The Alaska Construction Academies might see a steep decline in funding next year if the Legislature accepts Gov. Bill Walker’s proposed budget cuts.
The governor’s fiscal year 2018 budget, released Dec. 15, proposes a $600,000 reduction in general fund dollars for the Alaska Construction Academies, an Alaska Department of Labor and Workforce Development program that offers free basic construction training to high school students and adults in Anchorage, Juneau, Ketchikan, Fairbanks, the Mat-Su Valley and on the Kenai Peninsula.
“This will also greatly reduce the number (of) Alaskans trained through ACA unless the department can identify federal and/or private funding to help backfill this reduction,” the budget detail states.
The reduction leaves approximately $1.2 million left in the program. As a result, the Construction Education Foundation would be dissolved and the department would take over the administration of the sub-grants, which fund the individual construction academies, according to the budget detail.
The Alaska Construction Academies have undergone cuts from the Legislature for the last several years. In the fiscal year 2015 budget, the Department of Labor had a $3.4 million budget allocation for the construction academies. The following year, in fiscal year 2016, the department had a $2.5 million allocation for the program, and in fiscal year 2017, the funding dropped by about $700,000. The biggest share of funds for the program have come out of the general fund in the past.
The Construction Education Foundation is the nonprofit body receiving the funds from the Department of Labor for the program, said Kathleen Castle, the executive director of the Construction Education Foundation. The funds are not specially dedicated, but they are typically included in the budget, and the Department of Labor provides the funds to the foundation for the purpose of running the construction academies, she said.
The academies got their start 11 years ago when the industry leaders noticed a lack of trained people in the workforce. Industry representatives worked with the Legislature to get some state funds for an education program to give workers some of the basic skills they would need to enter the construction industry, Castle said.
“If … (a company) gets (workers) up to speed so they could read a tape measure and do some basic things, there was so much going on that they would get them up to speed and then they would move on,” she said. “…We were talking about the fact that there were so many people coming out of our high schools who didn’t know how to read a tape measure or anything.”
At the time, there was more work available than many companies could handle. Oil revenues were high and the state financed large projects through its capital budget, sometimes in the billions of dollars. Even though the economy in the Lower 48 struggled after 2008, the economy in Alaska was still growing as oil prices rose, so more people moved to Alaska and created construction work as well.
However, that’s not the case today. As oil prices have declined from more than $100 per barrel at the end of 2013 to a little over $50 today, the state government has been scrambling to try to bridge the gap created in the general fund.
Walker’s proposed budget, which the Legislature is set to begin considering when the regular session begins next Monday, allocates $100 million for capital projects. The governor’s director of the Office of Management and Budget, Pat Pitney, told the Kenai Peninsula Borough Assembly in a presentation Jan. 3 that this is the basic amount required to meet the federal match.
“That only covers match for federal items — housing, water, transportation, energy and so forth,” she said in the presentation. “It’s an unsustainable long-term capital budget. It’s really pretty too bad when $100 million is essentially no capital budget beyond meeting our match requirements.”
The Associated General Contractors of Alaska’s annual construction industry forecast, compiled by economist Scott Goldsmith, projected the value of construction industry spending would decline by about 18 percent in 2016. So far, it looks like that prediction came true, said John MacKinnon, the president of AGC. However, in context, the industry was projected to grow about 18 percent in 2014 due to increases in oil and gas, Department of Defense and increased state projects.
MacKinnon cited the Legislature’s passage of several industry bills providing stability for investors as the reason for the 2014 investments.
“So much of that bulge, that investment uptick in spending was a result of the confidence that investors had,” he said.
Now, with the downturn, some contractors are beginning to look for work outside the state if they can. Bids for projects are getting lower as contractors increasingly need work. State numbers don’t account for reductions in hours, which are decreasing for many workers, MacKinnon said. Highway work is fairly stable, but most of the reductions are coming from the private side, he said.
What investors are looking for is stability, he said.
“We’re seeing less money out there for work on the vertical side, less government investment in facilities. … That precipitates private investment,” he said. “When private money doesn’t have confidence in the investments made by government, then they pull back. There’s a growing lack of confidence in taking care of our fiscal mess.”
On the Kenai Peninsula, the construction academy has a strong relationship with many of the employers. Now in its ninth year, the Kenai Peninsula Construction Academy provides classes like carpentry, plumbing and electrical work. All of the teachers in the program are licensed in what they are teaching, said Bob Hammer, the program coordinator for the Kenai Peninsula Construction Academy.
“All of my teachers are business people,” said Hammer, a former carpenter who teaches the carpentry classes. “The electrician is a licensed electrician, same with the plumber.”
Some of the budget reductions have already played out for the construction academies. They used to partner with high schools all over the state. This year, the construction academies have no contracts with the high schools, Castle said.
Hammer said he is working on partnerships with the school district to keep high school students connected with the education. It’s important to get that point across to high school students — it’s hard to do anything without an education today, he said. Things are tougher for the employers as well. He has worked with them in the past to place graduates of the program into jobs, but there are fewer jobs now to give, he said.
Even though the industry is on a downturn right now, it’s always important to get young people into the trades, he said. Even though there’s an estimated downturn for new construction, there is always infrastructure work. Some of the academy attendees, who range in age “from 18 to 40,” Hammer said, have expressed interest in other types of trades to diversify their skills. Recently, the academy expanded to offer classes in diesel mechanics as well, he said.
“(The work) doesn’t stop the plumbers and the electricians,” he said.
Castle said the intent of the cuts was not to eliminate the construction academy, but to have the coordinators look elsewhere for funding. The Construction Education Foundation is doing so but has not had to do so in the past, she said.
“We’ve … been so lucky to have this heavy priority on the part of the state to fund our program,” she said. “It’s really a Catch-22 — the industry has been privileged by having all of these dollars for workforce development. The industry hasn’t had to pick up the tab for it. Here we are where we’re seeing a decline in the state dollars, but it’s such a downturn time for the industry that’s it’s not a time to ask the industry. Especially when so many companies are laying people off.”
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