JUNEAU — Alaska contractors warned of an “alarming” outlook for the 2025 road construction season in a sharply worded letter sent last week to Gov. Mike Dunleavy.
The summer construction season typically provides a major boost to the state’s economy. But Alaska contractors, engineers and unions say they’re worried that another lean year will see hundreds of jobs lost and critical projects delayed.
The Alaska Department of Transportation and Public Facilities advertises and awards state projects. The department said it is anticipating a “strong” $900 million construction year.
But officials also acknowledge the department is facing myriad challenges to deliver projects. Those include rising costs due to inflation, difficulties in securing American-made materials required under federal law and delays in getting federal grants.
State transportation officials say they are trying to address those issues.
Construction industry groups say they recognize some of the challenges cited by the state. But they’re questioning the state transportation department’s forecast for road construction projects.
Associated General Contractors of Alaska — the industry’s largest trade association — worked with McKinley Research Group to develop its own construction forecast based on the past 15 years of spending. They projected a roughly $600 million road construction season this year.
Alicia Amberg, executive director of AGC of Alaska, told state legislators Tuesday that contractors who work in state road construction are reporting a 50% to 90% decline in their portfolios. She said companies are shedding workers due to a continued drop in projects out to bid.
”We feel like we have to be the canary in the coal mine,” she said.
AGC of Alaska and the American Council of Engineering Companies of Alaska wrote to Dunleavy last week, warning of an “alarming and unprecedented” situation facing the road construction sector.
Both groups urged the governor to take immediate action, including by submitting a supplemental capital budget to the Legislature. They want lawmakers to draw $300 million from the state treasury to “salvage” the 2025 road construction season.
The governor’s office did not respond to a series of questions sent by the Daily News about last week’s letter.
Alaska construction industry veterans say the timing of the road construction shortfall is strange. Billions of federal dollars were expected to come to Alaska from the $1.2 trillion infrastructure bill that Congress approved in 2021. But projects are not being delivered.
”It’s really disappointing because a lot of Alaska’s future and economy depends on a good transportation system,” said former state Transportation Commissioner John MacKinnon, who served nearly three years in the Dunleavy administration.
“We should have so much work going on right now that we can’t handle it,” he said in an interview last month. “But that’s not happening.”
Project delivery challenges
Nikiski Republican Sen. Jesse Bjorkman, chair of the Senate Transportation Committee, wrote to state Transportation Commissioner Ryan Anderson, relaying concerns he had heard about the summer construction season.
Anderson sent a detailed six-page letter on Feb. 3 in response.
“Data and technical analyses indicate that the 2025 construction program is poised to deliver significant infrastructure improvements across Alaska,” he said.
Anderson acknowledged contractor payments are set to be down $259 million this federal fiscal year from the previous one. But he said the department has faced numerous challenges to deliver projects.
Those include: rising material and labor costs reducing the number of projects that can be implemented; federal grant funding getting released late in the season; supply chain constraints to secure American-made materials; and delays acquiring right-of-ways on federal easements, he said.
State transportation officials provided a detailed response Wednesday to questions from the Daily News about the upcoming construction season.
Spokesperson Shannon McCarthy said the department has “clear, real-time” information on projects and how they can be accelerated. She was not “familiar with the forecasting methods” used by AGC of Alaska, and reiterated the state’s $900 million forecast for construction awards this year.
Amberg, in a Tuesday presentation to the Senate and House transportation committees, sounded doubtful.
“We see a lot of numbers, and we’re having a lot of communication with the department,” she said. “But what we know are our numbers and the real impacts that we’re seeing.”
Amberg described a “multitude of issues” that have led to the gloomy outlook for the 2025 road construction season.
Associated General Contractors have 89 chapters across the U.S., but Amberg said the situation facing Alaska’s road construction sector is “unprecedented.”
“We are not hearing that other states are having similar challenges,” she said.
One factor unique to Alaska is that the state’s four-year transportation plan was initially rejected last year by federal highway administrators.
The State Transportation Improvement Plan, or STIP, is Alaska’s funding plan for roads, highways, bridges and state ferries. A STIP is required to receive billions of dollars in federal funding for hundreds of projects through 2027.
Alaska’s multibillion-dollar transportation plan should have been approved by October 2023. After numerous warnings, federal highway administrators first rejected the plan, and then it was only partially approved in March.
Federal and state transportation officials have said they are working together to resolve the remaining issues with the transportation plan.
McCarthy said the partially approved STIP is having “no impact” on the 2025 construction season.
Marcus Trivette, co-chair of the DOT steering committee for the AGC of Alaska, said there have been STIP-related impacts.
“Last year, we were assured time and time again that the state’s plan would ultimately be approved and there would be no negative impact on the surface transportation program — even as we witnessed dropping levels of projects on the street,” he said to legislators Tuesday.
AGC of Alaska said in Tuesday’s committee hearing that appropriated federal funding dropped by $200 million last fiscal year, partly due to STIP delays. Aviation project spending is also expected to be down this year, they said.
Trivette said “robust” construction activities are currently occurring on the North Slope. Contractors are expecting job growth in the construction industry overall. But they say that is not the case for state road and highway projects — notably in Anchorage and Fairbanks.
“There’s not a lot of big highway jobs. A lot of this is small stuff — roundabouts, some non-motorized paths, some resurfacing work,” said Jackson Fox, executive director of FAST Planning, Fairbanks’ local transportation planning organization, in a Jan. 13 interview.
Call to action
Transportation Commissioner Anderson said that the department is acting to address the construction industry’s concerns for the 2025 season.
Those actions include: “securing additional contractor support” and “realigning internal staffing priorities” to deliver projects this year; breaking up large projects so smaller contractors can bid on them; and creating a “dedicated agile project management office,” Anderson said in his Feb. 3 letter to Sen. Bjorkman.
Amberg said Tuesday that AGC of Alaska was still reviewing the commissioner’s letter, which she also received.
Alaska contractors and engineers, meanwhile, urged Gov. Dunleavy in their Jan. 27 letter to enact a series of “actionable steps to prevent future declines in construction programs.”
Those steps include providing additional resources and oversight for the state transportation department, and for the the Legislature to appropriate $300 million in state dollars to fund projects and “salvage” the 2025 road construction season.
Contractors and engineers in the letter warned that a shortage of projects “could force long-established contractors to contemplate closing their businesses.”
Alaska labor unions echoed those concerns, and expressed confusion about the shortfall of road projects amid high levels of federal infrastructure funding.
Operating Engineers, Local 302 — the largest union for Alaskans working on highway, bridges and airport projects — represents 3,000 Alaska members.
”We were told we were literally going to need every man, woman and child,” said Jason Alward, vice president of the union, in a Jan. 14 interview.
He said that the union graduated a record number of apprentices over the past three years — around 100 each year. But in 2024, they largely weren’t needed.
“We were barely able to keep our apprentices working. And so this year, we’ve dialed our numbers back drastically,” he said.
Fairbanks Democratic Rep. Ashley Carrick, co-chair of the House Transportation Committee, said it’s unlikely that the Legislature could fund $300 million in road construction projects this year due to the state’s strained finances.
Carrick was frustrated Wednesday about the ongoing STIP delays and the construction groups’ outlook for the season ahead.
“Unfortunately, I’m not surprised at this point, but I am very disappointed hearing how this administration has dropped the ball on critical federal dollars — and that we will not be prepared and shovel-ready for this year’s construction season,” she said.