SECTION THREE

ECONOMIC ISSUES & RURAL ECONOMIC DEVELOPMENT

Report of the Economics Task Force

Contents

I. Preface

There is no need to present a lengthy discourse on the economic problems facing Alaska Natives since so much has already been written over the last several years. However, a brief, historical perspective will help set the stage by showing that, unfortunately, there are many more examples of problems having increased than there are of solutions having been implemented.

Almost 30 years ago, in 1966, the Bureau of Indian Affairs (BIA) published a report that stated:

Recent years have brought many new agencies and programs to Alaska with more tools, personnel, and other resources for development. Programs are specifically aimed toward the elimination of depressed areas, poverty, unemployment and underemployment, and unequal economic opportunity, all characteristic of rural Alaska. The need in Alaska is to direct these programs toward the characteristics they were designed to eliminate and integrate them efficiently and effectively with ongoing programs.¹

Shortly thereafter, in 1968, another report, from the Federal Field Committee for Development Planning in Alaska, opened with the following generalizations:

A great contrast exists today between the high income, moderate standard of living, and existence of reasonable opportunity of most Alaskans and the appallingly low income and standard of living and the virtual absence of opportunity for most Eskimos, Indians, and Aleuts in Alaska. About four-fifths of the more than one-quarter million people of Alaska are not Alaska Natives. Most of them, living in or near urban places, lead lives very much like those of other Americans . . . The other one-fifth . . . live in widely scattered settlements, are unemployed or only seasonally employed . . . live in poverty . . . in small dilapidated or substandard houses under unsanitary conditions . . . are victims of disease, and their life span is much shorter than that of other Alaskans. They are not only undereducated for the modern world, but they are living where adequate education or training cannot be obtained, where there are few jobs, where little or no economic growth is taking place, and where little growth is forecast.²

Time has passed, oil revenues have waxed and waned, the population of Alaska Natives has continued to grow — and unemployment along with it — while subsistence resources have become more restricted and cash needs have increased. More than two decades after the BIA report, the Alaska Federation of Natives published its report, in 1989, on the status of Alaska Natives, A Call for Action, which reiterated the earlier reports (and, for that matter, dozens of other reports that had been published in the interim), noting that "despite investment in infrastructure and education, in most Native communities the increase in self-sustaining economic growth has been minimal. When Native population growth is factored into the equation, the future is even more disconcerting."³ This was followed by a report presented in 1991 by the Alaska Department of Commerce and Economic Development, entitled Alaska's Economic Challenge: The Level of Distress, which reported:

Unfortunately, the fact remains that conditions in the rural areas are not getting better. The economic prosperity of the recent pipeline construction era has had little lasting effect on many rural areas. They continue as before with high unemployment and low median incomes. State and federal dispute over regulation of subsistence, boycotts on the fur industry, international socioeconomics, and dozens of road locks face rural Alaska. The population continues to struggle with limited resources trying to find a degree of stability.

Also in 1991, the Alaska Department of Community and Regional Affairs published a report, Towards a Comprehensive Alaska Rural Development Strategy, which outlined and discussed barriers restricting the economy of rural (Native) Alaska. These included:

1. Rural financing barriers (capital constraints)

   a. Lack of access to debt capital
   b. Lack of equity
   c. Lack of public invested capital base

2. Rural education and training barriers
3. Rural economic development barriers
4. Rural infrastructure barriers
5. Rural housing barriers
6. Rural health barriers
7. Communications barriers

In order to overcome these barriers, the Department recommended that leadership begin at the local, community level: "There must be an understanding by federal and state agencies of the complexity of the various leadership roles which exist in Alaska's rural communities. This role may be shared by many, and determining priorities is difficult at best."⁴

In March 1992, the Institute of Social and Economic Research, University of Alaska Anchorage, published a series of Alaska Native Policy Papers, supported by the Henry M. Jackson Foundation, focusing on issues of Alaska Native communities. One of these, The Economy of Village Alaska, by Professor Lee Huskey, offered the beginning point for the Alaska Natives Commission and the backdrop against which the Commission's work has evolved over the last 18 months. Professor Huskey raises an interesting question early in the paper:

Conventional wisdom about the economics of village Alaska presents the casual observer with a puzzle: if these economies are in such bad shape, why do the villages continue to exist and grow? Why haven't they disappeared, like numerous small towns throughout the United States?⁵

In explaining the persistence of Alaska villages, Professor Huskey's paper presents a comprehensive organization of the three interwoven economies of rural Alaska: subsistence, transfer, and market. The interplay among the three and the multiple participation of Alaska Natives in these economies are also covered in his paper, as he notes the limitations imposed on Alaska Native villages by their small size, remoteness, and lack of economic integration, pointing to the facts that many areas do not have commercial resources and that significant shares of existing jobs are taken by nonresidents. In his thesis, Professor Huskey echoes conclusions that he and Professor Thomas Morehouse, also of the Institute of Social and Economic Research, published earlier in a review of eight years of conferences and symposia on the subject of Northern and Arctic development. The key problems that have been highlighted are as follows:

The prescriptions for self-sufficiency are shaped by development constraints. Three types of problems are associated with economic development in Native villages. First, economic limits are imposed by the small size and remoteness of most villages; these limit opportunities for market activity and increase the cost of living. The second set of problems is associated with dependency and control; not only are decisions affecting the local economy made outside the region, there may also be external controls on access to local resources. Third, rapid growth of population in the villages complicates the problem of economic development by increasing the required level of economic activity.⁶

The literature has often decried the problems that Alaska Natives face in trying to adjust to the modern world of "economic development" but has offered only limited recommendations for realistic change. The issue is far from simple, nor is it singular. There are vast differences between regions of Alaska, and any one recommended solution, though potentially applicable to one or two villages in a certain region, will not apply to villages in other parts of the state. Several authors have divided Alaska into separate economic regions,⁷ to limit the number of variables involved. In order to keep this study from becoming an academic exercise, the Commission has chosen to seek more broadly based solutions and examples of successful ventures.

In many respects, economic development, as it is generally conceived in the United States (and historically in Western European society), leads to a lessening of options for most Alaska Natives, rather than an enhancement. The essence of the inherent conflict is that "a self-sufficient economy relies on its own human and natural resources to provide for its population,"⁸ and most economic development has reduced the ability of Alaska Native villages to maintain that self-sufficiency. Whereas all Alaska Native communities at one time enjoyed self-sufficient, subsistence economics relying on their own human and natural resources to provide for their population, the introduction of non-Native lifestyles and modern technology rapidly escalated cash needs, while opportunities to earn cash failed to grow along with those needs. This led to reliance on a transfer economy, dependence on the government, and resulting negative social and psychological consequences which prevail today.

Examples of some of the dramatic changes that occurred — and the impacts that they had on life in Native communities — were described by Mr. Patrick J. Madros, Sr., from Nulato, in his testimony before the Commission on June 1, 1993:

The first thing we have to do is go back in history and find out where our problems started. In my old hometown of Kaltag, I can only go back to the middle '50s and early '60s when the first electrical generator was brought into Kaltag by a barge in the summer. I'll use this as a starting point of the change from my subsistence way of life to a cash-based economy.

In order to maintain a light bulb in your home, you had to pay a monthly electric bill in cash. That changed the way of billing and so forth — a major change in our society. Rather than pay bills once a year at the end of a season, this bill was occurring monthly. If you didn't pay it on a monthly basis, you lost your electricity.

The second thing that we thought up is we became a state, and with that wedlock developed. A woman who had kids out of wedlock became eligible for assistance — I figured some three to four hundred dollars a month at that time. Three hundred times 12 is $3,600 a year tax free to a person in our society out of wedlock, and that was a lot of money, especially when the per capita at that time was $1,000 in our area. All of a sudden this person became a very rich person and the single-parent family became acceptable.

It was during this era that the role of the Native male changed, and we did not realize it [then]. Instead of being the provider our culture called for, we took second place to welfare. The roles we played were not really important any more, as hunters, wood and water gatherers. We were replaced by PHS (Public Health Service), BIA (Bureau of Indian Affairs), free housing, energy assistance, food stamps, and the list could just go on and on and on.

The debilitating effects of this massive upheaval in the long-standing economy of Alaska Natives were dramatic, and repercussions are still felt throughout Alaska. As the overall economy evolved in Alaska, the Natives' simultaneous participation in two or three economic systems has been a material result: subsistence plus the transfer economy (in a majority of cases) with the addition of the market economy (in fewer cases) is the rule among rural Alaska Natives. Moreover, the movement from one system to another within a community and across time adds unaccountable complexities to any review of rural Native economy.

In its quest for such recommendations, the Commission has chosen to focus its attention on three primary topic areas, with additional discussion of other adjunct economic development issues. The first area is employment of Alaska Natives. The second is local production of goods and other village-based Native businesses, such as fish processing cooperatives, and "cottage industries." The third is the Community Development Quota (CDQ), which evolved from the Magnuson Fisheries Conservation and Management Act; the CDQ is reviewed both in its current fishing-industry configuration and as a potential model for providing future local economic development opportunities in other extraction industries.

The Commission readily admits that these three topic areas, even with the elaborations that are included here, represent only a confined sector of the economic landscape. This study takes its place at the end of a long, historical sequence of reports, studies, commissions, and recommendations that have preceded it, few of which seem to have made a significant impact on the economic welfare of Alaska's Native people. Moreover, this report emerges at a time that dire predictions about the future of Alaska's overall economy prevail and substantial modulations are transpiring at the federal level, necessitated by national deficit reduction. All of these will inevitably lead to diminishing transfer payments and government employment, which will inevitably, in turn, hit rural Alaska Natives harder than any other segment of the population.

Unlike many previous reports and studies, this study of the Alaska Natives Commission should lead to policy change and the implementation of new program options, all of which will offer improvements to the economic future of Alaska Natives. Respecting the fiscal limits of both the state and federal governments, the Commission has, in its development of this study and the recommendations which it contains, constrained its urge to request more funding and more programs. Rather, it has striven to encourage the redirection of current funding and implementation of policy changes that will increase public funding only minimally, if at all.

II. Employment

A. Options, Opportunities, and a Solid Foundation of Values

In the testimony that the Alaska Natives Commission received, during hearings held all around Alaska, lack of employment was often raised as a major problem facing Alaska Natives. However, there was not always consensus among presenters about ways in which employment opportunities could best be provided. Referring back to the preceding discussion about the mixture of different economies and the need for Alaska Natives to participate in two or three at the same time, the structure of a job is an important criterion for its being occupied by an Alaska Native. The following examples help to reveal some of the important fundamental social and cultural aspects of employment that are too often ignored when government-subsidized work programs are initiated. They also lead to portray the differences in perspective and offer clues to potential solutions. The first was provided by Mr. Jonathan Solomon, Second Chief of the Fort Yukon Tribal Council:

Economic development for Fort Yukon is hunting, trapping, and fishing. We got a project right now at Fort Yukon, the airport project . . . with all kind of work. Monday morning there was eight jobs opening. Not one was filled, because the kings happened to show up. When September hunting come around, you're not going to find anybody work in Fort Yukon, because this is their economic development you're talking about, their livelihood.

Another view was offered by Mr. Edward Rutledge, Director of Planning and Development, Tanana Chiefs Conference, Fairbanks. Noting that it has been shown that saving existing jobs is far less costly than new ones, Mr. Rutledge related the importance of the fisheries to employment. It is ironic that his testimony preceded the "chum crash" by one full year.

Probably the most significant segment of jobs at risk of loss are those that pertain to fisheries — both commercial and subsistence. The combination of high seas interception of Alaska salmon and the exploitation of mixed stock fisheries, most notably the False Pass fishery, have resulted in a drastic reduction in the wild resource available for harvest in our Interior rivers. We are the last in line to have a chance at harvesting salmon and are the first in line to suffer due to diminishing salmon populations.

Salmon enhancement programs for the Yukon River, the Kuskokwim River, and the tributaries of both of these rivers will greatly enhance the economic conditions of the Interior. The value of fisheries is not limited to only the dollars earned by fishermen, crews, and processors but also includes the import substitution value of salmon products harvested and used by subsistence fishermen.

Mr. Rutledge later added:

I think any job expansion in rural communities basically boils down to individual people, and the skills those people have to either be self-employed or be employed in an organization, or a government, or whatever, and to create the new jobs to the expansions of whatever entity they're working for.

The question of orientation, whether toward the individual or the community, begins to take on greater relevance when job creation is discussed. Reviewing the experiences resulting from one of the largest development undertakings since the pipeline, the Red Dog Mine, Mr. John Shively, NANA's Executive Vice President, discussed interactions between the NANA Regional Corporation and Cominco:

One of the places that we have not succeeded, we've tried with Cominco, is this idea that they should stop looking to individual workers' careers. I mean, some people will do that, but they should be more flexible in terms of offering people [jobs] that maybe only want to work their operation six months of the year, or developing a big cadre of people, let's say millwrights, they know they've got 60 or 70 in the region, and they just run people in and out, because . . . people aren't, in our region, into wealth accumulation, which is the basis for western economy. They're into sharing; they're into other cultural activities; and it's a strength that has never been used, to my knowledge, very well in this state in any sort of ongoing business that can keep a broader work force working. Actually, money from projects like Red Dog, I think, goes much farther in the Native community than it would in the non-Native community, because it doesn't go to the people that earn it, it goes to their immediate and extended family.

The Commission brings this discussion to the forefront at this point in order to incorporate what has been called "Management by Values," a system that was developed in Hawaii by Dr. George Kanahele⁹ and presented at an Economic Summit organized by the Alaska Federation of Natives in 1989. The core of Management by Values and values-based economic development resides in (a) values, (b) the right values, and (c) shared values. These are the responsibility of the Native community, in the sense that, as mentioned in the preceding quote from Mr. Shively, the community, as a whole, must make sure that corporations or governments intending to initiate economic development impacting a community must embrace and adhere to the community's values, while remaining flexible and adaptable. As Dr. Kanahele said in his closing remarks to the Summit, "The challenge of the 21st century will be to create a values-based politic, one in which our values provide the moorings. Continually tested against reality, debated, refined, and deepened, our values must become our beacon's casting light on the road ahead."¹⁰

An excellent example of values-based economic development "in action" occurred on St. Paul Island and was described for the Commission by Mr. Larry Merculieff, St. Paul's City Manager:

In 1976, St. Paul had absolutely no economic development or businesses whatsoever, and by 1983 our economic base was wiped out to the point where we had no place to cash a check. When we were put into that situation of total desperation we had to throw out the conventional wisdom manual about economic development and start fresh. And thus far everything we've tried has worked, but it required us throwing out practically everything in terms of conventional approaches to economic development.

For example, we didn't bring in any consultants because we decided that we would have to build on our strength; and so the very first thing we did is audit our strength, and the first and most important strength we acknowledged was: What are the cultural strengths? Now, normally, when a consultant is brought in, they usually do an audit of human resources, capital, and natural resources; but they don't do the cultural audit — what is the cultural strength? It's going to be the foundation to build on, and frequently economic development programs come and start something that doesn't work on the cultural strengths.

The importance of values-based economic development and the articulation and involvement of local, Native values is a recurring theme in this study. No matter what topic is addressed or what recommendation is made, unless the foundation is firmly set in the cultural traditions and values of the Alaska Native people who are to be impacted, the likelihood that it will "work" is low. Furthermore, when projects and programs are begun that fly in the face of local Native values, more harm than good can be the expected result.

B. Unemployment Statistics

On several occasions, the Commission heard testimony from individuals who questioned the accuracy and validity of unemployment statistics that are published for Alaska, which often show surprisingly low unemployment in rural areas well known for their lack of employment opportunities. There is an obvious discrepancy between the government's figures and reality, as noted by Mr. Hoefferle, the Chief Executive Officer, Bristol Bay Native Association, in his testimony before the Commission in Dillingham:

I suspect that you already know that unemployment figures that are quoted for Bristol Bay and rural Alaska in general are bogus numbers. They're mythical figures. They're cited at 12 percent, while we know that this rate is closer to 60 percent unemployment.

The explanation was well stated by Mr. Rutledge, Tanana Chiefs Conference:

The Alaska Department of Labor's official definition of unemployment, currently in place, excludes anyone who has made no attempt to find work in the previous four-week period. Most Alaska economists believe that Alaska's rural localities have proportionately more of these "discouraged workers." What is not mentioned by the Department of Labor is that in most rural, remote areas, discouraged workers do not result from those individuals not seeking work, but as a result of no work being available during much of the year. Therefore, after a period of four non-working weeks they drop out of the system and no longer register on unemployment statistics.

An example makes the difference between the State of Alaska's figures and "true unemployment" obvious. In a (hypothetical) Alaska Native village of 300 there are perhaps adults who would be considered the "work force," but there are only ten paying jobs (some of which are part-time): the Community Health Aide, the Community Health Representative, the Village Public Safety Officer, the Postmistress, two school teachers, a teacher's aide, a school cook, a school janitor, and the generator maintenance person. Even if all ten jobs were held by village residents, which is unlikely since most teaching positions are taken by non-Natives who live in the village only during the school year, that would leave 70 of the 80 employable individuals unemployed, producing an unemployment statistic of 70/80 or 87.5 percent, which accurately depicts the situation. However, each of the 70 unemployed persons knows that there are only ten jobs in the village and that each of them is currently occupied. Thus, none will venture to the state's employment office to enroll as an unemployed person looking for employment unless by doing so he/she receives unemployment compensation. The handful who do fit into that latter category will constitute the basis for the Department of Labor's calculations, which, as a result, may show unemployment to be 10 percent. Actual data from several villages substantiate this analysis. For example, in 1990 in Pilot Point, of the 38 individuals constituting the work force, 17 were employed, 21 were unemployed, and not one was "actively seeking employment." Whereas the actual unemployment rate was consequently 21/38 or 55.3 percent, the Department of Labor methodology would have calculated unemployment at 0.0 percent.¹¹

C. Alaska Native Employment and Unemployment: An Overview

The abstract term "economy" translates in human terms for individuals as jobs that provide: resources necessary to acquire food, shelter, clothing, and to meet other needs; personal fulfillment and a sense of dignity to those who work in them; and contributions to the well-being of their community and society overall.

As the environment in which they live has moved from a purely subsistence economy towards one that also involves the Western cash economy, many Alaska Natives, including most rural Alaska Natives, have not gained meaningful entry into that new economy. This leaves Alaska Natives unable to provide the necessities of life for themselves and their families and tears the social fabric of the communities in which they live.

1. Unemployment

In 1990 Alaska Natives numbered 85,698 and constituted just over 15 percent of the state's total population. Of this number, 62 percent of Alaska Natives (about 52,000) lived in village Alaska.

Isolation of Alaska Native people from the cash economy, whether they are rural or urban dwellers, is reflected in unemployment statistics. Statistics from the 1990 census show that while 8.8 percent of Alaska's total work force was unemployed in that year, 22.1 percent¹² of the portion of Alaska's work force comprised of Alaska Natives was unemployed.

Of particular concern to the Commission are the findings relating to unemployment among Native men in the villages. While this is not meant to draw attention from the unemployment situation among Native women or Natives residing in urban areas, the overwhelming testimony offered to the Commission linking, in particular, lack of productive opportunities for Native men in the villages with behavioral health and antisocial problems, as well as death, makes these statistics exceedingly urgent. For example, in one out of every eight villages, male unemployment is in excess of 50 percent. In one-third of all Native villages, male unemployment — at 32.4 percent (as calculated by the Alaska Department of Labor) — is nearly quadruple the statewide average unemployment rate.

As the discussion below points out, those men who do work are highly dependent on seasonal employment and on the few lower-level (e.g., custodial and maintenance) jobs available in small rural villages, and their female counterparts do not fare much better.

2. Employment Opportunities

a. General. Looking at those Alaska Natives who are in the work force, occupations range across the employment spectrum. There are, however, concentrations of Natives in certain fields.

The training programs administered by the Bureau of Indian Affairs mainly during the 1960s, together with the many training and employment opportunities in the construction trades associated with building the Tram-Alaska Pipeline in the 1970s, produced a present-day Native male work force with high concentrations in the crafts, trades, and service sectors. Among the roughly 16,000 Alaska Native men in the state's civilian labor force, about 42 percent (6,645) are in these fields. Of these, nearly one-fourth (24%) are in the construction trades (including operating engineers), and an additional 14 percent are mechanics and repairers. Some 1,231 are construction laborers, and even more, 1,442, are janitors. Significantly, this translates into the fact that about one in every 11 (9.0%) of Native males in the state's civilian labor force is a janitor.

Like their male counterparts, Native women are highly concentrated in a handful of job classifications within the state's civilian work force. Two broad categories in particular, administrative support occupations and service occupations, account for about 56 percent of the job classifications in which employed Native women can be found. Nearly one in three (30%) of all employed Alaska Native women works either as a secretary or clerk; and one in four (26%) works in the service sector, primarily in the food preparation and custodial fields. Another 10 percent of employed Alaska Native women are in sales, and nine percent find work in the executive and administrative fields.

While all Natives, both male and female, are severely underrepresented in managerial and professional specialty occupations, Native women are about 60 percent more likely to be working in the management and professional fields than are Native men. In professional specialty occupations (which include teachers and higher-level health practitioners, among others), Native women outnumber their male counterparts by better than two to one.

Finally, with respect to the types of jobs most likely to be available in village Alaska, including the many regional centers, men find employment at a rate far lower than the rate for women. These jobs — in the schools, in the city offices, and in a handful of retail and service establishments — are likely to continue to be the only sources of full- and part-time employment in many villages for decades to come.

b. Public Sector Employment. Throughout the 1980s and up to the present, governments (federal, state, and local combined) accounted for about one-third of the total annual wages of the state's industries. This huge outlay of wages was some 250 percent greater than the next highest industry (services), and from the years 1980 to 1987 nearly matched the total wages paid by the mining, construction, manufacturing, and retail trade sectors combined.

In terms of jobs, positions within the government sector consistently account for about 30 percent of the statewide total. As pointed out by Alaska's Department of Commerce and Economic Development: "These proportions underestimate the relative importance of government employment, since more of its employees are full time and they tend to be higher-paid."

It is difficult to determine the extent to which Natives hold jobs at the local government level, a sector that accounts for over 40 percent of jobs within the total government industry. However, with the ability for more centralized record keeping and certain affirmative action requirements to meet, the state and federal governments were able to supply the Commission with somewhat accurate numbers regarding Native participation in their respective work forces.

c. Federal Government Employment. In 1991, the federal government employed nearly 19,000 people in Alaska. A recent survey of various federal departments (current to July 1993) encompassing about 11,000 of those jobs, or 57 percent of federal positions, showed that a wide disparity exists between Alaska Natives as a percentage of the state's population and their representation in the federal work force.

With two exceptions — the Indian Health Service (IHS) and the Bureau of Indian Affairs (BIA) — the federal agencies surveyed had a combined cumulative Alaska Native/American Indian employment rate of 5.6 percent. This is despite the fact that Alaska Natives make up about three times that number in the state's general population. The Indian Health Service and the Bureau of Indian Affairs, which account for about one-eighth of the total federal jobs surveyed, had significantly higher Alaska Native/American Indian hiring percentage, 90.5 percent and 83.0 percent, respectively.

The key difference between these two agencies and the rest of the federal agencies is that IHS and BIA have special congressionally-approved Alaska Native/American Indian hire preference provisions. But for such a special preference provision, it appears that federal agencies, on the whole, for whatever reasons are not capable of employing Alaska Natives in meaningful numbers.

The Commission reminds the federal administration that in the Alaska National Interest Lands Conservation Act (ANILCA), Congress directed the Secretaries of Interior and Agriculture to institute Native and local preference in a number of programs related to the Conservation System Units established by the Act. None of these has been followed. The Alaska Federation of Natives brought the failure of the government to follow Congressional mandate to the attention of Secretary Babbitt during his 1993 visit to Alaska. Specifically, AFN noted the following:

Because of the close relationships that Native people and their corporations have with the new Conservation System Units, and in order to address Native concerns over potential loss of economic opportunities, ANILCA provided for specific potential benefits to Natives, Native corporations, and other residents of rural Alaska.

Section 1306 provides that, to the extent practicable and desirable, the Secretary shall attempt to locate administrative sites and visitor facilities on Native lands in the vicinity of any Conservation System Unit.

Section 1307 provides that the Secretary shall give preference, in the provision of visitor services, to that Native corporation that he or she determines is the most directly affected by the establishment of expansion of the respective unit. This section makes specific reference to Cook Inlet Region, Inc. (CIRI) and its villages for services in the Kenai National Moose Range and Lake Clark National Park, reflecting the intent of an earlier agreement with the Secretary.

Section 1308 provides that the Secretary shall establish a program under which any individual who has lived in or near a Conservation System Unit will be given preference for employment.¹³

Expanding on that last point, the Act stipulates that:

[T]he Secretary shall establish a program under which any individual who, by reason of having lived or worked in or near a conservation system unit, has special knowledge or expertise concerning the natural or cultural resources of such unit and management thereof (as determined by the Secretary) shall be considered for selection for any position without regard to —

(1) any provision of the civil service laws or regulations thereunder which require minimum periods of formal training or experience,

(2) any such provision which provides an employment preference to any other class of applicant in such selection, and

(3) any numerical limitation on personnel otherwise applicable.¹⁴

These articles of ANILCA were designed purposefully to provide employment for the Alaska Natives who comprise the local population and who unquestionably constitute those who "have special knowledge or expertise concerning the natural or cultural resources." Since passage of ANILCA, these articles have been patently ignored by the federal government.

d. State Government Employment. If the federal government's record of Alaska Native employment is much less than adequate, state government's record is dismal. Alaska Natives, since statehood, have been virtually locked out of meaningful employment in the State of Alaska’s job industry.

In 1992, only 4.8 percent of the State of Alaska's executive branch work force of 13,703 individuals was comprised of Alaska Natives. Table 1 shows the number and percentage of Alaska Natives holding full-time positions in key agencies whose programs and policies have significant effect on Alaska Natives and rural Alaska in general.¹⁵ As the numbers demonstrate, Alaska Natives are extremely underrepresented in almost all of these agencies. Of particular note are the Departments of Law, Natural Resources, and Fish and Game. Full-time Alaska Natives in these agencies, as percentages of overall departmental staffs, are 3.9 percent, 2.1 percent, and 1.6 percent, respectively. Further, between these three important agencies, there is only one Alaska Native holding a position in the "officials/administrators" classification.

Of those Alaska Natives working in the State of Alaska labor force, a disproportionate share find themselves in the lower ranks of authority and earnings. This is quite evident in looking at the figures relative to those employees in the general government bargaining unit. Nearly 80 percent of all executive branch jobs fall within this unit, and Alaska Natives' representation (4.7%) in the unit matches their representation in the work force as a whole.

Alaska Natives are concentrated in lower paying jobs (see Table 1). Whereas 53.6 percent of Alaska Native employees in the general government unit of the executive branch are employed in these lower ranges (i.e., State Range 12 and lower), less than one-half that percentage (25.7%) of whites are in those ranges. At the other end of the spectrum, the discrepancies are even more pronounced. While only 2.1 percent of Alaska Native employees in the general government unit of the executive branch hold positions in the higher wage and policy-making ranges (State Range 20 and above), 16.8 percent of white employees are in these positions.

Table 1: Numbers and Percentages of Natives Holding Full-time Positions in Departments of Alaska State Government

e. Capital Improvement and Housing Programs. Two problems in particular have surfaced in the Commission's work, and they have both been mentioned in testimony presented at the hearings of the Alaska Natives Commission. The first of these is a policy — or at least a standing practice — of the U.S. Department of Housing and Urban Development (HUD) that appears to result in the prohibition of tribes from designing and constructing their own housing. Flowing funds through Native housing authorities, HUD groups housing construction programs in such a way that large contractors are practically assured of receiving contracts, and local laborers are cut out of the process. Mr. Mark Edward Springer, from Hooper Bay, summed up the problem well in his testimony before the Commission.

HUD is . . . man, they're a big bureaucracy! They are critical to our survival because they're the ones who build our houses out there, through the housing authorities, and I think it's kind of a two-pronged approach. You know, I think the housing authorities in some cases have kind of got to change their attitudes a little bit in terms of the provision of service.

Not to mention any housing authorities by name, but when they come in and say, "Well, you know, it's not our business to be making money," or when you say, "[w]e here in Hooper Bay have got a really nice wood shop, the city has got thousands of dollars' worth of power tools — I mean, industrial grade power tools here — and we've got guys that are, you know, almost cabinet makers. How would we go about getting a contract to build breakfast nooks for the houses you're going to be building next summer?" When they get through laughing over the term "breakfast nook," they say, "Oh, we can't tell our contractors what to do. The contractor can buy his stuff where we wants." So the housing authorities slough it all off onto the contractor. After it goes out to bid we see what the contractor wants to do.

More often than not, the result of this process is that non-Native subcontractors and firms — in fact, frequently non-Alaskan subcontractors and firms — receive the money and employ their own people. This problem could be remedied by a restructuring of HUD's bidding and contracting policies. Regional Native corporations can become more active in contracting as well; the 1991 amendments to the Alaska Native Claims Settlement Act (ANCSA) and subsequent legislation automatically gave ANCSA corporations designation as Disadvantaged Business Enterprises, which enables them to obtain plan sets and participate in government contracts at lower cost. It is unlikely that any ANCSA regional corporation would pursue any such contracts with HUD, however, unless the policies and regulations change. Some of those that have tried in the past have lost considerable sums of money.

Another problem that often accompanies the aforementioned difficulty with HUD is that created by the Davis Bacon Act, which sets minimum wage structures for federally subsidized capital projects, including those administered through HUD. One common consequence of this is the importation of "tried and true" laborers by contractors who shy away from hiring local Alaska Natives for projects in rural Alaska. Their argument is that if they have to pay a very high wage, they do not want to risk that wage on someone who is unknown and may not be reliable. This problem can be remedied through enabling local force account construction, rather than the use of a general contractor. It can also be resolved by designating Alaska as a geographical region not covered by Davis Bacon. As the recommendations made in the final section of this study note, the Commission urges both the federal administration and Congress to act to relieve this employment problem since it has a disproportionately large negative impact on Alaska Natives.

f. Other. One significant employment opportunity that may soon be accessible to Alaska Natives derives from the need for the many land conveyances to be surveyed that are still pending from both ANCSA and the Alaska National Interest Land Conservation Act (ANILCA). Native corporation conveyances, state government conveyances, "townsites," Native allotments, and ANCSA 14(c) conveyances all need to have surveys completed before they can be finalized. Interim conveyances have been made through what is termed "protracted survey" based upon estimated boundaries drawn from existing plats and surveys. -But specific, on-site, certified surveys have to be completed for the final conveyances to occur. Altogether, there are approximately 10,000 Native allotments, and only a small fraction of that number have been surveyed. Of the 200 conveyances under section 14(c) of ANCSA, only about 25 have been surveyed. At its current level of budgeting, the Bureau of Land Management estimates that there are about 30 years of surveying work left to be completed. If the Department of Interior were to increase its budget for this now, the conveyances could be completed much more quickly than they otherwise will be and, since the costs of surveying will increase over time, the overall expense would be lower than it will be if it continues to be spread out over the next several decades. Moreover, if this initiative included an emphasis on — and priority for — contracting with ANCSA corporations and other Native firms for the on-site surveying, coupled with federal job training programs, the University of Alaska, and training centers in the hubs (e.g., Kotzebue, Nome, Bethel, Kodiak, etc.), approximately 1,000 rural jobs could be generated for Alaska Natives.

A second opportunity that is about to avail itself to Alaska Natives is the result of the National and Community Service Trust Act, which was signed by President Clinton in September 1993. In its first year of implementation, 1994, the program plans to enable 20,000 people to earn education benefits while being employed in community service jobs.¹⁶

As this new program is organized and implemented in Alaska, Native leaders need to become involved in the State Commission for National Service that is required to be established under the Act. Furthermore, Alaska Native regional non-profit corporations should engage in planning to ensure that Natives achieve easy access to these employment and education opportunities. Tribal councils need to develop community-service jobs for their tribal members as part of AmeriCorps.

3. Principal Causes of the Unemployment Problem

There are multiple reasons that many Alaska Natives have not gained meaningful entry into the cash economy. That many in rural Alaska still rely on the subsistence economy for many of their needs is one of the most important reasons. Another is that some live in locations appropriate to a subsistence economy that have not yet become, and may never be, viable in a Western cash economy in the long term.

Other Alaska Natives, for a variety of complex reasons, have not been able to acquire the skills that would make them employable in the income-producing jobs available where they live. This is coupled with in-flow to rural areas of non-residents who take many of the few jobs that are available. Calista Corporation, a regional Native corporation that has dealt with rural employment issues for over two decades in one of the most economically distressed areas of the state, pointed out in a 1993 report:

During the economic boom of the 1980s, most jobs created in the villages were taken by non-residents. This pattern continues today as teachers, administrative officials, health care professionals, and government employees move to the villages to take jobs . . . [O]ver half the employment opportunities created by public projects in villages went to non-residents, with more than 10 percent of those jobs going to workers who were not even residents of Alaska.¹⁷

A final reason for the lack of significant Alaska Native participation in Alaska's work force is that when jobs are available and Alaska Natives have the skills to fill them, most employers have not shaped the jobs in ways that take advantage of Natives' cultural strengths and that recognize the differing life and work patterns of Alaska Natives.

4. Effects of High Unemployment Among Alaska Natives

a. Poverty. The impact of the unemployment rate is seen in 1990 census statistics on "persons in poverty." Alaska Native per capita income was only 45.9 percent that of Alaska non-Natives. An estimated 21.5 percent of Alaska Native families had incomes below the officially established "poverty" line income ($12,674 for a family of four) in contrast to 6.8 percent of all Alaskan families. The 21.5 percent of Alaska Native families living in poverty was a far higher percentage than that for whites (4.5 percent), blacks (8.8 percent), Asians and Pacific Islanders (6.0 percent), or other ethnic groups (7.0 percent).

These figures are even more dismal when it is realized that they are based on a nationwide determination of what constitutes inadequate income. The figures do not take into account the higher cost of living in Alaska. The Alaska Department of Labor estimates that if the higher cost of living were taken into account on a statewide basis, the overall poverty rate would be 12.5 percent with corresponding increases in Native poverty rates. Those rates would necessarily be much greater in rural areas where the cost of living is substantially higher than the 12.5 percent rate commonly accepted for Anchorage.

b. Growth of the Transfer Economy. The lack of employment opportunities for Alaska Natives has a direct impact on the level of government transfers needed to provide a basic "safety net" for Alaska Natives. These Americans, like their counterparts throughout the state and the nation, have expectations about what "modern" life should be. These expectations, first introduced by the missionaries and school teachers and traders, have been fully adopted by the current generation of Alaska Natives. Absent the economic means to fulfill these expectations on their own, Alaska Natives have turned — knowingly in some instances and unknowingly in others — to subsidies, income maintenance programs, and other components of the transfer economy to make ends meet.

c. Employment and Subsistence: The Fundamental Bond. As the Alaska Department of Commerce and Economic Development points out in a late 1980s report:

Employment generated by state-financed construction projects has not proven to be permanent or self-sustaining for rural residents. Whatever the reasons for the difficulty in translating short-term government monies into long-term jobs in the villages, one consequence of high and increasing levels of unemployment is that subsistence activities, which have always been of great importance to the villages, will grow in absolute and relative importance. In turn, this has numerous implications for policies and programs.¹⁸

Though subsistence hunting, fishing and gathering by Alaska Natives is extremely important in the cultural context, it is also a large and fundamental part of the rural Alaska economy. The Alaska Department of Fish and Game (ADF&G), following 15 years of intensive research, concluded that the non-commercial taking of wild plant and animal species for food and other domestic uses continues to produce "significant economic value" in contemporary Alaska, particularly in the rural areas of the state. For example, 45 of 98 communities surveyed by the ADF&G during the early 1980s were found to have wild food harvesting equal to or surpassing in quantity the western U.S. standard for average annual per capita purchases of meat, fish, and poultry. Some 83 percent of those same 98 communities reached at least half of that western U.S. benchmark through hunting and fishing.

The simple fact of the matter is quite clear, as further research reveals: subsistence productivity (and activity) tends to vary inversely with community levels of cash income. The result is equally clear: as long as unemployment and the corresponding inability of rural Natives to acquire meaningful cash incomes persist, the demand for access to fish and game resources by Alaska Natives will continue to be a reality of life in Alaska.

The importance of Alaska Natives' maintaining their involvement in subsistence cannot be overly stressed. As Mr. Hoefferle put it in his testimony before the Commission in Dillingham:

Here today in our villages we have a 60 percent unemployment rate. Sixty percent! What do you think our people live on? The cost of living in Dillingham is 165 percent of the cost of living in Anchorage. The cost of a gallon of gasoline in Dillingham is $1.92 . . . in Nondalton it is $2.50. How do people survive with no jobs and a high cost of living? The answer is very simple, it's subsistence. . . .

Subsistence economic systems, with their emphasis on sharing, accepting the contribution of all participants and so forth, are the epitome of a supremely flexible and very conservative economic system, a system that's been honed over the millennia to adapt to changes in climate and abundance of resources and to adapt to the kinds of economic fluctuations that we're seeing in the state's economy right now. In the current state economy, in its impending impact on rural, social, and economic life, the state government should be promoting utilization of subsistence systems, not attacking them.

The Commission urges the State of Alaska — and the federal government as well — to seriously consider these points. The consequences of not safeguarding Alaska Natives' continuing involvement in subsistence far outweigh the insignificant problems that may be faced in ensuring Native preference for access. Mr. Gary Moore, Economic Development Specialist for the Tanana Chiefs Conference, summarized the situation well:

Coming to the conclusion that rural communities or villages endure greater economic hardships certainly comes as no surprise. However, what villages critically depend on to offset the high cost of living is the utilization of subsistence wildlife resources. Without this resource the village lifestyle would quickly perish. Bringing rural Alaska into a cash dependent economy is still fairly new, considering that Alaska Natives lived and survived solely in a subsistence way of life for thousands of years prior to the onslaught of Western civilization in this country. In the anticipated future, all change, adaptation, and evolving of the Native way of life should be controlled by Native people. This can be accomplished by maximizing their participation in proposed changes. This state and our nation, as a whole, has had a notorious history of paying little or no regard for the indigenous people's rich cultural past, prior to permanently altering their lifestyle. Let it be noted that, regardless of future economic conditions in rural communities, subsistence activities will always play a vital role in the lives and cultural practices of modem Native people . . .

It is not uncommon to hear state and federal officials focus on the costs of economic development programs. It may be advantageous for these officials to consider the costs of not adequately funding such programs. The combination of the lack of jobs and high cost of living results in a myriad of social and behavioral problems that burden society in general, and cost the state and federal government millions of dollars each year. These funds are spent to support social, family, and mental health programs, which, to some degree, are the result of low self-esteem stemming from chronic unemployment.¹⁹

D. Employment and ANCSA Corporations: Regional and Village

When ANCSA was signed into law in 1971, it erected a complicated set of new and alien systems for the Alaska Natives who had been assured by the federal government that their aboriginal claims to Alaska would be settled through the payment of money ($962,500,000) and the selection of limited land holdings (44,000,000 acres). However, rather than transferring either land title or funds to Native governmental entities, ANCSA established an intricate corporate structure, with newly created for-profit corporations receiving the settlement payment, to be held in the form of shares for each corporate "shareholder." Land was similarly conveyed to 12 regional²⁰ and over 200 village for-profit corporations, but the subsurface rights to land were retained by the regional corporations.

On the other hand, opportunities afforded the village corporations initially appeared promising. They received significant capital resources (i.e., money and land) and they had access to a ready labor pool. However, they were not equipped with nor prepared to obtain quickly the managerial capability needed to bring the resources and labor together effectively. Beyond that, the sudden thrust into the for-profit, competitive Western world did not readily conform to traditional values and culturally based patterns of decision making that predominated in the villages. The "bottom-line" was not always the highest priority. Confusion rendered corporation boards easy prey for unscrupulous consultants and advisors. Among the potential benefits that an ANCSA Native village corporation can bring to its village is cash paid out in dividends, employment, and capital investment/infrastructure. Of these, cash paid out in dividends has generally had the least overall impact in a village since, in most cases, villages have become conduits for cash.

Because there is no significant commerce or industry in the villages, most of the cash which enters the village economy turns around and leaves it: with exception of the few foods, some fuel, and certain clothing materials provided by subsistence activities, everything else villagers need must be purchased outside. The school custodian, whose salary brings cash into the village, orders his family's clothing from a catalog and sends money out of the village to cover the cost of the purchase. The firefighter, who brings his summer's wages home, buys food at the village store — and the storekeeper buys his stock from an urban wholesaler. The examples are endless and the results are obvious: what cash does come into the villages goes out again for imported goods and services.²¹

Even if employment in rural Alaska is significantly increased, unless there are additional ways to keep the money thus garnered in rural Alaska, the benefits will be relatively small and more individual than communal. Import substitution would enable each dollar brought into the village to cycle longer within the local economy and provide more local jobs and income. As we speak of increasing employment options within the customary context, we also need to look toward enhancing local production of goods that can be purchased in the place of those that would otherwise be ordered out or bought from a discount warehouse in Anchorage. Mittens, hats, parkas, mukluks, snowshoes, nets, skiffs, fishing gear, and other traditional items can be village-made, consistent with a subsistence lifestyle, and sold locally, recycling the limited cash resources that "regular" employment generates.

An assumption that is often made, particularly by those who are not familiar with ANCSA, is that the regional corporations offer large employment opportunities for Alaska Natives. With the exception of only a few of the corporations, that is not the case, as shown by a study published by the Institute of Social and Economic Research in 1991 that reviewed the employment practices of the 12 Native regional corporations in Alaska.

Table 2 shows that, all in all, there were only 306 direct, corporate positions available. Adding the joint ventures and subsidiaries raised that total to 7,416, but the corporations' ability to exercise Native preference in hiring diminishes with its direct involvement in management. Altogether, the data show that a total of 2,445 shareholders were employed by their respective regional corporations, joint ventures, and subsidiaries combined.²² Thus, 33 percent of the employees were shareholders.²³

Table 2: Regional Corporation Employment for 1991

There are differences of opinion among the shareholders of these 12 ANCSA corporations regarding the corporate goals. As Colt noted:

Some shareholders want their corporations to concentrate less on profits and more on jobs, education, and training. Others want them to be even more aggressive in going after profits and distributing dividends.²⁴

The opportunities for employment available within the village corporations are even more limited. With rare exception (e.g., Ukpeagvik Inupiat Corporation), village corporations have only one or two employees, although some (e.g., Cape Fox Corporation, which is discussed in a later section) have been active in contracting with other firms that do have substantial Native employment. All in all, though, the total number of jobs, part-time, full-time, and seasonal combined, in all of the ANCSA corporations, both regional and village, does not reach 8,000. With an estimated available work force²⁵ of over 54,000 Natives, there is a great and growing need for increased employment opportunities.

One of the ANCSA regional corporations that did choose to set shareholder employment as a high priority is the topic of the next section.

1. NANA as a Special Case: Setting Human Resource Goals

One example of a regional ANCSA corporation known for its employment of shareholders and, in other ways, holding the human factors above the drive to make profits, is the NANA Regional Corporation. Early in its development, as a substantiation of "values based economic development" (long before that term was coined) the NANA Board of Directors established its priorities in such a way that the needs of its shareholders could most effectively be met.

The NANA corporation's efforts to manage the impact of social change through the human resources approach are reflected principally in three orientations: a primary goal of subsistence protection; localization of production and investment function to promote regional economic self-sufficiency; and a quasi-governmental "constituency" approach to management.²⁶

By pursuing this management style, which was then characterized as an "empowering process,"²⁷ NANA has, it appears, maintained its position in the forefront of ANCSA regional corporations in terms of employment of its shareholders. It has also aggressively pursued ways in which subsistence resources within its region can be protected; the Northwest Arctic Borough, working in conjunction with NANA, established permitting ordinances that limit access to Borough (and NANA) land by outsiders for the taking of game and other natural resources. NANA has also engaged in significant development in its Red Dog Mine.

It is not the intent of the Commission to depreciate the work of any of the other regional corporations by highlighting NANA, for each corporation has its own priorities, agendas, and achievements. Rather, NANA is presented here as an example of what a contained system can accomplish if the community which it serves and its management or government agree on priorities and direction.

In terms of planning and policy development, NANA may prove to be a quintessential case in point. Building on the NANA example, one can envision an ideal ("utopian") Alaska Native village economy, in which the community, through consensus, agrees to uphold as its foremost priority a subsistence way of life. In this hypothetical village, employment and other means of bringing cash into the community are directed towards the capitalization of subsistence. Income garnered in excess of that need is banked for later communal use. Village (i.e., tribal) governmental functions are established as a means to protect subsistence resources. The community agrees — as a community — to share costs and distribute resources according to traditional, cultural patterns. In this scenario, the Native people have the benefits of enjoying a life that is more fulfilling in its social, ethical, and spiritual senses while necessarily foregoing some of the "trappings" of the modern, Western world. Budgets would be driven more by the need for new fishing gear or other items essential to subsistence harvesting than by luxuries such as Nintendo games and CD players. The empowerment process is predominant in such a community, with familial and communal cooperation being fundamental requirements of membership in the community (i.e., Native village or tribe).

Whereas this best-case perspective may be unrealistic as a statewide model, it may well be practical in many small villages. In order to develop this prototype, the concept of subsistence must be understood in a broader context than it is often viewed, especially by non-Natives or those far removed from Alaska.

Internationally, "subsistence" refers to those economic activities . . . which are relatively self-contained within a community or region, which are not conducted primarily for profit-maximization, which aim primarily for present consumption, and which are governed by traditional patterns rather than market conditions or immediate needs. A subsistence farmer, for example, is one who consumes most of what he produces, sells little in the cash market, buys few items for production and consumption, uses little non-family labor, employs noncapital demanding technology, possesses a limited standard of living, and whose decision making is dominated by family survival. Subsistence is, in this way, a system of production for both use and exchange. Its objective is not total self-sufficient nor capital formation but an endless flow of goods, services, and other products.²⁸

In such a self-contained community, individual income to capitalize subsistence could conceivably be partially derived from dividends paid by Native corporations (albeit small) and the Alaska Permanent Fund, augmented by part-time and seasonal wage-paying work, thereby diminishing, if not totally eliminating, dependence on transfer payments. Although the relative lack of employment in the village would remain, the impact of unemployment would be significantly lessened because of the concentrated use of funds to provide basic support and to capitalize subsistence activities.

III. Community Economic Development

A. Village Industry: Success Stories

In its search to find successful examples of locally generated village "business" in the sense of "cottage industry" the Commission listened carefully to all those who testified in the hearings held around the state and also sought out information from both state and federal government offices that are involved in funding or otherwise supporting such endeavors.²⁹ Several "success stories" surfaced, although they represent a small percentage of the villages in Alaska, which number over 200. They are briefly reviewed here to provide insights into the processes that Native communities have implemented to improve their economic futures. There are certainly others, but the following illustrate different types of approaches and outcomes. They are portrayed here to help policymakers understand some of the necessary and sufficient conditions that, it seems, are critical to success.

1. Saxman

A long-term success has been demonstrated by the Tlingit village of Saxman in the Southeast. Over the last seven or eight years, the Saxman tribal council, working with the city and the Economic Development Administration, has developed a highly successful tourism program at the Saxman Totem Park, which has provided employment for a number of tribal members (carvers, carpenters, and others) during the construction of a traditional long house and the restoration of the poles. Employment has continued: last summer over 15,000 visitors came to Saxman; 30 to 40 full-time jobs were filled by tribal members; and the village's annual income from the program grew to $250,000. The intensity of this effort is remarkable, as Saxman often has as many as 700 tourists passing through the Totem Park every two hours at the height of the summer season. Bill Williams, President of the Cape Fox Corporation (the ANCSA village corporation for Saxman), has said, "For me, the best thing about our tourist business is what it does for our young people. Working as guides they are exposed to a lot of people. They develop speaking skills and pride in who they are. We've seen this reflected later in their improved academic performance." Once again, this success shows that the relationship between economy, health, wellness, and self-esteem is both integral and resolute.

2. Kodiak Island

Within the last few years, the regional non-profit Native corporation serving the villages of Kodiak Island, the Kodiak Area Native Association (KANA), has organized an increasingly successful cooperative that currently supports about 25 artisans and craftspeople from several of the villages on the island. Begun by Mr. Joseph Kelley, a vocational rehabilitation administrator at KANA, the cooperative was initiated as a program to help people with disabilities, but it has evolved to promote Native art and culture, offer workshops to young people who want to learn traditional Alutiiq arts and crafts, and assist in marketing, including establishing new markets in Japan. The cooperative is also tied in with the Kodiak Island Connection Project, funded by the Alaska Department of Community and Regional Affairs and organized by the Southwest Alaska Municipal Conference, which also functions as the Alaska Regional Development Organization (ARDOR) for the geographical area that encompasses Kodiak Island.³¹ The Connection Project completed a marketing study and acted as a catalyst to bring individuals together in each of the island's villages, to work on crafts and share their skills with young people.

3. Klawock

Another example of a business endeavor that has come about as a result of coordination among different organizations, agencies, and governments is now reaching fruition in the village of Klawock, where the Klawock Cooperative Association, with assistance from the City of Klawock, major support from the Economic Development Administration, and a 20-year advance rental payment from the Tlingit and Haida Regional Electrical Authority, has converted the vacant cannery complex into an industrial mall to include several small businesses (including S.E.A. Leather Products, owned by Klawock-Heenya, which produces salmon leather garments sewn from traditional patterns). A second Klawock project is the new herring pound fishery that produces row-on-kelp for the Japanese market. Unusually, this endeavor involved two ANCSA village corporations, Klawock-Heenya and Shaan Seet (Craig) awarding a grant to the Alaska Department of Fish and Game, which had been restricted by the Board of Fish to use non-government funds for the development. The potential gross annual income for each of the 248 individuals who were given herring pound permits has been estimated at $20,000 once the business reaches a stable production level.

4. Emmonak

A collaborative effort that combined the resources and dedication of the Emmonak Corporation, Emmonak Tribal Council, City Council, Emmonak Co-op, Yukon Delta Fisheries Development Association and their Community Development Quota (CDQ) partner Golden Alaska Seafoods has led to substantial improvements in Emmonak. A barge has been renovated and, by securing an Indian Community Development Block Grant from HUD, the Emmonak Tribal Council has been able to expand the fishing co-op to other species. Additional funds for economic development in the village have been secured from the Alaska Department of Community and Regional Affairs and the federal Economic Development Administration. The project has been in place for many years and has had a tremendous impact on the village, particularly residents involved in fishing. The incorporation of the CDQ in this endeavor and training provided to villagers makes it especially relevant as an example of a successful local collaboration.

5. Common Threads Interwoven in Success

In its review of successful and upcoming village-based businesses and economic development programs, the Commission realized that there were common threads and characteristics that give clues to those who wish to explore similar projects and programs in the future. The first and most compelling characteristic is coordination of a number of different "entities" throughout the program's planning and development, including the traditional and IRA councils, municipal governments, village and regional ANCSA corporations, state agencies (e.g., the Department of Community and Regional Affairs, Department of Commerce and Economic Development, Department of Fish and Game), and the federal government (e.g., Economic Development Administration, Administration for Native Americans). Compared with five or ten years ago, current projects have only rarely involved the Bureau of Indian Affairs.

The second characteristic that appeared to hold in all of the successful projects that the Commission reviewed was community-based strategic planning, with emphasis on community, and an important component of that planning was the attention paid to Alaska Native values. As mentioned earlier, cultural and traditional values that uphold the strengths of the Alaska Native people must be articulated and incorporated into planning processes and planning documents in order for the outcome of that planning to be both accepted and appreciated within the community.

Other factors that appear to play important roles in success include the stability of the village government, consistency of leadership, cautious utilization of resources, and commitment to making a project work, even if it requires extra effort and more volunteer time than might have been predicted. The Commission returns to the discussion about the approach that NANA has taken to ensure that values are involved in all phases of planning and implementing economic development. Quoting Mr. John Shively of NANA:

I think that [cultural strength) really is critical, because . . . too often when we talk about economics, we talk about it from the Western standpoint. When we did Red Dog [mine], for instance, there were things that we put in there that, you know, no mining company would have ever put in, but they were at the top of our list: things like subsistence protection, rotations, assuring that we maintained political control in the region, ability for our shareholders to have access to subsistence, cultural foods at the mine, things like that. I mean, that was the head of our list; and, of course, the head of Cominco's list was how they were going to make money.³²

Another salient factor in the success of both small and large business enterprises involving Alaska Natives is the importance of the group rather than the individual. This was mentioned in several hearings that the Commission held and was also mentioned by Mr. Merculieff, describing experiences on St. Paul Island.

One of the cultural strengths we identified here locally was our group orientation . . . The federal government hadn't made a profit in the commercial fur sealing operation for 19 years, and we took it over one year before it was shut down and made a net profit of a half billion, because we restructured the work operations from individual orientation to group orientation and competition, and productivity and efficiency skyrocketed.³³

There is an intricate mix of special factors, circumstances, and energy that coalesce to produce a successful village business, and there are far too many "outliers" for any scientific conclusion to be drawn or system to be constructed that would ensure that failure is always avoided. However, as more businesses are started and more information is systematically gathered regarding the involvement of local, state, and federal government, ANCSA corporations, and the private sector, Natives will have access to enhanced data that will help lead them to create successful ventures. The Commission encourages existing organizations, such as the Institute of Social and Economic Research, to document "cottage industries" and other local production activities and to make relevant reference material concerning successes — and pitfalls — available to village councils, Alaska Native corporations, and individuals who are striving to improve the economic well-being of their communities.

B. Community Development Quotas

1. A Brief History of the CDQ³⁴

The concept of Community Development Quotas (CDQs) emerged in the mid-1980s as the Bering Sea groundfish fisheries, which had been dominated by foreign fishing fleets, became profitable for the domestic fishing industry. The idea of a guaranteed quota, which had previously been established in Greenland, New Zealand, Iceland, and elsewhere, was explored for implementation in Alaska. It was thought that if the coastal Native communities of western Alaska could implement such a program, they could help lessen chronic unemployment and social problems by sharing directly in the harvest of a multimillion-dollar fisheries resource. A contingent from western Alaska proposed an amendment to the Magnuson Fishery Conservation and Management Act, at the time of its reauthorization by Congress in 1989, that would have allowed the creation of CDQs. Unfortunately, the amendment did not succeed, and the Act was reauthorized without it.

Nonetheless, the Alaska-based seafood industry launched a campaign to convince the North Pacific Fishery Management Council to split groundfish allocations in the Gulf of Alaska and Bering Sea between shore-based seafood processors and offshore factory trawlers. At its meeting in April 1991, the Council adopted a specific CDQ alternative for analysis as part of the inshore-offshore proposal. The final inshore-offshore management plan that was approved by the Council in June 1991 included a provision that set aside 7.5 percent of the pollock quota in the Bering Sea, which represents approximately 100,000 tons annually, for a four-year CDQ program.

The CDQ provision was designed to give the Governor the lead responsibility for recommending who would receive quotas, a responsibility that has been delegated to the Department of Community and Regional Affairs. In 1992, state and federal officials drafted CDQ criteria, procedures, and regulations and then solicited applications from the eligible communities of western Alaska, with eligibility determined by (a) the community meeting the definition of Native village in ANCSA and (b) the location of the village on or within 50 miles of the Bering Sea coast from the Bering Strait to the westernmost of the Aleutian Islands or located on islands within the Bering Sea. Proposals were submitted by 62 villages through six newly formed or reorganized corporations, each of which had a corporate fishing partner.

The six corporations and their partners are Aleutian Pribilof Island Community Development Association with Trident Seafoods Corporation and Starbound Partnership; Bristol Bay Economic Development Corporation with Oceantrawl, Inc.; Central Bering Sea Fishermen's Association with American Seafoods Company, Inc.; Coastal Villages Fishing Cooperative with Golden Age Fisheries; Norton Sound Economic Development Corporation with Glacier Fish Company, Ltd.; Yukon Delta Fisheries Development Association with Golden Alaska Seafoods.

In November 1992, Governor Hickel issued findings and recommendations for the amount of quota each applicant would receive for 1992 and 1993, which were reviewed by the North Pacific Fishery Management Council and approved by the U.S. Secretary of Commerce on December 3, 1992. The biennial plans are based on 7.5 percent of the biologically harvestable Bering Sea pollock resources. Applications must address the level of local employment that will be created and the schedule for moving from reliance on CDQs to self-sufficiency. They must also include detailed business plans to allow the feasibility of the CDQ joint ventures to be evaluated. Under these joint ventures, the corporate partners purchase the rights to the fish, hire western Alaskans to work at all levels of their operations, and guide the CDQ groups to full involvement in the groundfish industry. State government requires active, not passive, operations; the mere sale of quota and receipt of dividends is not considered acceptable. Western Alaska residents must participate fully in the fisheries, and CDQ proceeds must be invested in fishery development programs and ventures that both create jobs and promote stable local economies in the participating villages.

2. CDQs: Accomplishments to Date

Because this is a relatively new program, the ways in which the CDQ can benefit the 62 villages that are participating in the program are still unfolding, but it is already clear that this program is both successful and creating a positive impact in all of the communities.

An example of a sweeping positive evaluation of the CDQ program appeared in the Anchorage Daily News in early January 1994:

Community Development Quotas shared by western Alaskans in the form of Bering Sea pollock royalties were hailed as a resounding success. During the program's first year, all groups receiving CDQs met or exceeded their goals in terms of employment, training, and investments.³⁵

There are several other aspects of the Magnuson Act that have also had very positive impacts on coastal communities in Alaska — and it is at times difficult to separate the results of these other components from those directly attributed to the CDQ. The following description of some of these illustrates both the complexity of the changes created by the Magnuson Act and the sweeping changes that have resulted:

The passage of the Magnuson Act in 1976 extended the jurisdiction of the United States over marine resources 200 miles offshore and established a priority for Americans to take the fish in those waters. This was one incentive for fishermen and processors to develop this resource — they had a subsidy in the form of reduced competition from the foreign fleet. The bridging mechanism between totally foreign harvest and processing of the fish resource and the "Americanization" of this process were joint venture operations. These were essentially contracts between American catcher boats and foreign processors whereby the American boats caught the fish and transferred them at sea to the foreign vessel. The Total Allowable Catch (TAC) was set aside for American fishermen and processors, but any of the TAC not used by this Domestic Annual Production (DAP) was usable by the joint Venture Production (JVP) operations. In turn, any of the TAC still left was then available as the Total Allowable Level of Foreign Fishing (TALFF) . . . [T]he TAC very rapidly changed from being TALFF dominated to 100 percent DAP.³⁶

The data presented in the report showed that the DAP increased from 4,198 tons out of the total cod catch of 36,401 tons (11.5%) in 1983 to 67,122 tons of the total cod catch of 67,122 tons (100%) in 1990. This dramatic shift from foreign to local Alaska utilization of the cod catch demonstrates one remarkable impact that the Magnuson Act has had on Alaska. The CDQ, and the additional broad opportunities that it provides, is another influential evolution of the Act that must be supported to ensure its long-term effects. The above-referenced shift from TALFF to DAP took seven years to complete, and similar changes resulting from the CDQ program may also take a while to be fully accomplished. The Commission strongly supports the continuation of the CDQ, its codification in the Magnuson Act, and its expansion in the future to include other fisheries to enable the coastal villages of western Alaska to realize the full potential of the program.

A personal example of the rewarding consequences of the CDQ provision was brought to the attention of the Commission at its hearings in Emmonak, when Ms. Frieda R. Costley testified:

Regarding economics, I wholeheartedly support the CDQ program which I feel is needed for our people. Unemployment is a depressing idea. A lot of people are on Public Assistance programs and this CDQ program is in my eyes going to lessen the unemployment rate in our village. By providing jobs for our people this may lead them to a better life instead of drinking and consuming dangerous liquids such as Lysol and Scope mouthwash. I know, before I got my job with the City of Emmonak I had no goals in life; at the time I saw alcohol as a way of beating depression. The Emmonak Tribal Council and the Yukon Delta Fish Marketing Co-op along with the CDQ program is a light on the horizon for betterment of our people, for the present and for the future.

Once again, the importance and involvement of the broadly ranging concept of "economy" in the multitude of other elements of village life (e.g., social, psychological) are demonstrated by Ms. Costley. The positive effects resulting from the infusion of economic and social support and assistance created by the CDQs are only now beginning to be fully realized in Alaska, but every sign indicates that the long-term rewards will have a major impact on the coastal Native communities.

3. The Need for Renewal

Unless there is some intervention in the sequence of events that is now under way, the CDQ allocation for Bering Sea Pollock will expire on December 31, 1995. In order for the Community Development Quotas to continue, two important processes must be accomplished. The first is that the North Pacific Fishery Management Council, which is now engaged in a comprehensive rationalization process to develop a system for the allocation of federal fisheries resources after 1995, must include the CDQs in its final comprehensive plan. The second is that when the Magnuson Act is reauthorized, the CDQs must be codified in the law. At the present time, the CDQs are allowed, but they are not an integral part of the Magnuson Act, which they must become. As the recommendations at the end of this report show, the Commission urges the administration and Congress to require the CDQ allocations, which will certainly prove to be beneficial to Alaska Natives and will stimulate increased economic activities in all 62 of the participating villages.³⁷

4. Exploration of the CDQ as a Model for Other Extraction Industries

The Commission sees the potential for Community Development Quotas in other extraction industries, in addition to fishing. If, for example, a percentage of the resources from timber or mining or oil were made available in the same way that the CDQ has made a percentage of the pollock fishery available, with similar planning groups and social goals, the conceptual program would be greatly magnified in terms of its scope and breadth and the number of Alaska Native villages that would ultimately benefit.

C. Additional Resources for Alaska Native Economic Development

1. Reindeer

As a resource, reindeer represent a unique niche for Alaska Natives, because of the exclusive right that they now have to establish and manage herds. Bringing domestic reindeer to Alaska was originally proposed to Congress by Charles Townsend of the U.S. Fish Commission in 1885. In 1891, Reverend Sheldon Jackson, a Presbyterian missionary and the U.S. General Agent for Education in Alaska, unable to obtain any federal funds to implement his ideas, raised private funding to enable him to acquire reindeer from Chukchi herders across the Bering Strait. He used the money to purchase barter goods and, sailing on the revenue cutter Bear, succeeded in bartering 16 live reindeer, which were then transported back to Amaknak Island, in the Unalaska harbor, in September 1891. To Reverend Jackson, reindeer were seen as a way to help the Alaska Native population of the area who, at that time, were suffering from a very limited resource base that had recently been further diminished by legions of non-Native miners and whalers.³⁸ Reverend Jackson's hope was:

to stock Alaska with reindeer, to reclaim and make valuable millions of acres of moss-covered tundra, to introduce a large permanent and wealth-producing industry where none had previously existed, to take a barbarian people, on the verge of starvation, and lift them up to comfortable self-support and civiiization.³⁹

In 1892, an additional 171 reindeer were acquired from Russia by Reverend Jackson and transferred to Point Clarence on the central western coast of Seward Peninsula, along with four Siberian reindeer herders who had agreed to accompany the reindeer and teach herding techniques to young Eskimos. Over the next decade, a total of 1,280 reindeer were imported from Siberia, but in 1902 the Russian Czar forbid further reindeer exports from Russia. By that time, however, the number of reindeer in Alaska had grown to exceed 5,000. There were problems over the years: the Chukchi and Eskimo herders did not get along due to long-standing differences between the two cultures, and in 1894 the government imported herders from Scandinavia to teach the Eskimos.

The twentieth century brought dramatic changes to reindeer herding, as the ownership of herds by non-Natives advanced rapidly; the Lomen family of Nome became the largest and most influential of the non-Native reindeer owners. Over the 15-year period from 1914 through 1929, the Lomens purchased over 14,000 reindeer from the mission and other non-Native herds.⁴⁰ The Lomens held a clear edge over other reindeer herders; anyone indebted to the Lomen Company stores which had extended them credit were forced to pay the store in reindeer at a value of only $2.00 per head, at a time when the Lomens were selling reindeer meat for 40 cents a pound, and a sled reindeer brought as much as $150.⁴¹ Over the next few decades, the reindeer numbers increased significantly; it was estimated that, by 1930, there were 640,000 reindeer in Alaska, but a drastic decline lowered that number to 250,000 by 1940. The most influential change was due, however, not to the reduction in the numbers of reindeer but rather to the Reindeer Industry Act of 1937, which was the culmination of investigations into the Lomens' operation.

The Act (P.L. 75-413) stated:

That a necessity for providing means of subsistence for the Eskimos and other natives of Alaska is hereby declared to exist. It is also declared to be the policy of Congress, and the purpose of this Act, to establish and maintain for the said natives of Alaska a self-sustaining economy by acquiring and organizing for and on behalf of said natives a reindeer industry or business, by encouraging and developing native activity and responsibility in all branches of the said industry or business, and by preserving the native character of the said industry or business thus established.

The Act went on to authorize the Secretary of the Interior "to acquire . . . by purchase or other lawful means . . . reindeer, reindeer-range equipment, abattoirs, cold-storage plants, warehouses, and other property . . . for and on behalf of the Eskimos and other natives of Alaska." From the passage of the Act on, Native reindeer herding experienced several transfigurations, occurring more or less a decade at a time. During the 1940s the implementation of the Act occurred, with the Bureau of Land Management (BLM) assuming the supervision of range utilization and allocation, which resulted in the formation of relatively stable herds.⁴² Simultaneously (and presumably coincidentally), the number of reindeer in Alaska plummeted to only 25,000. During the 1950s, the markets for reindeer products were expanded by the federal government to the Lower 48. In the 1960s, the division of responsibility for governmental assistance and management was established between the BIA, BLM, and the State of Alaska, but by the end of the decade the BIA began to withdraw from involvement in the industry. Beginning in the early 1970s, a new market, selling antlers in the orient, introduced significant changes in the reindeer-herding business since antlers could be harvested without slaughtering the animal. Also in the 1970s the passage of ANCSA complicated land-ownership and herd-management issues, which were made even more complex by the passage of ANILCA in 1980.

The last ten years have seen many new problems emerge in the reindeer industry. In 1992, the rich Oriental market for antlers quickly diminished when the Korean government ruled that reindeer antlers could not be sold as natural medicine. On Nunivak Island overgrazing of the reindeer herd evoked threats on the part of the Soil Conservation Service that the herd would be largely — if not entirely — eliminated, to which the people, of Mekoryuk responded by rebuilding their slaughterhouse and gaining management of the herd, a process that was assisted by the Alaska Department of Community and Regional Affairs. Recently, public attention and notoriety were brought upon the federal government by the gross mishandling of the reindeer situation on Hagemeister Island, which was described by the Alaska Geographic:

Until winter 1992, few Alaskans had heard of, let alone visited, Hagemeister Island. But by late November, Hagemeister was a household name throughout much of the state, and had gained considerable notoriety outside Alaska, as well.

A 23-mile-long island in Bristol Bay, about 19 miles from the Yupik village of Togiak, Hagemeister is the site of a reindeer-herding project that, left unmanaged, spiraled out of control with tragic consequences.⁴³

The herd of 1,057 animals was descended upon by riflemen of the U.S. Fish and Wildlife Service who shot and killed 742 reindeer, over the strong protests of the Togiak Village Council. Dr. Don Olson from Nome organized a private airlift that removed another 122 reindeer, and the remaining 193 were left on the island to survive the winter as best they could.44 The history of this failure provides insights about management issues and raises several questions about the federal government's motives and abilities concerning reindeer. The Hagemeister herd originated in the mid-1960s when the BIA loaned 144 reindeer to three Yupik residents of Togiak for the purpose of developing an island herd. The BIA, BLM, and University of Alaska were supposed to provide technical assistance and conduct studies to ensure that the herd did not exceed the carrying capacity of the island, which was projected to be from 1,000 to 3,000 reindeer. However, little to nothing was actually ever done, and the herd grew without effective grazing management; furthermore, the projections of the island's carrying capacity were grossly inaccurate, as it became obvious by 1973 that the range had badly deteriorated. The government reduced the size of the herd to 450 (with far less fanfare, obviously), but the herd increased to over 800 animals within two years. It continued to grow, unabated, to 1,530 in 1990. In 1992 the U.S. Fish and Wildlife Service purchased the herd for $1.00 and proceeded to try to give the animals away through the BIA's reindeer loan program, with no success. This quickly led to the mass killing in November 1992.

The Commission draws the attention of state ;and federal government agencies to this example because it epitomizes the miscarriage of administrative attempts to interact with Alaska Native tribal entities. If the federal government is going to support reindeer herding as a means to "establish and maintain for the said natives of Alaska a self-sustaining economy" that the Reindeer Act of 1937 promised, then it must engage in long-range planning and centralized management assistance. The involvement of the BLM, Soils Conservation Service, BIA, and several state government agencies has enabled all involved to disavow responsibility for such debacles as Hagemeister Island brought to the attention of Alaska and the Lower 48. The Commission submits that the appropriate role for these many governmental agencies, once they have their respective responsibilities and jurisdictions sorted out, would be in assisting Alaska Native reindeer herders to establish and promote enhanced markets for reindeer products. Rather than impairing the development of this exclusive, Native economic resource, they should work to advance it.

2. Mariculture

Mariculture, in its many different forms, offers opportunities for cash income and requires relatively small-scale infrastructure investment. In several southeast villages and at least one village in the Prince William Sound (Tatitlek), oyster farming has begun to grow to a stable, income-producing business. As mentioned earlier, in Klawock the new herring pound fishery that produces row-on-kelp for the Japanese market is quickly developing, and in other parts of Alaska feasibility studies and business plans are "on the drawing board" for other iterations of this industry.

To date the state legislature and administration have, in response to highly effective and powerful lobbies, steadfastly prohibited even the exploration of fin-fish farming, but even a quick and cursory review of the international fishing economy confirms that Alaska is being left behind by Scandinavian, Oriental, and now even South American countries that are farming salmon, trout, and a number of other fish. Both the state and federal governments should consider the long-range economic impacts of Alaska's stance against expanding mariculture to include limited fin-fish farming. Furthermore, in reviewing means to establish that limitation, the governments should follow the lead of the Reindeer Act and institute a Native-only experimental demonstration of salmon farming in one or more Native villages.

Existing shellfish mariculture programs in villages have proven to be effective and to fit well in the subsistence lifestyle of the villagers, who are not required to work an eight-hour day for five days of every week of the year. Because the patterns of mariculture management, feeding, harvesting, etc., are so ideally suited to the subsistence-oriented Native ways, it is natural for the fin-fishing experiment to be Native owned. By establishing Native ownership, the government would also ensure a built-in limitation to growth because of the population base permitted to participate. If non-Native interests wished to participate- and if the government felt that, in the long term, increased growth would be helpful to the state, a mechanism similar to the CDQ — only in the reverse — could be employed, by which Native fin-fish farmers would enter into partnerships with non-Native firms to enhance markets, transportation, etc. to further the industry.

3. Ecotourism

Another market that is particularly well adapted to expansion in rural and Native Alaska is ecotourism, which has grown over the last few years and now includes small, but persistent, markets in all parts of the state. Requiring minimal capital investment and typically no permanent infrastructure beyond what already exists, ecotourism is ideally suited to individual Alaska Natives, village councils, and ANCSA corporations. As a case in point, the National Bank of Alaska's Business Cache highlighted "Nunivak Island Experience," an ecotourism attraction operated by Mr. Abraham David.

Located off the western coast of Alaska, Nunivak Island is one of the few remaining reserves for musk-ox and reindeer. By boat or snow machine, Abraham David can provide an up-close glimpse of an unspoiled habitat, little changes from the days of pre-history. He'll provide the tents, stoves, and other camping equipment. You'll need to come prepared for rain, mosquitos, sun, and picture-taking.

Whether you are an avid bird-watcher, big-game hunting enthusiast, sport fisher-person extraordinaire, a well-conditioned hiker or nature photographer, the Nunivak Island Experience may be the answer to your recreational dream.

And the article is followed by a critical message that has been shaded to make it more noticeable:

ALCOHOL: Importation, possession or consumption of alcoholic beverages is strictly prohibited and strongly enforced by local ordinance. Plan accordingly.⁴⁵

It is obvious from the preceding that a small business venture such as Mr. David's Nunivak Island Experience is ideally suited to ecotourists who want a different kind of adventure in Alaska and to Alaska Natives with entrepreneurial goals. The Commission encourages the state and federal governments, the ARDORS, and regional corporations to assist individuals and village councils to pursue the ecotourism market through training, promotion, and the provision of other kinds of support.

4. Information Age Opportunities

As "information age" systems evolve, there will be impacts on employment and lifestyles throughout the nation as a whole, but the Commission is particularly interested in those changes that will soon enable an individual in Nuiqsut, for example, to write articles and transmit them via computer and modem to a remote editorial office somewhere in the Lower 48. Likewise, tribal councils are currently able to transmit their financial and bookkeeping work to a Certified Public Account who can review, correct and transmit them back to the village office at relatively small cost. These are only two in a vast multitude of options that the "information age" will bring with it. The entire school system of Alaska, as well as all other educational and training centers, must be oriented toward preparing Alaska Natives to participate fully in this new resource. Again, as with ecotourism, this new-age trend enables entrepreneurial involvement at comparatively small capital investment and, moreover, permits engagement in the system on schedules that are typically less rigid than those required by customary 40-hour-a-week employment. The Commission encourages Alaska Native participation, governmental support for that participation, and a dedicated effort on the part of regional corporations and others to focus training in such a way that Alaska Natives will gain from the "information age."

D. Other Economic Development Issues

I. Limited Entry Permits

The limited entry permitting program was formulated ostensibly for the purpose of helping Alaskan fishermen protect their fishing rights and to diminish the incursion of nonresident fishing enterprises. Although devised to support an admirable cause, the limited entry program has, in the end, resulted in disaster for Alaska Natives.

There are two problems related to the Limited Entry permits that the Commission will address. The first is the outcome of the permitting process itself: entire villages have lost their access to fisheries due to the permit holders' inability to compete in the increasingly costly business and their consequently deciding to sell their permits. The second is the fact that the Internal Revenue Service has launched an assault on holders of Limited Entry Permits that has impacted Alaska Native permit holders more than non-Natives. Both problems continue to have drastic effects on Alaska Native individuals and communities, and the Commission calls for immediate remediation of the dead-end limited entry system and the Internal Revenue Service's collecting those few Alaska Native permits that remain.

a. A Good Idea Gone Bad. From the moment the limited entry program was instituted in 1974, it was criticized by many Alaska Natives. A statewide referendum in 1976 failed to overturn the program, as have hundreds of lawsuits. A study conducted in 1979 concluded the following:

Five years after the institution of limited entry, the author found a prevailing mood of bitterness and frustration among Bristol Bay residents. Some consider access to the resources an aboriginal right. Many expressed the view that the program had been originally proposed to them as a means to prevent the fishery from being taken over by "outsiders," but that it had resulted in the closure of the fishery to the residents themselves. This mood is enhanced by the apparent unresponsiveness of the [Limited Entry] Commission and the state government to their situation despite many appeals, lawsuits, hearings, and promises by political leaders.

If the Alaskan limited entry system is to enhance the state's rural economy, some aspect of the program must be directed more clearly to including that segment of the society. Economic revitalization might begin with the issuance of non-transferable permits to rural residents of coastal or watershed regions with greater than, for example, five years' fishing experience. A state loan program directed specifically to rural Alaskans for the purchase of adequate vessels and gear, as well as permits, would enable rural Alaskans to achieve parity with non-local fishermen. While the change would be politically difficult at this time, the system should be based upon a non-transferable permit, so that as fishermen retired, new fishermen could enter based upon equitable criteria (for example, experience in the fishery and dependence upon it). ⁴⁶

Twenty-four years later, the situation has grown worse, but there are still no indications that state government will respond. The Alaska Natives Commission heard complaints about the limited entry program in all coastal areas. In Klawock, Mr. Ron Williams, representing the Grand Camp of the Alaska Native Brotherhood, testified that up to 60 percent of the limited entry permits from the Southeast now belong to people who live out of Alaska. In Dillingham, Mr. Hoefferle, Bristol Bay Native Association, added:

We were told that limited entry would control the number of people that are allowed to fish in a particular fishery . . . it would have a conservation effect in that regard. There are more limited entry permits being fished in Bristol Bay today than there were people fishing in the Bay prior to limited entry.

In the community of Ekwok, a few miles upriver from where we now sit, there were originally 20 limited entry permits. Today there are none. With each one of those permits that leaves the area, it takes with it a couple of jobs as crew shares. If this trend persists, we're going to see an economic disaster in Bristol Bay, where local people will sit on the beach and watch others fish and reap benefits from our fisheries.

Something must be changed — and changed quickly — to prevent further erosion of Alaska Native ownership of limited entry permits. The Commission calls upon the State of Alaska to convene a special task force, with strong representation of Alaska Native communities, to study this problem and propose ways in which the program can either be expanded to allow additional permits to be acquired or, alternatively, replaced with a program that accomplishes more effectively the program's original objective. Possible solutions would include assigning permits to Alaska Native village councils which would have the authority to transfer permits among village members but not allow any permit to leave the village. Other solutions will no doubt be discovered if the limited entry task force solicits input from the Alaska Natives who continue to be most negatively affected by the program.

b. The IRS Assault on Permits. Two questions must be asked of the federal administration, specifically the Internal Revenue Service (IRS) of the Treasury Department. First, what is the logic of stripping fishermen who have not paid taxes of their limited entry permits, thereby eliminating the means by which they could make the money that would enable them to pay those taxes? And second, why is it that Alaska Natives are disproportionately represented among those who have had their limited entry permits "pulled" as a result of IRS activities?

The problem with the IRS has grown over the last few years, with increasing numbers of Alaska Native limited entry permit holders having their permits "pulled" by the IRS for failure to pay federal income tax. Although it is clearly illogical for the federal government to take someone's ticket to income because he/she does not have the income to pay taxes, that is precisely what the IRS does. A problem that impacts Alaska Natives more than most non-Natives is the fact that the communication from the IRS to the offending individual is structured in such a way that many, if not most, Alaska Natives avoid the confrontation that they foresee is required in any interaction with the IRS. As a result, they fail to respond until it is too late for the problem to be resolved in any way other than the federal government's taking the permit, resulting in personal disaster and questionable gains on the part of the federal government.

This rather odd situation was the topic of correspondence from the President of the Alaska Commercial Fishing and Agriculture Bank (CFAB) to the Alaska Federation of Natives, which was forwarded to the Commission. Quoting President Edward Crane:

CFAB is institutionally involved in dialogue with the IRS and the Limited Entry Commission in an effort to shape the development of IRS policies which will effectively address genuine tax evasion or delinquency situations without wreaking indiscriminate havoc. . .

[W]e see individual IRS enforcement agents aggressively pursuing-their respective caseloads . . . [T]his aggressive pursuit seems to get translated into attacking the "easiest" and/or "most vulnerable" situations — not necessarily the most egregious violators.

From what we have seen, these attacks tend to focus on rural Alaskans — in particular, on Native rural Alaskans. I'm sure that simply reflects the demographics of the fishing populations rather than any ethnic bias on the part of the IRS. Nevertheless, it does seem to be happening. We're seeing more loan applications from Native rural Alaskans that appear to be "last-ditch" efforts to resolve a hopeless situation that quite possibly could have been salvaged by a little imagination, or by a more aggressive defense, 90 days ago.47

The Commission agrees and calls upon the Alaska Federation of Natives to convene such a group, which should include representation from the Treasury Department and the Limited Entry Commission as well.

2. Village Fuel Businesses and Bulk Fuel Storage

One economic activity that has routinely occurred in many of Alaska's villages is the supply of fuel to users in the community, and the fuel business is often operated by the village corporation or private proprietors. Furthermore, fuel is obviously essential to the development of any village-based economic venture. Beyond the limitations of little (or no) infrastructure, high costs, restricted transportation access, and the many other factors that constitute barriers to economic development (as discussed in the introductory section of this Report), if fuel were not readily available, practically any sort of market economy would be prohibited. However, the fuel delivery, storage, and distribution business is beset with major problems, reflecting on both the economy and the health of Alaska Natives (see the related discussion in the Report of the Health Task Force).

In February 1993, the United States Coast Guard ordered that fuel deliveries to 75 villages be stopped because the fuel tanks in those villages were leaking. At the request of the Governor's office, the Coast Guard gave a reprieve until March 1994, during which time the Alaska Department of Community and Regional Affairs established the Bulk Fuel Task Force and completed repairs to tanks in 17 of the 75 villages⁴⁸, at a cost of $3,000,000. However, the costs for completing the repairs and cleaning the contamination that has resulted from leaking tanks have been projected to range from an additional $300,000,000 to $400,000,000. Most of the tanks were built by the Bureau of Indian Affairs, but they are now owned by the State of Alaska, village corporations, or the private sector. The Bureau has not offered to participate in their repair, even though in many cases they were built without proper engineering or regard to building codes, according to the Department of Community and Regional Affairs.⁴⁹ The impending cessation of fuel delivery would obviously prove disastrous to the residents of the villages, creating economic havoc and actually threatening survival. Although it is unlikely that the Coast Guard will enforce such a harsh response at the end of its one-year moratorium (particularly in midwinter],⁵⁰ it is inevitable that fuel storage will ultimately be prohibited unless repairs are made and existing oil pollution is mitigated.

IV. Recommendations

The Commission offers the following recommendations, which, if implemented, will result in measurable improvements in the economic welfare of Alaska Natives.

A. Employment

1. Native Preference and Federal Employment

At a minimum, every agency of the federal government that is available for contracting under P.L. 93-638 should have a Native hire requirement similar to that which is in place with the Indian Health Service and the Bureau of Indian Affairs. Furthermore, all federal departments with job classifications located in rural Alaska should be required to maintain Native preference in hiring to ensure that, at a minimum, the proportion of Native employees corresponds to the proportion of Natives in the population of the immediate area. As noted earlier in this report, the Commission is aware that the Department of Interior has ignored provisions of ANILCA stipulating local/Native preference in hiring, contracting, and other support. The Commission asks that Congress revisit ANILCA and establish legislative directives to the federal administration to follow the mandates of that Act; the Commission also asks that the Alaska delegation to Congress join with the Alaska Federation of Natives, ANCSA corporations, the Alaska Intertribal Council, and other Alaska Native organizations and groups to ensure that Native preference is enforced. Furthermore, the Commission urges that Alaska Native IRA and traditional councils and regional corporations contract federal programs under P.L. 93-638/100-472, in order to implement and maintain Native preference in hiring for all contracted positions to the full capacity of the law.

2. Preference for Service in the Alaska National Guard

Presently, the federal personnel system does not consider service in the Alaska National Guard as "military service" and consequently deprives a large number of Alaska Native job applicants the veteran's preference that others receive. The Commission asks the federal government to change the civil service employment procedures in order that those who have served in the Alaska National Guard receive veteran's preference.

3. Application of Davis Bacon Requirements in Villages

The Commission asks the federal and state governments to apply the federal Davis Bacon Act and the Alaska "Mini-Davis Bacon" effectively and rationally, following the statutory rule of the "local prevailing wage." The Alaska Department of Labor should determine through objective, statistical means what the actual local prevailing wage is in a rural area and then set that wage scale for the implementation of the Davis Bacon Act, with the objective of hiring more local, Native laborers and creating more jobs. In addition, as a means to correct the imbalance of hiring on construction projects, Alaska Native corporations should be encouraged to contract not only capital projects but all functions of these federal departments under P.L. 93-638/100-472; given the superior record Native firms have in recruiting and hiring Natives, compared with the federal government, contracting will undoubtedly result in increased employment for Alaska Natives.

4. Eliminate HUD Prohibitions on Local Design and Construction

Provisions imposed by the U.S. Department of Housing and Urban Development in Alaska have had the effect of prohibiting village-based construction of housing. They have also forced upon Alaska Natives an inefficient practice of outside contractors and non-Native laborers descending upon a village, constructing sub-standard housing, and leaving. The Commission asks both the federal administration and Congress to investigate this statewide problem and devise new procedures to eliminate it, enabling village councils, village corporations, and ANCSA regional corporations to become directly involved in housing construction with provisions in place that will both ensure substantial Native hire, improved housing, and contract stability for participating Native firms.

5. Conveyance Surveys and Employment of Alaska Natives

The Commission urges the new job Corps Training Center, all the regional non-profit corporations, and other agencies providing training to Alaska Natives to redirect programs in such a way that surveying positions that will be created by the need to complete land conveyances will be made available to trained Alaska Natives. At the same time, the Commission urges the Department of Interior to hasten the conveyance process by more appropriate budgeting of funds. The Department also needs to assist Alaska Native corporations in their pursuit of contracting cadastral surveys under P.L. 93-638 from the Department of Interior (as several regional ANCSA corporations have) in order to gain control of funding and the employment of surveyors under Native preference provisions.

6. "Information Age" Training Programs

The Commission asks that the state and federal governments reorient their training programs, with support from the job Training Partnership Training Act, to develop and implement dedicated programs to prepare young Alaska Natives to participate fully in the burgeoning "information age" market. These programs should also be integrated into Alaska's educational curricula, particularly in rural, predominantly Native schools.

7. AmeriCorps in the Villages

The Commission recommends that all Alaska Native corporations and organizations aggressively pursue employment and education opportunities that might be available through the new AmeriCorps (e.g., the National Service Corps).

8. Establish a State Office of -Alaska Native Recruitment

Because the state government continues to demonstrate an imbalance in its recruitment and hiring practices with disproportionately few jobs going to Alaska Natives, the Commission calls for the immediate establishment of an Office of Native Recruitment within the Governor's Office to develop and implement procedures within all other departments to ensure more equitable hiring practices. Within that Office, an independent review panel should be created to review all cases in which a Native applicant is passed over in the hiring procedure to ensure that no bias, either purposeful or inadvertent, exists.

Private sector companies doing business in Alaska should also recognize the need for job development and contracting opportunities designed to expand economic and employment opportunities for Alaska Natives. They do not always have to wait until the government orders them to do so.

B. Village Businesses and "Cottage Industry"

1. Grants for Village Economic Development

The Commission asks Congress to evaluate the Administration for Native Americans and the ' extent to which its social and economic development strategies are actually accomplishing their goals in Alaska, for the purpose of restructuring its program if it is found that more effective means are available to affect economic growth on the part of Alaska Native villages. Furthermore, the Commission asks the Alaska Department of Community and Regional Affairs and the Department of Commerce and Economic Development to strengthen all their programs targeting Alaska Native villages. All agencies, including HUD, should strive to eliminate unnecessarily complicated application procedures and to respect the limited staffing possessed by most Alaska Native villages. Although the Commission acknowledges that, with limited funding, all such programs must be competitive, the procedures, forms, etc. used in the application process should be specifically designed for simplicity and ease of completion. In far too many instances, Alaska Native villages with excellent projects lose out in the funding battle simply because their proposals were less sophisticated than their competitors. This is particularly evident in programs which pit Alaska Native villages against large tribes in the Lower 48, which do have professional proposal writing staff.

2. Expansion of ARDOR Activities in Support of Native Business

In the same light, all Alaska Regional Development Organizations (ARDORS) should review their policies and procedures and ensure that Alaska Natives are receiving their share of assistance, training, and support. Although many of the ARDORs are obviously helping their Native constituents, others are far less active in Native business and economic development. The Alaska Department of Commerce and Economic Development, which is charged with the responsibility to oversee the statewide ARDOR program, should encourage Native support and involvement.

3. Increased Support for Native Tourism and Ecotourism

Existing federal and state agencies should provide specific, targeted support for Alaska Native businesses, villages, and individuals who wish to participate in the growing tourism and ecotourism industries in Alaska. Support should include, but not be limited to, market development and promotion and assisting in the acquisition of capital investment by Alaska Native individuals, village councils, and Native firms that wish to become involved in this growing industry.

C. Community Development Quota (CDQ)

1. Codification of CDQ in the Magnuson Act

The Commission asks the North Pacific Fishery Management Council to include the CDQs in its final comprehensive rationalization plan: The Commission also recommends to Congress that, when the Magnuson Act is reauthorized, the CDQs be codified and required to continue perpetually. Furthermore, the Commission asks that the government consider raising the percentage from 7.5 percent to 15.0 percent of the Pollock fishery and to expand the CDQ to other fisheries in the future.

2. CDQ as a Model for Other Industries

The Commission also recommends that the CDQ program be expanded to include at least one other extraction industry, as a demonstration project, to be studied and further developed if its benefits resemble those that have already been realized from the CDQ for the pollock fishery.

D. Limited Entry

1. Re-examination of the Limited Entry Program

The Commission calls upon the State of Alaska to convene a special task force, with strong representation of Alaska Native communities, to study the problems created for Alaska Natives by the limited entry system and to propose ways in which the program can either be expanded to allow additional permits to be acquired or, alternatively, replaced with a program that accomplishes more effectively the program's original objective. The Alaska Federation of Natives should be charged with the responsibility to represent the interests of all Alaska Natives in this process and to report the outcome of the task force's work at its 1994 convention.

E. Bulk Fuel

1. Establish a Standing Bulk Fuel Task Force

During the moratorium that the Coast Guard has given before forcing the-cessation of fuel delivery to 75 villages that have unsafe storage facilities, the State of Alaska created a Bulk Fuel Task Force which has helped organize repairs in 17 of the villages and has sought to secure funds needed for future repairs and oil spill clean-up efforts. The Commission recommends that a continuing Task Force be appointed to work on this problem.⁵¹

2. Funding for Remediation of Bulk Fuel Storage Problem

If current projections are accurate, in excess of $300,000,000 will be needed to repair or replace faulty fuel storage facilities and clean up existing pollution from leaking tanks. Obviously, funding is not now available to support such a massive undertaking, and creative solutions will need to be found and implemented. The Commission encourages the continuation of a cooperative effort involving federal, state, local, and private entities to resolve this problem for the scores of Alaska Native villages that are impacted.

F. Reindeer Industry

1. Long-range Plan Development

It is obvious from the information provided in this report that neither the federal nor state government has a long-range plan consistent with the Reindeer Act, and the first recommendation of the Commission is that such a plan must be developed, with the Reindeer Herders' Association, that will address all aspects of the reindeer industry in Alaska, including the need for cold storage and other supportive infrastructure. Foremost in this endeavor must be the stabilization of the reindeer industry, along with development of non-Alaskan markets, to accomplish the Reindeer Industry Act's goal of a "self sustaining economy" for A1aska Natives.

2. Governmental Support for Increased Training

If there were more opportunities for young Alaska Natives to obtain training related specifically to reindeer herding, animal husbandry, product preparation, business skills, marketing, and other topics related to this industry, there is no doubt that more would become involved and the industry would grow. The Commission asks the federal and state governments to become more active in establishing such training programs, again in conjunction and collaboration with the Reindeer Herders' Association.

3. Expansion of Reindeer Markets

The Commission calls upon the existing state agencies that are dedicated to developing and promoting markets for other Alaska products to invest as much energy and commitment in the development of reindeer product markets to support Alaska Native reindeer herders.

G. Mariculture

1. Support of Native Mariculture

The growing shellfish mariculture industry in many Alaska Native villages should be fully supported by federal and state government agencies through increased training and redirected economic development funding.

2. Reconsideration of State Ban on Fin-Fish Farming

It has become clear to the Commission that, even in the face of pressure from the fishing lobbies, the Alaska legislature should overcome its resistance to entering into the fin-fishing industry that has exploded in other parts of the world and resulted in an inescapable decline in the market for salmon caught in Alaska's waters. In order to enter this cautiously, establish a limitation on its expansion, offer income opportunities to deprived Alaska Native villages, and reverse trends that have contributed to the chum crash of 1993, the Commission calls for the immediate establishment of a demonstration project that would enable Alaska Natives (only) to initiate fish farming, to include but not be limited to salmon, trout, arctic char, and other indigenous Alaska fish species. The oversight for the program should be federal, with support and technical assistance provided by the Alaska Department of Community and Regional Affairs and the F.R.E.D. Division of the Alaska Department of Fish and Game.

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