Economic Impacts of the Vetoes on the Alaska Economy

By Mouhcine Guettabi and Nolan Klouda

On June 28, 2019 Governor Mike Dunleavy announced line-item vetoes totaling $409 million from the State of Alaska budget for Fiscal Year 2020. These vetoes include significant cuts to the University of Alaska, Medicaid, payments to local governments, public assistance programs, state personnel headcounts, and numerous other categories. The full consequences of these cuts on the state economy, fiscal health, population, and policy outcomes will take years to develop. In this paper, we provide the short term impacts of the cuts, how they interact with the current state of the economy, and a descriptive outlook of the some of the future effects. We find the cuts will result in more than 4,000 jobs lost in the short run and will therefore return the Alaska economy into recession. While the short term losses represent a considerable negative shock to the economy, the consequences of these cuts on long term development could be even more pronounced.

Presentation give to Anchorage Chamber of Commerce July 8, 2019

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Comments

[pinksugar]

Just as the 2008 Recession didn't hit AK for a few years after the L48, now our Recovery is lagging behind that of the 48 states below as well.
It used to be, people would go where the jobs are. I know Alaskans who have done that. It's not ideal when you have to leave your family for a job that will support them, but these things are usually temporary and is part of making those tough choices..(and it would inject money into Our economy!) The new term is 'Adulting.' Unlimited Compassion cannot keep the state afloat. If there isn't enough money for everything on the Christmas list, we have to Prioritize. That's what families have to do. I heard a person complain that their spouse might get laid off from their State job because they are in a non-essential position. Even the State considers these jobs non-essential. Their words. As with governments - local to state to federal, at all levels, we've gone so far off the rails as to what is the legitimate role and responsibility of government that there has to be a reset. Sometime. Of course who ever stops kicking the can down the road will be 'the bad guy' because they had to make some tough choices. This has been coming a long time. It's not Dunleavy's fault. Maybe the cuts should be phased in a bit slower over 2-3 years but until our revenue recovers from resource development or tourism, we need to tighten our belts. You can not tax a community into prosperity.

[Gregory Moore]

In keeping with Senator Von Imhof, we need to emphasize fact-based decisions to arrive at a State budget. Dr. Guettabi and Mr. Klouda from UAA ISER have developed a fact-based financial model and analysis. Our state has been slowly emerging from a recession. Guettabi and Klouda's analysis from their model suggests that Dunleavy's current budget would throw the State back into a recession. A retreat back into a recession is not in the best interests of Alaska. The positive side is, we do have a fact-based financial model and experts to assist us from ISER. We should use these tools to arrive at better budget.