Is it time for the state to get out of the aerospace business?

One of the potential cost-saving measures that was recommended during the Walker-Mallott transition conference this weekend was doing away with the Alaska Aerospace Development Corp., the corporation that runs the Kodiak Launch Complex, which was recently renamed the Pacific Spaceport Complex-Alaska. Part of that renaming had to do with the corporation’s planned expanded mission, which, if it continues, would include “other aerospace business pursuits.” Such ideas include selling geospatial data and satellite imagery. According to the minutes of an August board meeting, which met a few days after the last failed missile test that left the facility greatly damaged, “launch operations alone may not generate sufficient revenues to maintain financial stability of the Corporation.”

The Aerospace Corp. was founded in 1991, and in 1994, it chose Kodiak as the place to build the launch pads for the missiles that were part of one of the nation’s first independent spaceports. From the start, it was controversial and way over budget.  But in 1998, the site launched its first missile and hope soared. The site, about an hour’s drive outside of Kodiak, was expected to get multiple annual contracts from the military and Kodiak was supposed to experience an economic boon.

None of that happened. All told, the site has seen 17 missions, including the last fiery-ball of one. The total cost since 1998, according to the corporation’s financial reports: $41 million from the state, about $151 million from the feds. It’s generated about $141 million from the government for launches.

It costs about $8.5 million to keep the lights on, the employees paid and the pencils sharpened. In 2012, the corporation told the state that in order to stay afloat, it would need $100 million to upgrade the facility to accommodate bigger loads. The state appropriated $25 million and said that it would consider giving it the remaining funds when the corporation could prove that it had contracts in hand.

By August, before the rocket blew up at the site, it hadn’t procured those contracts.

Insurance will likely pay for most of the damage caused by the August blow up. But the question remains:  Should the state give the corporation the remaining money to build larger pads that appear to be necessary in order to have a prayer of being viable?

During times of declining revenues and looming deficits, Is it time to give up on the aerospace business?

According to legislative committee minutes, here’s what outgoing Rep. Alan Austerman, who sits on the board and represents Kodiak, said in February about the state continuing to fund the corporation:

Chair Austerman stated that the corporation planned to get contacts for a long term facility or to faze (sic) themselves out. He hoped that there was a business plan that involved launches 3 to 5 times per year that made the facility viable, but that at the rate things were going it seemed doubtful. He said that the corporation was on notice to make it work or get state money out of the business.

Contact Amanda Coyne at


18 thoughts on “Is it time for the state to get out of the aerospace business?

  1. DB Cooper

    Well if there was any agency that needs cleanup or deletion this is certainly one of those right behind AKDOR audits group and the AGIA clan that remains. In this case, the aerospace fellows pull in some of the top salaries in this state with several double the gov and chief of staff and some aerospace employees just trailing in earnings behind the highest paid state person, the PFD director. Check out the annual state earnings salaries reports. They tell it all. The director of aerospace is nearly $300k annual and several business development positions being nearly $300K. This recent ADN article provides some summary on the subject of way too much money going out and not enough coming in or benefit being reaped.

  2. Crude is Rude - Gas is Groovy

    Kodiak is a stupid location for this type of “civilized peaceful” aerospace enterprise…
    This location is only useful for military defense of the coastline..
    This style of rocketry is soon to be obsolete..
    After Fukushima I doubt the Japanese will try invading the Aleutians again..
    ..who else? North Korea ??

    I’m not worried about China&Russia either,
    they are already past due to surface any day now under Nome with their tunneling machines and hi-speed railway heading east to Nunavut & New York.

    …I’m more worried about the damage already done to Alaska since Texas invaded and trashed the place 40 years ago.

  3. EcoDev

    The Alaska Aerospace Corporation has not produced an economically sustainable operation, but economic diversification is critical for our State’s future. Instead of closing the facility and letting it gather dust, we could turn the recent catastrophe into an opportunity. Following in the footsteps of the Alaska Gasline Development Corporation, the State could confer with the burgeoning aerospace private sector and use the insurance money to rebuild the Launch Complex to standards that would entice a private firm to purchase it from the State. Surely we could develop a contract that would demand a private firm pay the operational costs during repairs in exchange for a reasonably priced, newly-customized facility.

    The program hasn’t progressed as hoped, but good decisions over the next few months could provide a one-time financial windfall for the State while retaining the potential for a better-managed, high-tech industry in Alaska.

    If it’s possible and low-risk, we need to reach for it. Refusing to be dependent on resource extraction is the only way forward. The State can’t fund and manage all of these projects, but shutting them down isn’t our only option – or even the most fiscally responsible one.

  4. DB

    I believe you are somewhat mistaken on your comment that the goodies derive solely fm one end of the political spectrum. There is a lot of log-rolling and pork pulling done in Juneau. Legislators trade one thing for their thing-kinda like their own “speed dating”. Both sides are guilty. Most of the out-of-control spending was done while the Senate “coalition” was in charge. That coalition controlled the spending and it went through the roof. Blame is aplenty, regardless of political party.

  5. Andy Matoon Scott

    All politicians, regardless of race , creed or color, are dependent on staying elected by maintaining power. To get the power, you need to spend big bucks. Especially when the public sector unions finance your future campaigns, demanding more and more using quid pro quo as a justification.

    The only way the State will get control of its spending is to motivate less of it. Currently , all the State managers are rewarded to spend as much as they can because they have power and prestige that corresponds to their spending ( power=spending). If the State managers were compensated via a bonus for spending less of their budgets, the motivation would shift to frugality. This will never occur because the public sector unions control politicians, or the budgets will be purposefully bloated so they can show a savings, a classic catch 22.

    Make public sector union contributions to the politicos illegal and voila, their piggy power diminishes.
    Make the department managers spend less and we save money. Rocket pads, LIO, crime lab, port debacle, feckless studies, AHFC, non-profit support, fish plants, pouring money into the bush, etc. etc. etc. When the supposed fiscal conservatives outspend the liberals, what do you expect?

    Change of direction you say ??? When RINO pigs fly………..

  6. birchstick

    Considering that Alaska has been dominated by one-party politics for at least the last decade or so, I’d say the pressure and the goodies solely derive from one end of the spectrum. The “fiscal responsibility” side…

    It’s hilarious to me that Alaska now has to rely on an independent and a Democrat (the horror!) to “save” us and get our fiscal house in order.

  7. Gadid Gal

    When the launch people sold Kodiak on the idea of launching rockets they insisted that 1) it would never include any military operations; 2) it would provide ‘hundreds’ of new jobs; and 3) the AADC would back several new college courses to do with aerospace topics.

    All of it was a lie. The whole focus is military, the only local jobs are for one or two security people and broom pushers – whenever there is a launch or any other business, people are brought to Kodiak from California. And no college courses ever materialized.

    Instead, we are left with a closed road (the only one on Kodiak), secretive ‘missions’ and unanswered questions about impacts on local lands, waters, sea life. The millions of dollars could be so much better spent on other things that benefit all Alaskans.

  8. Lynn Willis

    I agree. Thank you for pointing out that the pressure to spend on these projects comes from both ends of the political spectrum.

  9. J. Miller

    An Open Letter to Governor Walker –

    Please don’t allow the special interests and people hosting fundraisers for you corrupt what needs to be done for the good of the state. We MUST get our fiscal house in order. A great place to start in closing down the Aerospace Corporation. It has never been a good business plan or remotely sustainable. The ARRC has been poorly run too; however, it has more of a public purpose. Leadership and discipline demands that the railroad go under the Executive Budget Act. There is no responsible argument against this suggestion. Also, consider starting a state suggestion program on responsible ways to save money. Recognize and reward suggestions of merit. We don’t have time. Hit the ground and prove to Alaskans that you are a leader. We don’t need another Captain Zero.

  10. Garand Fellow

    Yes, it is long past time to look at the businesses the state is in and determine which meet the needs of government in a post-petroleum economy. Making these decisions before all the oil is gone makes sense. The state is in the campground business, the commercial and residential mortgage business, the railroad business, the ferry business, the commercial lending and venture capital business, the student loan business, the tourism promotion business, the motion picture development business, the salmon ranching business, the tree farm business, the airport freight business, the geological exploration business, and yes, the aerospace business. All of these have private sector counterparts in other states (look at that fellow named Musk as an example for aerospace) but with the possible exception of railroad and aerospace some other states are likely themselves in one or more of these other businesses. Where government owns businesses is where fascism and communism meet by the way, but there is no need to worry about ideologies here; the state is simply going to run out of money. A dairy farmer might here cite an homely homily but I shall not (not even tempted). As long as my list is there likely are businesses the state is in that I have missed.

    Some of these businesses are mainly in the business of arbitraging the US Treasury. However, while we pat ourselves on the back for gaming the IRS we pay more each year from the PFD (as it is ordinary income for all Alaskans who receive a PFD) to the IRS than all the arbitrage earned (let alone the mid-six figure bureaucrats’ salaries who run these state agencies and other costs charged against the arbitrage).

    Closing down lots of these businesses should be an easy decision for an incoming administration facing a $3 billion annual deficit. Those enterprise funds that are determined to remain should be examined for opportunities to make them self-sufficient. Using more contractors is an example of how that can be done.

    I sincerely hope the Walker administration is a thinking and thoughtful one. Alaska has not yet had one of those.

  11. Fish Fanatic

    This is definitely a project that needs to end. The days of wasting money are behind us. I implore soon to be Governor Walker to immediately stop the bleed. Put an end to the program now, not the end of the fiscal year. We need leadership and management to make cuts. Not cross the board percentage cuts but someone with the courage to stop this kind of fiscal irresponsibility now.

  12. DB

    This is another fine example of the State government funding “welfare” projects to keep people employed. This is a version of the federal government’s stimulus plan. Let’s take a look at who is at the top tier of the State’s space launch facility. That should tell a lot about the “project”. The barley project, the fish plant, the crime lab, the Anchorage LIO, the space launch facility. All these are what we could call “state-union-crony capitalist partnerships”. What is the return on the investment for this facility? Zero. Except the Kokiak community, led by Sen Gary Stevens, will cry out loudly to keep it going, This should be the first acid test for our legislature and Governor Walker. It is well past time to do away with these “make work” projects. And while we’re at it, let’s check out all school district and local government projects.

Comments are closed.