The current Alaska Department of Labor forecast predicts only two local job sectors will grow this year: health care and government. Jobs in state and federal government agencies are expected to increase; jobs in oil and gas are projected to decrease.

An aging and ailing population that requires more medical attention and an expanding government bureaucracy are not encouraging indicators of economic strength. With less oil in the pipeline, elected officials need to explain how we’ll finance even a slight expansion of Alaska’s public sector “economy.” Most Alaskans oppose statewide income and sales taxes and don’t take kindly to tapping the Permanent Fund to feed government. Are there lessons to be learned from the experiences of other states?

The Small Business and Entrepreneurship Council measures the cost of government for entrepreneurs. Their “Small Business Survival Index” ranks states from the “Friendliest to the Least Friendly Policy Environments for Entrepreneurship.” According to the Index, the state with the best environment for business is South Dakota and the worst is New Jersey (Actually, the worst is Washington DC, but it's not technically a state). The states ranked lowest are New York (48), California (49) and New Jersey (50).

Could there be a correlation between the growth and cost of government jobs and a state’s economic health? As government grows does it inhibit growth elsewhere?

E. J. McMahon, director of the Manhattan Institute’s Empire Center for New York State Policy, has observed that, “One out of every eight New York workers is a unionized government employee; the ratio averages one out of 19 in the rest of the country.” McMahon further notes that in 51 out of New York’s 62 counties the average salary for state and local government jobs is higher than the private-sector average.

In neighboring New Jersey, between 2000 and 2007, the state created 6,800 private sector jobs and over 55,000 government jobs. Now plagued by plummeting revenues and increased costs, New Jersey’s governor today announced a fiscal emergency to resolve the state’s $2.2 billion budget deficit. Declaring the state on “the edge of bankruptcy,” Gov. Christie proposed $1.5 billion in cuts and urged the Democrat-controlled Legislature to enact sweeping pension and benefit reforms.

And then there’s the Golden State. Gov. Schwarzenegger recently declared a fiscal emergency and called the Legislature into a special session to deal with the $6.3 billion projected deficit for 2009–10. Between 1990 – 2007, California lost 26 percent of its factory jobs and 35 percent of its high-tech manufacturing jobs to states with lower taxes and less onerous regulations. Democratic State Treasurer Bill Lockyer told a legislative hearing last fall that public employee pensions would "bankrupt" the state.”

Writing in the San Francisco Chronicle last month, former California Democratic Assembly Speaker Willie Brown acknowledged that “… we politicians, pushed by our friends in labor, gradually expanded pay and benefits to private-sector levels while keeping the job protections and layering on incredibly generous retirement packages that pay ex-workers almost as much as current workers.

Brown continued, “Talking about this is politically unpopular and potentially even career suicide for most officeholders. But at some point, someone is going to have to get honest about the fact that 80 percent of the state, county and city budget deficits are due to employee costs.”

Oregon ranks 38 on the Small Business Survival Index but recently raised taxes on wealthy residents and both large and small businesses. The pro-tax campaign was funded largely by public employee unions who will benefit most from the $700 million increase in taxes. How long will it take for Oregon to join New York, California and New Jersey at the bottom of the Small Business Survival Index?

Five years ago Alaska was ranked 20th on the Index but by 2009 had risen to 12. I'm getting concerned that we may have peaked at 12, and don't want to think about what that could mean for Alaska's future. State employee benefits currently amount to a generous 59 percent of payroll in the state system so keeping public employee contracts sustainable should be a priority.

There’s no arguing that unions generally serve an important role in American society. The trade unions were born of the laborers and craftsmen who literally built our country and Alaska as well. But it's legitimate to question whether government employees have shed the same levels of blood, sweat and tears as have the more traditional union workers, and whether the same protections and privileges are warranted – or can be supported.

We need to spend enough on government to keep our communities safe and invest sufficiently in basic infrastructure, especially transportation, to allow private sector expansion and entrepreneurship to grow every slice of Alaska’s economic pie. Not just health care and government.