Federal money, not oil, drove half of Alaska's growth — and now it's shrinking

Federal money powered roughly half of Alaska's economic growth from 2015 to 2023, far outpacing oil and gas, University of Alaska Anchorage economists said at a June forum. That federal spending is now starting to pull back, in a state that leans on it more than almost any other.

Federal spending in Alaska nearly doubled over those years, from about $11 billion to nearly $20 billion, economist Brett Watson said, while oil and gas growth over the same stretch came to between $3 and $4.5 billion — less than half as much. The biggest single piece of federal money isn't contracts or wages but direct payments to people: about $6.5 billion a year, mostly Social Security and Medicare. By 2023, federal dollars equaled nearly 30% of the state's entire economy.

Alaska is home to about 15,500 federal civilian workers earning some $1.5 billion a year, and the state ranks third in the nation — behind Maryland and Hawaii — in how much of its workforce is federal. Between 2024 and 2026, that workforce fell about 16% in Alaska, slightly faster than the national drop.

Alaska largely avoided the mass firings seen elsewhere. Only about half a percent of its federal workers were cut through forced measures, against more than 4% in Washington, D.C. Most of Alaska's losses came through buyouts, taken on average by workers with about a decade of experience. The hardest-hit agencies were Interior, Agriculture, Commerce and Transportation, and the losses landed on field workers: park rangers, biologists, maintenance mechanics, forestry technicians.

Researcher Brock Wilson cautioned against assuming private business will simply absorb that work, calling the federal workforce a complement to Alaska's core industries rather than something interchangeable with them. If there are no rangers to keep Denali accessible, he said, the cruise economy feels it too.

A chunk of that federal money flows to Alaska-owned businesses. Five of the state's top 10 Defense contractors are Alaska Native corporations, led by ASRC and Doyon, making those dollars both federally sourced and Alaska-owned.