Unsustainable Spending: The State of Alaska’s Budget and Economy

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Alaska Policy Forum is proud to have partnered with economic experts at The Buckeye Institute and its Economic Research Center to release our latest policy paper: a study of Alaska’s budget, economy and the impact of proposed taxes.

Alaska faces a budget crisis and recently has had to use its Permanent Fund earnings and Constitutional Budget Reserve Fund (CBR) to cover revenue deficits. Largely dependent on tax revenues from the volatile oil sector, federal funding, and investment returns, the state failed to collect enough revenue to fund current spending and has resorted to drawing money from its “rainy day” fund, the CBR, and then proceeded to reduce the Permanent Fund Dividend (PFD) that it pays to Alaskan residents. Due to years of undisciplined overspending, the state currently faces a projected $1.6 billion budget gap and burning through the CBR is not a sustainable strategy going forward.

Hard choices now confront Alaska policymakers, but the prudent course will be to pursue policies that promote broad economic growth, and reduce or eliminate unnecessary government spending. Alaska must continue to resist the temptation to introduce or raise growth-killing taxes that stymie private investment and hinder job creation. The state must find responsible ways to generate revenue and cut spending without undermining future economic growth or harming residents.

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