A Sustainable Alaska Budget …

BGK (State Senate Affairs 2.4.2016)

Yesterday, Scott Goldsmith and I testified before the Senate State Affairs Committee on SB 128 (the Governor’s fiscal bill) and SB 114 (Senator McGuire’s fiscal bill, which GCI has been using in its presentations).  The video of the hearing is here.   Scott’s testimony starts at 17:05:00 into the video, mine at 1:10:00.

Both of us testified using the Goldsmith sustainable revenue model, and both of us concluded, though for different reasons, that the Legislature should not enact PFD cuts or broad based taxes this year.  Scott believes that such revenue measures may be needed in future years; based on the outlook I believe is appropriate to the state’s current fiscal situation I am not as certain.  The slide decks follow:

Based on my outlook (at slide 10) I conclude that the current sustainable revenue number is $4.3 billion (compared with a current, FY 2016 budget of $5.4 billion).  As I outlined in the testimony (at slide 11) I believe that spending can be reduced to or near this level with the effect of avoiding PFD cuts or taxes.

In his testimony Scott compares different approaches to deriving a number, using various inputs and timeframes (at slide 15).  Using a 3-year moving average, which is designed to smooth out what otherwise might be year-to-year jumps due to changing oil values, he concludes that the current sustainable revenue number is $4.39 billion.

Separately during my testimony I expressed significant concerns about the effects of cutting the PFD on Alaskans and Alaska’s private economy (at slides 16-18).  Scott did as well (at slide 18).

In its coverage of the hearing (For lawmakers, 3 options to tap Fund earnings) the Juneau Empire listed the approach as the third option before the Legislature this session (in addition to the Governor’s and Sen. McGuire’s proposals).  Alaska Dispatch News columnist Dermot Cole had his own take on the hearing, and another view from Alaska Commons — which confuses some of the testimony to create a conflict between Scott’s testimony and mine similar to what Dermot does in his column (“Goldsmith and Keithley told me they do not believe there is a contradiction …”) — is available here.

To some degree the morning hearing was an opener for a subsequent hearing later in the day to take broader public testimony on the Governor’s proposed approach.  As several of the state’s media outlets reported, there was significant opposition to cutting the PFD during that hearing .  (Alaska Dispatch News:  “Governor’s budget plan picked apart as Alaskans debate Permanent Fund changes;” Fairbanks News-Miner, “Public testimony opens for new PFD plan;”  KTUU, “Alaskans weigh in on proposal to finance government with Permanent Fund earnings;” KTVA, “‘Don’t touch my PFD’ Public weighs in on Governor’s PFD proposal“).  In part the later hearing provided real life examples of the concerns Scott and I raised in the morning about the adverse effects on Alaskans and the private economy from cutting the PFD.

It will be interesting to see where this goes. I anticipate it won’t be the last time this session we have the discussion.

An appearance on the “Weekend Edition” of the Michael Dukes Show …

As the Alaska budget battles start to heat up Alaska talk show host Michael Dukes invited me to join him on his weekend Fairbanks show for a deeper dive into the issues.  We spent an hour discussing the background of how we got here, my take on the Governor’s proposal and GCI’s recent new affiliated effort (“Alaska’s Future“), the history, purpose and reasons why the PFD should not be cut, where I think spending can be and my view on a better way forward (a slide deck from a recent speech outlining my views is available here).

Listen here or at the widget below and for past episodes, go here.

This week (Jan 26, 2016) on The Michael Dukes Show …

Each Tuesday morning at 7:15 am Alaska I join KBYR AM750‘s The Michael Dukes Show to discuss the latest in Alaska oil and budget issues. This week we discuss who is coming after your #PFD (and why), where the Alaska economy is headed and why the two are related.  I join Michael at around 10:15 of the following segment.  Listen here or at the widget below and for past episodes, go here.

The FY 2016 Budget: Oops …

Fiscal CliffRemember last spring when the Alaska Legislature finally finished up the FY 2016 budget.

Yep, I do too.

The spending level authorized when they did?  $5.18 billion (see circled number below, line 40).

FY 2016 Fiscal Summary (1.23.2016)

Continue reading

A Way Forward on the Alaska Budget: A Presentation to the Friday Fairbanks GOP Lunch

Speaking on behalf of Alaskans for Sustainable Budgets and following on the heels of Governor Walker’s State of the State last night, I had the privilege of being the luncheon speaker at today’s Friday Fairbanks GOP Lunch to discuss the Alaska state budget.  As with a previous presentation last month to the Alaska Republican Assembly, the speech centered around three points:

  • Alaska is facing a budget challenge but it may not be as bad as some suggest.
  • In my view, there is a solid and realistic fiscal alternative to addressing the state’s current budget issues that doesn’t rely on PFD cuts or taxes.
  • The Governor’s and GCI’s (“Alaska’s Future“) PFD cut and other tax proposals are unnecessary, are imbalanced (between the private and government sectors) and may do more harm than good to the overall Alaska economy.

A copy of the slide deck is available in the window above or here.

Cuts to PFD much, much deeper than cuts to spending under Governor’s, GCI plans …

ThelmaLouise4_001PyxurzIn the course of recent conversations with Alaskans I have heard some say that they ultimately may be prepared to accept cuts in the PFD and/or the imposition of other taxes on the private sector as long as the state is prepared to make a similar level of cuts in the state government sector.

The purpose of this post is to analyze whether the level of cuts to each sector proposed each under the Governor‘s and GCI‘s recent fiscal plans meet that objective.

The conclusion?  Neither the Governor’s nor GCI plans treat the two sectors equally, by a long, long shot. Continue reading

How deep are the Governor and GCI proposing to cut the PFD …

FiscalCliffThe short answer is pretty damned deep, a lot more than they are proposing to cut government spending.

One of the things I spent time on while preparing for my presentation last week to the Alaska Republican Assembly (“A Way Forward on the #AKbudget“) was understanding the effect on the PFD of the Governor’s and GCI’s proposed fiscal plans.

It’s not necessarily an easy thing to do.  Both the Governor’s and GCI’s fiscal plans propose to change Alaska’s fiscal structure significantly, with the effect that it is challenging to trace the sources and uses of funds in place under the state’s current fiscal approach to how and where they are used under the proposed plans.  But it is possible, with some patience. Continue reading

A Way Forward on the #AKbudget

As I have before, Tuesday evening I presented to a meeting of the Alaska Republican Assembly on Alaska’s current fiscal situation.   The slide deck is above.

The presentation covered my views on what the current outlook is for Alaska’s fiscal situation if we continue down the road of “business as usual,” an analysis of the alternatives that have been proposed for changing course and my thoughts on the best way forward.

My conclusions?

  • Alaska is not “falling of the cliff” immediately, but the 10-year outlook demonstrates we can’t continue “Business as Usual”
  • “Cuts only” based on traditional revenue sources fall well below FY 2006 adjusted (pre-bubble) spending levels, send Alaska back to pre-oil spending levels
  • Based on current, long-term fiscal outlook, “Sovereign Wealth Fund” and SB 114 both go unnecessarily far by cutting PFD and taxes
  • Based on current, long-term fiscal outlook, Goldsmith model remains best current approach (properly monitored and adjusted)
  • The Legislature needs to respond to S&P this session

My proposal at tomorrow’s “Forum on Alaska’s Fiscal and Economic Future” …

Alaska's Fiscal and Economic Future ForumAs most readers likely are already aware, tomorrow (Saturday, September 19, 2015) Alaska Common Ground and the University of Alaska – Anchorage Institute of Social and Economic Research (“ISER”) are sponsoring a day long forum on Alaska’s fiscal and economic future.  A description of the forum and detailed agenda is available here.

The forum is from 9am – 4pm, at the Wendy Williamson Auditorium located on UAA’s campus.  For those unable to attend in person, the forum will also be televised live on 360 North, the same public television system that televises Gavel-to-Gavel.

Based on the agenda and discussions with both those who have brought it together and various speakers, I anticipiate it will be a significant event in shaping the course of the coming debate on Alaska’s fiscal future.

One part of the forum will involve presentations by four Alaskans, each of whom will discuss and defend their own budget proposals, with audience members voting after the presentations on which they favor.  Those presenting are John Havelock, former Alaska attorney general; Liz Medicine Crow, president/CEO, First Alaskans Institute; Gary Wilken, former Alaska state senator … and me.

Those interrogating the panelists about their proposals (I am confident in a good sense of the word — hahahaha) are  Cliff Groh, Chair of Alaska Common Ground; Gunnar Knapp, ISER director and professor of economics; David Teal, director, Alaska Legislative Finance Division; and Larry Persily, former federal coordinator of the Alaska Natural Gas Pipeline Project, and former deputy commissioner, Alaska Department of Revenue.

Somewhere along the way I can guarantee I will mumble to myself (because I always do), “why did I agree to do this?” … and somewhere later along the way I will realize the answer.

Each of the “citizen panelists” has been asked to provide materials explaining and supporting the position.  These will both be handed out to those attending in person and available online for those tuning in via web or television.  For any that want to have a flavor for what is likely to be discussed — or get a jump in formulating questions, my set follows.

We will see how this goes ………

Part 3 of the “Alaska’s Fiscal Future” curriculum saga …

letterReaders will be familiar with Parts 1 and 2 of the “Alaska’s Fiscal Future” curriculum saga.  If some need a refresher, here are links to Part 1 and Part 2.

Following Part 1 I had an extended and ultimately, good exchange with those responsible for curriculum at the Anchorage School District and became convinced that they understood the reason for and importance of including the ISER model as part of the materials they made available to teachers.  In the last communication ASD committed that “all teachers who attended ​[the previous breakout session] ​will be invited to attend a special training focused on the DOR model vs the Goldsmith model​ ….” Continue reading

The “Alaska’s Fiscal Future” curriculum saga continues …

letterYesterday I posted a letter that I had sent to Anchorage School District Superintendent Ed Graff and others on the rollout at an ASD in-service day last Friday of a new curriculum on “Alaska’s Fiscal Future.”  According to a press release issued by the Governor and posted by ASD on its website the day before, the new curriculum “centers on the Alaska Revenue and Expenditure Model developed earlier this year by the Alaska Department of Revenue.”

As I explained in yesterday’s post, I have significant concerns about DOR’s model.

As I received responses during the day from the Superintendent and others I came to realize that, while ASD was responsible for the Friday rollout and was listed in the press release as one of the developers of the curriculum, the issue extended as well to two other organizations that, according to ASD, played a larger role in developing the materials.

Those organizations are the University of Alaska – Fairbanks division of “eLearning  & Distance Education,” which appears to have set up a website containing the materials used by ASD entitled “Alaska’s Fiscal Future: Educational resources for solving Alaska’s fiscal challenges,”  and the Alaska Council on Economic Education, which describes itself as “a non-profit partnership of leaders in business, economics and education who are devoted to advancing the economic way of thinking so an informed public understands economics, shapes their future and advocates sound personal, local and national economic policies” and, according to ASD, helped set up the in-service day.  The Board of Directors of the Council is available here.

I have long admired and respected the efforts of both organizations and readily anticipate that their efforts in developing the curriculum are motivated by the best of intentions.  For the same reason as I outlined yesterday in my letter to ASD, however, their use and adoption of the DOR model as the “center” of the curriculum materials is problematic.

Consistent with my letter yesterday to ASD, this morning I sent a letter also to those involved in the effort at the UAF eLearning division and ACEE.  A copy follows: