Our view of the way forward on Alaska fiscal policy (and the consequences of taking other directions)

At their invitation, we were part this week of the Fairbanks “Budget Blitz” hosted by the Greater Fairbanks Chamber of Commerce and the Fairbanks Economic Development Commission. The “Blitz” was designed by the two organizations to provide the Fairbanks community with a range of views on Alaska’s fiscal situation and potential responses.

Following presentations Tuesday by Office of Management & Budget Director Pat Pitney and Wednesday by Alaska’s Future new Executive Director, Ian Laing, we presented our views on Thursday. The title of our presentation was “Implementing Governor Hammond’s 50/50 Plan,” but as importantly, it also focused in part on our preliminary analysis of the likely consequences on the overall Alaska economy of HB 115, another option currently being considered by the Alaska House Finance Committee. That option proposes to cut the Permanent Fund Dividend (PFD) and implement a capital gains and income tax, taking a significant amount of money out of the private sector to fund Alaska government.

To our knowledge, our analysis of the potential impact of HB 115 on the overall Alaska economy, if not the only one, at least is the only one that has been made publicly available. Our conclusion is that while the bill results in saving some government and government-related jobs, it would result in a net loss in income to the overall Alaska economy and as importantly, result in putting more Alaskans below the poverty line than it would save jobs and significantly increase income disparity between upper income Alaskans on the one hand, and middle and lower income Alaskans on the other.

A copy of the slidedeck is available below and here. Our analysis of the importance of the Alaska PFD and the impact of cutting it on the overall Alaska economy generally, and under HB 115 specifically, is at slides 30–35. We will be discussing the issue further this coming Wednesday in our presentation as part of World Trade Center Anchorage’s “Meet and Brief” Luncheon series (details available here).

This post is published also at Thoughts on Alaska Oil & Gas, a blog focused on News & Commentary on Alaska oil, gas & fiscal policy.