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While some have and likely will continue to argue over the coming year that the crisis is the result of the recent passage of SB 21, it is not. The crisis substantially predates that event.
In January 2013 -- before SB 21 was even introduced and based on data which assumed the continuation of ACES -- the University of Alaska-Anchorage's Institute of Social and Economic Research had this to say about the state's fiscal situation:
"Reasonable assumptions about potential new revenue sources suggest we do not have enough cash in reserves to avoid a severe fiscal crunch soon after 2023, and with that fiscal crisis will come an economic crash.”At the other extreme, some have and likely will continue to argue that, by creating the environment for additional oil investment and production, SB 21 somehow has averted the fiscal crisis. They also are manifestly wrong.
As I explain in a recent piece in the July 2013 edition of Alaska Business Monthly, the (ultimate) increase in revenues attributed to SB 21 isn't nearly enough to maintain current levels of state spending over the long term. Instead, as I explained further yesterday, continued spending at current (FY 2014) rates will continue to lead to the reenactment of the Alaska state income tax and ultimately, the draw down of the Permanent Fund, despite the passage of SB 21. It may come a little later than under ACES, but at current spending levels the state remains on track for those events.
Over the past few months I have been asked to talk about state fiscal issues several times and the frequency is increasing. As a result, today I put together the first draft of a baseline "stump speech" on the topic. The complete draft is available here.
I post it here for whatever interest it may hold for others; as always, comments are welcome.