Last year, the Legatum Institute released its first United States Prosperity Index, which reports that overall prosperity in the U.S. has improved over the past decade (2009–2019) across all regions. The bad news? Alaska is one of only four states which saw a decline in prosperity (33rd to 41st nationwide), and the only state in the ten least-prosperous states not from the South. With the information from the Index, Alaska can learn from other states – and hopefully, policymakers will find useful models in the successes of states that have substantially improved over the decade.
The U.S. Prosperity Index attempts to capture both economic and social well-being for each state, which requires examining non-wealth-based indicators. The Index identifies 11 pillars of prosperity, each of which contains subfactors tabulated from nearly 80 sources. This report summarizes each of the 11 pillars for Alaska and takes note of subfactors that disproportionately influenced individual scores.
Alaska’s Rankings for Each Pillar of the U.S. Prosperity Index
The report underscores the importance of an open economy, which is measured by business environment, market access and infrastructure, and economic quality. “Prosperous societies require open economies that encourage innovation and investment, promote business and trade, and facilitate inclusive growth,” the report states, and overall, the West has seen substantial improvements in this domain. Alaska’s dead-last scores in business environment and market access lead to an inhospitable 50th place for the open economy metric, showing a generally unwelcoming climate toward business and finance. Indeed, Alaska was one of the three states most affected by federal regulations – another signal of excessive government overreach into the state’s economy.According to the Index, no single state has fostered a high degree of both economic and social wellbeing for its population, evidenced by the fact that no state besides Massachusetts ranks above 20th in all 11 pillars. However, Alaska is particularly weak in the categories of business environment (51st), market access and infrastructure (51st), safety and security (47th), and education (46th). For related information on these issues, see Alaska Policy Forum’s reports on Alaska’s tax climate and dismal education outcomes.
Despite the grim prognosis for two economic categories, a third – economic quality, which measures how well a state’s economy is equipped to sustainably generate wealth – received a cheery 8th place. For the subcategory of “fiscal sustainability,” Alaska ranked 3rd due to the then-$65 billion budget stabilization fund, known commonly as the Permanent Fund. Alaska also placed 3rd in the subcategory “productivity and competitiveness,” due to making high-value products like oil. Output grew by 9.2 percent between 2007 and 2009, largely because labor productivity improved during the Great Recession, in no small part because employees tended to work fewer hours.
However, other subcategories in the economic domain show substantial weaknesses; pension assets are just short of 40 percent of future liabilities, which amounts to a debt burden of $46,774 per capita. In addition, Alaska’s dependence on extractive industries like oil for revenue leads to severe fluctuations. When oil dropped from $98 per barrel in 2012 to $33 per barrel in 2016, Alaska’s creditworthiness dropped from AAA to AA in Standard and Poor’s rating system. In sum, Alaska’s economy struggles to welcome business and finance, and there are structural instabilities that may endanger economic prosperity in the future.
Alaska’s safety and security subcategory scores all saw a downward trend throughout the decade, and the overall pillar has dropped 15 places since 2009. However, one markedly disappointing ranking is Alaska’s property crime at 49th place, ahead of only New Mexico (51st) and Nevada (50th). The report notes that property crime is usually an urban problem, making Alaska and New Mexico’s positions “somewhat anomalous,” largely fueled by “particularly high levels of both burglary and motor vehicle theft.”
Alaska placed 35th on the personal freedom pillar, which incorporates agency, freedom of association and speech, absence of legal discrimination, and social tolerance. For agency, the degree to which individuals are free from coercion or restriction and are free to move, Alaska improved by 6 places to the rank of 30th from 2009 to 2019.
In the governance pillar, Alaska improved three places since 2009, and the state gained a relatively high ranking (11th) in the government integrity subcategory, up 17 places since 2009. Though the political accountability and rule of law subcategory rankings decreased several places, it is still an optimistic prognosis that Alaskans tend to trust their government.
One of Alaska’s strong suits in the Index is social capital, ranking 13th. The satisfaction of citizens depends on how enmeshed they are with their communities. Alaskans experienced an increase of 10 places in their personal and family relationships ranking and a 23-place increase in institutional trust since 2009. However, social networks decreased 15 places from 15th to 30th, and civic and social participation decreased from 3rd to 7th place in 2019. This is concurrent with general declines in civic engagement across the United States, though this can be remedied through participation at the local level.
Though prosperity in living conditions increased in the western states by 2.3 points overall, Alaska still ranked 42nd in the category, a decrease of 10 places since 2009. Material resources dropped 14 places from 12th to 26th, though improvements in nutrition (14th place) and connectedness (20th) were substantial. The report notes that Alaska has the highest fatal injury rate of over 10 out of 100,000 workers due to a high proportion of employees in natural resource extraction and transportation; as a result, Alaska ranked 39th in the protection from harm subcategory.
The results of the Index wholly support APF’s long-running conclusion that Alaska is in the midst of an educational crisis, ranking 46th overall in the education pillar. The report mentioned Alaska’s National Assessment of Educational Progress (NAEP) fourth-grade literacy score of 207 out of 300, which was the weakest performance out of every state and sunk the primary education subcategory. For comparison, the top performer, Massachusetts, averaged 236 on NAEP.
Secondary and tertiary education in Alaska fared no better in the Index. Tertiary education ranked 51st (dead last) in college enrollment, college graduation rate, and university quality. Compared to the other worst performers in these subcategories, Alaska’s enrollment is below 35 percent, and only 26 percent of students complete their tertiary courses within six years of enrollment. However, Alaska’s adult skills subcategory received 13th place, since 93.1 percent of residents have at least a high school diploma – one of the highest proportions in the nation.
Alaska ranked 34th in health, which takes into account the subcategories of behavioral risk factors, preventative interventions, care systems, mental health, physical health, and longevity. Alaska’s suicide rate, which is the highest in the nation at 26 deaths per 100,000 population, took a toll on the mental health category. In fact, all but Alaskans’ physical health decreased since 2009, mental health most substantially.
To no one’s surprise who is familiar with the state, the natural environment in Alaska is pristine. The state gained a high ranking of 14th for the natural environment pillar, which comprises: emissions; exposure to air pollution; forest, land, and soil; freshwater; and preservation efforts. Alaska placed third for preservation efforts, largely due to having the highest proportion of GAP1-3 protected areas under USGS classifications. Alaska’s exposure to air pollution ranked 10th; forest, land, and soil ranked 9th; and freshwater ranked 6th. The only subcategory in which Alaska is not in the top 10 in the nation is emissions, with a ranking of 47th in 2019 – a drop of nine places from 2009.
The U.S. Prosperity Index provides valuable feedback for policymakers regarding areas in which Alaska’s economy can be improved. Though Alaska’s overall prosperity declined since 2009, there are still pillars that have seen gains, and through following the example of other states which saw substantial improvements over the decade, the prosperity of Alaskans can advance.