New economic reports show AIDEA fails at creating jobs, succeeds at eluding legislative oversight
JUNEAU, ALASKA — Three new independent reports from respected long-time Alaska economists Gregg Erickson and Milt Barker show that the Alaska Industrial Development and Export Authority (AIDEA) largely fails at creating jobs or generating new economic opportunity, engages in wasteful loan practices, and has become “in many respects an autonomous organization, exempted from the most important laws that protect the public.”
These reports build on Barker and Erickson’s previous report, AIDEA: Cost and Financial Performance — A Long, Hard Look, which showed that through its poor decisions, AIDEA has cost Alaskans $10 billion in lost revenue. One new report demonstrates that in the last 15 years, AIDEA’s Loan Participation Program created only 6% of the Alaska jobs it claims to.
“These in-depth reports clearly reveal AIDEA is lousy at job creation, provides an abysmal return on its investments, takes credit for jobs it shouldn’t, and successfully dodges meaningful legislative oversight,” said SalmonState executive director Tim Bristol. “At a time when Alaska’s schools, our fisheries, and our established infrastructure all desperately deserve greater investment, AIDEA essentially functions as an autonomous corporation with a slush fund of Alaskans’ money. It’s time for the legislature to take a serious look at AIDEA — and at how the $1.4 billion of Alaskan money this failing state corporation is sitting on could be used more effectively.”
“Our goal with this report was to gauge the performance of AIDEA’s Loan Participation Program when it comes to job creation,” said economist Milt Barker. “What we found was public waste — and private gain. From 2008-2023, AIDEA’s $417 million of large loans wasted more than $363 million that served only to enrich borrowers, with no increase in Alaska jobs or economic development. AIDEA fails to accomplish its mission.”
“AIDEA’s money isn’t ‘AIDEA’s money.’ It’s Alaska’s money, and it can be used for anything,” said Wild Salmon Center Alaska Director Emily Anderson. “While AIDEA is busy dodging legislative oversight and making decisions behind closed doors and out of the public view, Alaskans are left without the funding necessary to support our schools and provide essential services for our communities. It’s time for state leaders to ensure AIDEA stops getting away with head fakes and excuses, and to hold this state-created, state-maintained, state-funded corporation to account. There are far better things Alaska could be doing with $1.4 billion than padding the pockets of foreign corporations and wealthy commercial real estate investors.”
“AIDEA is a $1.4 billion endowment that is hoarding state money and evading legislative oversight,” said Gregg Erickson, a report author who delved into AIDEA’s legislative, endowment, and dividend history. “The good news is that it’s fully within the legislature’s power to take back that control, to stop exempting AIDEA from the most important laws that protect the public, and to ensure the $1.4 billion of state money in AIDEA’s hoard does not continue to bleed out to projects that don’t even create jobs.”
The first new report dives deep into the numbers on AIDEA’s Loan Participation Program; the second is a short history of the AIDEA Endowment and AIDEA’s unimpressive, shrinking dividends to the state; and a third focuses on AIDEA’s “march to autonomy” and away from legislative oversight.
After the release of AIDEA: Cost and Financial Performance, AIDEA officials defended the corporation by claiming that AIDEA creates jobs; by claiming that the Loan Participation Program is effective; and by referencing their dividends to the state. The three reports released today show the reality behind those arguments, painting a picture of where this state-endowed and maintained corporation has gone wrong — and what can be done to remedy it.
Read on for highlights of each report.
Report 1: Alaska Industrial Development and Export Authority (AIDEA) Loan Participation Program — A Closer Look
AIDEA engages in wasteful loan practices, fails to create economic activity, and subsidizes loans when other financing is available.
56% of AIDEA’s Loan Participation Program, or LPP, large loan borrowers were commercial real estate landlords. Most, if not all, would have qualified for conventional, unsubsidized loans from a bank.
That means much of the $417 million in large loans for the AIDEA program between 2008 and 2023 went to subsidize ownership of commercial property, not to “get feet off the ground” for businesses. That money created few, if any, permanent jobs.
From 2008 to 2023, AIDEA created only 6% of the Alaska jobs it claimed to. 94% would have been created by bank lending without AIDEA.
AIDEA claims to have created jobs that were actually created by businesses that rent from the commercial real estate landlords its loan program subsidizes.
AIDEA put up 33% more dollars than necessary for borrowers’ enterprise investments to pencil out. This equates to 25% of AIDEA loan money wasted, or $104 million wasted, out of $417 million in large 2008-2023 loans.
Most loans are made with the maximum AIDEA subsidy — a 90% AIDEA participation, whether needed or not. Repeat borrowers most consistently garner 90% participations.
Report 2: “The AIDEA endowment”
AIDEA was intended to reinvest plentiful oil money in the State. Instead, it squeezes dollars away from other public services without providing a return on its investment.
AIDEA started to break from its purpose in the 1990s, when state revenue declined but AIDEA’s endowment kept growing.
AIDEA would not pass even a lenient inspection of public cost versus public benefit.
The Constitution gives the legislature the power to appropriate any state funds, which includes AIDEA’s endowment and what AIDEA must return in dividends.
Between 1996 and 2018, AIDEA was the driving force in thinning out what is included in its dividend payments. The legislature has accepted these low payouts.
In 2003, the legislature overturned the idea that AIDEA dividend needs to be a percentage of its earnings, meaning in years of lost profit, AIDEA can pay out of its endowment. This system hides AIDEA’s failures even as the public corporation continues to drain money from public funds.
Report 3: AIDEA’s “March to autonomy”
AIDEA is publicly funded yet has successfully fought for exemptions from basic processes for public input and transparency in its nearly 60-year tenure. This has earned it the reputation as the most opaque public authority in the State of Alaska.
AIDEA has gained exemptions from major provisions of the Alaska Public Records Act, Administrative Procedure Act, and Public Employment Relations Act.
Moody’s credit rating service downgraded AIDEA’s credit rating in 2019 in part due to the opacity with which AIDEA operates and “the fact that AIDEA provides very limited information on its loan program participants.”
The legislature and the governor's office used to require approval of AIDEA development projects from local governments prior to AIDEA issuing bonds. AIDEA no longer must gain local support for projects.
AIDEA has successfully pushed legislators to remove local oversight boards.
AIDEA, a state-funded, state-staffed, public corporation, may be the only entity of its kind in the United States.