Alaska Natives and the “New Harpoon”:
Economic Performance of the ANCSA Regional Corporations 1976-1993
Steve ColtInstitute of Social and Economic Research
University of Alaska [email protected]
Rev. 04 June 2003
2
Alaska Myth – the “Great Land”
3
Reality includes People
ANCSA aimed at “real social and economic needs” of Alaska Natives
4
Reality is about Poverty
5
Rapid Integration into Cash Economy
6
For Some, ANCSA was engine of resource extraction
7
• Context• Alaska Native Claims Settlement Act• ANCSA Corporations
– Overall Economic Performance– Variation in Performance– Jobs vs. Profits?
• ANCSA as Policy– Economic Policy– Environmental Policy– Social Policy
8
•Context• Alaska Native Claims Settlement Act• ANCSA Corporations
– Overall Economic Performance– Variation in Performance– Jobs vs. Profits?
• ANCSA as Policy– Economic Policy– Environmental Policy– Social Policy
9
• Context
• Alaska Native Claims Settlement Act
• ANCSA Corporations– Overall Economic Performance– Variation in Performance– Jobs vs. Profits?
• ANCSA as Policy– Economic Policy– Environmental Policy– Social Policy
10
1968: North Slope Oil, Prudhoe Bay
11
Land Settlement
• 22 million acres to village corps• 18+ million acres to regional corps• ------------• 40 million acres total
– Larger than New England– 3 times the acreage under Nature
Conservancy protection
12
Disposition of Alaska Lands
104
44
152
736
State
ANCSA
Conservation
Other Fed
Other Private
Total 375 million acres
13
ANCSA – Money Settlement
• $440 million to 12 regional corps– [only!] $6,000 per person
• $440 million to ~200 village corps• $82.5 million to individuals
$962.5 million total
14
Net Resource Revenues must be Shared (section 7(i))
retained
30%
shared
with all
village/ at
large
35%
shared
with all
regional
corps
35%
15
How Should one measure corporation success?
• Business success, growth, dividends?
• Provide jobs?• resource extraction?• Maintaining traditional use and
occupancy?• political forces?
16
• Context• Alaska Native Claims Settlement
Act• ANCSA Regional Corporations
– Overall Economic Performance– Variation in Performance– Jobs vs. Profits?
• ANCSA as Policy– Economic Policy– Environmental Policy– Social Policy
17
What did they Do?
18
What did they Do? - Nana
19
What did they do? – CIRI
20
Revenue, Assets, and EquityGross Revenues, Assets, Book Equity
All Regional Corporations
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
mill
ion
s o
f cu
rren
t $
Assets
book equity
Revenue
21
Per Capita Cumulative Dividends 1974-93
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000K
onia
g
Cal
ista
Ber
ing
St
Ale
ut
Chu
gach
Bris
tol B
ay
Doy
on
Aht
na
NA
NA
AS
RC
Sea
lask
a
Coo
k In
let
Ove
rall
(wei
ghte
dav
erag
e)(3
)
22
Sources & Uses of Wealth, 1974-93
440
273
596
243
1066
0
200
400
600
800
1,000
1,200
1,400
mill
ions
of
dolla
rs
Sources Uses
Equity
Dividends
Net I ncome
Other Capital
ANCSA Cash
23
Adjustments to Reported Income
• Windfall Tax loss sales• Windfall Natural Resource Sales• Passive Investment Income• “Social Overhead Cost” of Being
ANCSA corp.
24
Adjustments – Tax Loss Sales• Sever interest in asset that you
didn’t pay for,
• generate loss for tax purposes,• sell loss to profitable company for
cash
25
Tax Loss Sales
(20)
-
20
40
60
80
100
120
140
160
180
$ Millions
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
Total NOL SalesThrough 1993:$408 million
26
Adjustments – Resource Sales
• NR sales are one-time windfall, not sustainable income– NR Assets not carried on books– No Depletion taken as expense
• ANCSA required resource revenue sharing among regions
27
Resource Asset Sales 1976-93
0
10
20
30
40
50
60
70
80
mill
ions
of
dol
lars
197
6
197
7
197
8
197
9
198
0
198
1
198
2
198
3
198
4
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
Total $480 million
28
Passive Investment Income
•Many corps had stock and bond portfolios.
29
Components of Income 1974-93
-400
-200
0
200
400
600
800$
mill
ion
gene
rate
d
nol sa
les
reso
urce
sale
s
pass
ive
over
head
bus
ines
s
components
components
shared
reported
30
Return on Equity
-40%
-30%
-20%
-10%
0%
10%
20%
30%
1974
1977
1980
1983
1986
1989
1992
Reported
Business
31
Variation in Average Rate of Return across Regions
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
32
Explaining the Variation
Idea #1:
Profitability depends on WHAT SECTOR the assets are
invested in.
33
• Simple Example:– You buy only Home Depot stock, you
earn 20%– I buy only Amazon.com, I lose 50%– Conclude, return on Cisco is 20%
while return on Amazon is –50%
• Have computer play this game with real data
34
Oil Sector– Direct connection to North Slope
fields
35
Statewide Sector– Construction, Fish Processing, Hotels,
Tourism, Real Estate, Manufacturing
36
Local Sector
• Serves local market• Food, fuel, retail
37
Public Works Sector– Arctic Slope Corporation only– North Slope Borough tax $$
38
Passive Investments
• Passive Investments– Stocks and Bonds
39
Asset Allocation Fractions
0%
20%
40%
60%
80%
100%
% o
f to
tal a
ss
ets
1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
Asset Allocation to Sectors
pubworks
local
statewide
oil
passive
40
Hedonic Regression Equation
Overall Rate of Return (ROR) = PASSIVE
+ 1it OIL+ 2it STATEWIDE+ 3it LOCAL+ 4it PUBWORKS+ it
N = 12, T = 17, nobs = 204
41
Asset Allocation Results
7%
0%
-20%
22%
59%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Avg Annual Rate of Return
passive
oil
statewide
local
pubworks
42
Management Effects:Statewide Sector Returns to Each Corp
-200%
-150%
-100%
-50%
0%
50%C
ook
Inle
t
Bris
tol B
ay
Aht
na
Nan
a
Sea
lask
a
Ale
ut
Cal
ista
Chu
gach
Ave
rage
Kon
iag
Doy
on
Ber
ing
Str
aits
43
What about JOBS?• Idea #2:• “Efficient Tradeoff” idea –
– Lose some money as a business, but– Provide needed employment– Develop “human capital”
44
Average Annual Payroll per Shareholder
0
500
1,000
1,500
2,000
2,500
3,000
Aht
na
Ale
ut
Arc
tic
Slo
pe
Ber
ing
Str
aits
Bri
stol
Bay
Cal
ista
Chu
gach
Coo
k In
let
Doy
on
Kon
iag
NA
NA
Sea
lask
a
45
Statewide Sector Returns, with Payroll Income
-200%-180%-160%-140%-120%-100%-80%-60%-40%-20%
0%20%
Cook
Inl
et
Bri
stol
Bay
Aht
na
Nan
a
Doy
on
Sea
lask
a
Ale
ut
Chug
ach
Ave
rage
Calis
ta
Kon
iag
Ber
ing
Str
aits
AS
RC
Profits
Profits + Payroll
46
Profits ROE vs. Jobs ROE
0%
10%
20%
30%
40%
50%
60%
-140% -120% -100% -80% -60% -40% -20% 0% 20%
profits return on equity
qu
asi
ren
ts r
etu
rn o
n e
qu
ity
47
ANCSA as Economic Policy
• Inefficient -- Corps lost a lot of money
• Equitable?
48
Fairness Issues -- NOLs
• Resource revenues were shared but
• Tax loss sales resulting from resource extraction were NOT shared
49
Fairness Issues – Wages vs Dividends
• Average wages: $25,000 / yr• Average mgmt salary: $60,000+ /
yr• Average SH dividends: $170 / yr
50
Economic Needs are Great
• Alaska Natives have legitimate need to convert ANCSA corporate assets to cash
• But,• Individuals can’t sell stock!
51
are Natives “locked in” to Capitalism?
– It would have been “ludicrous” not to cut the trees (Sealaska CEO)
– The land can be sold (by the Board), but the stock cannot.
– "we hire shareholders, but we don't overburden ourselves. If we fail in business we are worthless." (former CIRI President Hundorf)
52
ANCSA was a Reaction to Oil
0
5
10
15
20
25
30
35
40
$ B
illio
ns
Oil ANCSA lands
Market Value of Resources from ANCSA Lands and North Slope Oil Cumulative extraction circa 1991
53
The Future for ANCSA Corps
• Global integration• Contracting (using DBE
preferences)