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11 Budget FAQs

11.3 The Crash of '86-How Badly Was the Economy Hit?

The Alaska economy suffered through a severe recession between 1986 and 1988 that coincided with a fall in oil prices and a contraction of state spending. Here are some of the effects of that recession that was mostly due to the inevitable slowdown after 5 years of frenzied state spending growth.

• Alaska lost 20,000 jobs,or nearly 10 percent of all jobs. Most of these were private jobs--especially construction jobs. The state had seen an enormous construction boom in the early 1980s, in both public and private projects.
• Anchorage lost nearly 12 percent of its population, as jobs disappeared.
• As people left the state, housing prices crashed. Prices of single-family houses dropped between 20 and 50 percent in urban areas ( and condominuium prices even more). It took more than a decade for prices in Anchorage to recover.
• At least 7 percent of all the mortgaged homes in Alaska went into foreclosure, and the vacancy rate for apartments and houses in Anchorage doubled.
• Property taxes went up, as state aid to local governments declined and property values sank. The tax mill rate in Anchorage doubled between 1985 and 1989.
• Government services remained mostly intact, because the state concentrated the cuts in the capital budget which pays for construction projects. In the early 1980s, the state paid for hundreds of projects that communities would have either been unable to afford or woud have had to finance by selling bonds.

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