By Mouhcine Guettabi,
Alaskans have been arguing for years about how much the state should be spending, ever since low oil prices gouged a big hole in the budget. A new paper by ISER researchers Mouhcine Guettabi, Trang Tran, and Linda Leask aims to give some context to that debate, by looking at state spending in several ways.
• In 2015, the most recent year for which cross-state data is available, state and local spending per person in Alaska was twice the national average. But much of that gap is due to Alaska's unique spending programs (PFDs being the largest but not the only one), higher living costs, and federal grants that are twice the U.S. average per person.
• Wyoming, another oil-producing state with a small population, spent more per person than Alaska in 2015, if you take into account Alaska's unique spending programs and higher living costs. Per-person spending in North Dakota—another oil-producer with a small population— was within 15% of Alaska's.
• Over the 20-year period from 1992 to 2015, Alaska's real (adjusted for inflation) state and local spending per person grew 50%—considerably slower than the U.S. average of 73%, and much slower than the 100% growth in Wyoming and 116% growth in North Dakota. That was because during most of that period low oil prices constrained growth in Alaska. It was only in the last part of that period, when oil prices were high, that Alaska's spending grew twice as fast as the national average.
• Alaska's real per person spending from the Unrestricted General Fund—which pays for most general government functions—moves up and down sharply with higher or lower oil prices. That spending peaked in 1982, during the first state oil-revenue boom, and was second highest in 2013, during the most recent oil-revenue boom. But in 2004 and the current fiscal year, with much lower oil prices, real state spending per person is not much different from what it was in 1975.
Download the paper, How Does Spending in Alaska Compare? (PDF, 784KB) A grant from Northrim Bank helped fund this research. If you have questions, get in touch with Mouhcine Guettabi, assistant professor of economics at ISER, at [email protected].
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