Friday, November 8, 2013

Monday's "Thrilla in Dena'ina" ...

As readers of these pages will know, recently some have criticized the idea of moving Alaska state government toward using a sustainable budget model.

Despite endorsement by Commonwealth North ("Long Term Economic Sustainability for the State of Alaska") and the Alaska Chamber ("Support Reduction of Spending to Sustainable Levels"), among others, and predictions by the University of Alaska-Anchorage's non-partisan Institute of Social and Economic Research (ISER) that, absent its adoption, Alaska faces a "fiscal crisis" and "economic crash" within the next decade, some apparently feel safe with Alaska continuing its current spending binge.

In my view -- and interestingly enough, the view not only of ISER but also Northern Economics, a co-author of two studies making the same point -- Alaska is following a path that, while benefitting current Alaskans by creating an artificial bubble economy, comes at the significant expense of future generations.  According to one of the studies co-authored by Northern Economics on Alaska's current fiscal path
… state general fund revenues are projected to exceed state expenditures until 2015, after which time annual revenues fall below annual expenditures. Starting in 2015, the state begins to draw down accumulated balances in the general fund and constitutional budget reserve. Revenues from the development of a gas pipeline starting in 2020, the phasing in of a state personal income tax starting in 2022, reduction in the Permanent Fund dividend by half, and diversion of remainder of the earnings of the Permanent Fund to support general fund expenditures starting in 2023 largely offset declining oil revenues for a decade but eventually they are insufficient to forestall a downward trend in general fund revenues ….
This Monday, ISER's Scott Goldsmith and I will be debating the Anchorage Chamber's Andrew Halcro and, interestingly enough, Northern Economics' Jonathan King on this subject at the Anchorage Chamber's weekly "Make it Monday" forum.  Scott and I will defend the proposition that developing and adhering to a sustainable budget model is the best approach for avoiding this future.  Andrew and Jonathan will argue the opposite.

The formal title given the debate is "Debating Alaska's Fiscal Future."   I prefer to think of it as the "Thrilla in Dena'ina" (for those who don't understand the analogy on which that is based, an explanation is here).

The debate is open to the public; the details are here.  If you are interested in the subject -- and I would guess you are if you have read this piece -- it may be worth your time to attend.