In a new paper published by the University of Alaska's Institute of Social and Economic Research, economist Scott Goldsmith explains the importance of oil money to Alaska's economy. In earlier research, ISER estimated that one-third of Alaska jobs are oil related, but close to 20% more jobs can be traced to the "spinoff" benefits of oil weath, including:
- A stable economy that's twice the size it would be without oil revenue
- Economies of scale from a population that's double what it would be
- No state income tax for individuals, and much lower taxes for non-oil businesses
- The nation's highest per capita state government spending
ISER's analysis shows that the State of Alaska has collected $157 billion (in today's dollars) from oil since 1959. Where has it gone?
- $70 billion went to new and expanded operating programs, including Permanent Fund dividends
- $37 billion went into savings, mostly in the Permanent Fund and the Constitutional Budget Reserve
- $31 billion provided tax relief for households, which pay no state income or sales tax
- $19 billion provided tax relief for non-oil businesses, which pay less than half of the taxes they'd pay if their taxes made up the same share of revenues as in other states
ISER concludes that, while other economic drivers are critical to Alaska's economy, Alaska's future prosperity depends on continued oil production - because none of the other economic drivers can replace the economic value of oil. There is still a lot of oil on the North Slope and offshore, but how much of that oil is produced will depend on a number of factors - including politics. ISER suggests that Alaskans focus on a strategy to maximize the long-term benefits, considering the following:
- Alaskans need to have realistic expectations about future oil production - we aren't likely to have another Prudhoe Bay
- Policy makers need to find the "sweet spot" of oil taxation that provides maximum long-term benefits in oil production, employment and state revenues
- Alaska's leaders must resist the temptation to use the state's oil wealth for economic diversification projects, considering the state's lack of past success.
Comments