Category Archives: Alaskans for Sustainable Budgets

#KeepThePFD

As the next step in our efforts, yesterday we started a radio and social media campaign focused on urging legislators to retain the Alaska Permanent Fund Dividend as it currently is.  The ad above is the first in the series. The audio is the radio campaign ad.

The social media campaign is introduced by this post:

We believe the full PFD should stay in the pockets of Alaskans rather than be used by government to help fund special interests. If you agree, contact your legislator by email, text, by posting on Facebook or Twitter and tell them you want them to #KeepThePFD. Their contact information can be found at http://akleg.gov. Then, repost this video so that your friends do the same. For continuing updates and commentary on Alaska’s fiscal situation, like, follow and engage with us at Alaskans for Sustainable Budgets.

We are taking this step because, for the reasons we have explained on these pages, we believe strongly that the Alaska legislature is headed in the wrong direction on this issue and are willing to put our money where our mouth is.

Our comments on the proposed House Operating Budget (HB 57) …

CommentsOver the weekend we prepared and submitted our comments to the House Finance Committee on the proposed House Operating Budget (HB 57).  Here was the summary:

Alaska is currently in an economic recession. We believe consideration of that fact should drive the evaluation this session of every bill touching on the state’s economy. Things that adversely affect the state’s overall economic situation — or unfairly treat some Alaskans economically compared with others — should either be amended to avoid those effects or rejected.

HB 57 certainly is one of those bills that touch on the state’s economy.

For the reasons explained below, we believe that, in its current form, HB 57 both worsens Alaska’s overall economic situation and unfairly treats some Alaskans. In other words, we believe that HB 57 worsens the recession for both Alaska and Alaskans.

In order to avoid those effects, we believe that HB 57 should be amended in certain respects.

Our full comments are here:

Comparing the impact of SB 70 v. HB 115 on the overall Alaska economy …

comparison-of-sb-70-v-hb-115-2-27-2017
Last Friday, the Alaska Senate Majority introduced SB 70, a new bill which proposes to address Alaska’s fiscal situation. Like HB 115, the version being considered in the House, the Senate version relies heavily on cutting the Permanent Fund Dividend (PFD) in order to raise “new revenue.” Unlike the House version, the Senate version does not also contain an income tax component.

Because no one else is, we have started scoring the effect of various fiscal proposals on the overall state economy. As we explained in a previous piece last week scoring HB 115 (“Scoring the effect of HB 115 on the overall Alaska economy”, Feb. 20, 2017), we are doing so using the factors developed last year in two studies done by economists at the University of Alaska-Anchorage’s Institute of Social and Economic Research (ISER).

Our basic methodology is described in the February 20th piece. It measures the effect on the overall Alaska economy of the proposal being scored in four areas: jobs, income, poverty levels and income disparity. Especially given that Alaska is in the midst of a recession, the purpose of the scoring is to determine whether the proposal moves the overall economy forward or backward. Continue reading

Why Hammond 50/50 works …

When asked about alternative proposals to address Alaska’s current fiscal situation that are founded on using Governor Hammond’s original vision for the Permanent Fund, the current Administration and, now, apparently, the Senate Republicans are falling back on the same mantra — “the numbers don’t work.”

Well, the numbers do work and we capture the reasons why in this slide deck.  Use the right revenue forecast, start using the “other half” of the annual revenues from the Permanent Fund for the purpose intended by Governor Hammond (to help fund “essential government services”), view and use the accumulated amount in the earnings reserve account for what it was originally intended (as a savings account to help fund “essential government services” during low points in the oil price cycle) and maintain total UGF spending at last year’s $4.3 billion (the sustainable budget number) adjusted going forward for inflation and population change (growth or decline) and Alaska’s fiscal situation stabilizes, without PFD cuts or taxes.

Going further, by cutting the PFD as the Administration (SB 26), House Majority (HB 115) and now Senate Majority (SB 70) have proposed and, in some instances, imposing additional taxes on top of that (as the Administration and House propose) leads to even more erosion in overall Alaska income, huge increases in statewide poverty levels and vastly increased income disparity between high income Alaskans on the one hand, and middle and low income Alaskans on the other.

In short, all three bills make Alaska’s overall recession worse, and in Alaska’s version of Simon Legree, focuses its most harsh effects on those who can afford it least.

We outline why Governor Hammond’s 50/50 vision works, and the adverse effect on Alaskans by going further, in this slide deck from last week’s presentation at one of the World Trade Center Anchorage’s periodic “Meet & Brief” luncheons.  We encourage readers to review it if you haven’t before, and to share it if you agree with the approach and want others to be aware of it as well.

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This post first appeared on Alaskans for Sustainable Budgets, a blog focused on News & Commentary on Alaska fiscal and economic policy on national website Medium.

 

Scoring the effect of HB 115 on the overall Alaska economy …

moneybwLast Wednesday, Legislative Finance (LegFin) Director David Teal appeared before the Alaska House Finance Committee to discuss HB 115, the Committee leadership’s proposal to cut the PFD and institute income and capital gains taxes.  The stated purpose of the presentation was to discuss modeling the impact of HB 115.  As it turned out, however, the only impact of HB 115 that LegFin had considered was that on government revenues.  The presentation didn’t even remotely touch on the impact of HB 115 on the overall Alaska economyboth the government and private sectors.

Especially in the midst of a recession, we believe that effort — assessing the impact of HB 115 on the overall Alaska economy — is critical.  Government fiscal policy plays a hugely influential role in the midst of a recession.  It can make a recession better, but it also can make it worse, or even much worse.

Because, to our knowledge, none of the Administration, LegFin, the Chamber, or for that matter anyone else has undertaken the effort specifically to score the effect of HB 115 on the overall Alaska economy, we have decided to do so, using the factors developed last year in two studies done by economists at the University of Alaska-Anchorage’s Institute of Social and Economic Research (ISER).  The first — Short-Run Economic Impacts of Alaska Fiscal Options — was published in March 2016 (the “March 2016 ISER Report”).  The second — Permanent Fund Dividends and Poverty in Alaska — was published in October (the “October 2016 ISER Report”). Continue reading

Our view of the way forward on Alaska fiscal policy (and the consequences of taking other directions)

At their invitation, we were part this week of the Fairbanks “Budget Blitz” hosted by the Greater Fairbanks Chamber of Commerce and the Fairbanks Economic Development Commission. The “Blitz” was designed by the two organizations to provide the Fairbanks community with a range of views on Alaska’s fiscal situation and potential responses.

Following presentations Tuesday by Office of Management & Budget Director Pat Pitney and Wednesday by Alaska’s Future new Executive Director Ian Laing, we presented our views on Thursday. The title of our presentation was “Implementing Governor Hammond’s 50/50 Plan,” but as importantly, it also focused in part on our preliminary analysis of the likely consequences on the overall Alaska economy of HB 115, another option currently being considered by the Alaska House Finance Committee. That option proposes to cut the Permanent Fund Dividend (PFD) and implement a capital gains and income tax, taking a significant amount of money out of the private sector to fund Alaska government. Continue reading

My written testimony for tomorrow’s Senate State Affairs Committee hearing on SB 1 and 2

Because I am out of the country and several time zones away I am unable to testify in person at tomorrow’s Senate State Affairs Committee hearing on SB 1 and 2.  Instead I am submitting written testimony.  The following is my submission.

Why we believe cutting the PFD has the largest adverse impact on the overall Alaska economy …

2016_03_30-shortruneconomicimpactsofalaskafiscaloptions-p-iii-9

Over the last few days we have been engaged in a debate about ISER’s analysis of the economic effects of various fiscal options.  The analysis is contained in a report, Short-Run Economic Impacts of Alaska Fiscal Options, published by ISER last March (the “March 2016 Report”).  Portions of the report were included also in a presentation by ISER this week before the Senate Labor & Commerce Committee (What do we know about the Alaska economy and where is it heading?“).

The debate has been about the relative effect of cutting the PFD compared with other options.  While various charts have been used in the course of the debate, the most complete is that above from the March 2016 Report, which shows all of the options and the relative “high” and “low” impact of each separately on overall Alaska income and jobs.

The “Income Impacts” side shows the relative “high” and “low” impact of the various options per $100 million of deficit reduction.  The impacts are shown in terms of the reduction in overall Alaska income by taking a given action.

For example, reducing the deficit by cutting the permanent fund dividend (next to last line) by $100 million (and transferring the money to government) results in a reduction in overall Alaska income of between $130 – $149 million.  On the other hand, reducing the deficit by raising $100 million through sales taxes (fewer exclusions, eighth line) results in a reduction in overall Alaska income of between $117 – $134 million.

Comparing the mid-point of each range — which we have used in various presentations to help simplify the discussion — demonstrates that reducing the deficit through sales taxes reduces overall Alaska income by approximately $125 million, while cutting the PFD results in reducing overall Alaska income by approximately $140 million (per $100 million of reduction).  Because the PFD cut results in a greater reduction in overall Alaska income, the PFD cut has a larger adverse impact on the Alaska economy (measured by income) than raising sales taxes.  

Indeed, looking up and down the chart, cutting the PFD has a larger adverse impact on the Alaska economy (measured by income) than any other option on the list. Continue reading

Some thoughts on how the discussion of fiscal issues is shaping up for this coming session

 

Today at their invitation I appeared as part of BP Alaska’s Citizens’ Action Program brownbag lunch series.  The title of the presentation was “An Overview of Fiscal Issues This Coming Session. The invitation grew out of a similar presentation I had made during December’s Law Seminars International Annual Two-Day Conference on Alaska Energy Markets and Regulation, https://goo.gl/ZaYPW5.

Today’s presentation updated the numbers I had used in the earlier presentation and expanded the discussion to include a deeper dive into the “Hammond 50/50” plan.  I also took the opportunity to talk about how I believe Alaska’s current economic recession plays into the session.

The slidedeck I used is above.  It also is available on my “Slideshare” page here:   https://goo.gl/7S5ivC.

Discussing the Hammond 50/50 plan on The Dave Stieren Show

dave-stieren-showWednesday afternoon I joined guest hosts Rebecca Logan and Renee Limoge Reeve on The Dave Stieren Show on AM 750 KFQD to discuss Governor Jay Hammond’s original “50/50 plan” for the use of earnings from the Permanent Fund.

Here was Governor Hammond’s original vision as he described it in his final book, Diapering the Devil:

“I wanted to transform oil wells pumping oil for a finite period into money wells pumping money for infinity. …[Once the “money wells” were pumping] each year one-half of the account’s earnings would be dispersed among Alaska residents …. The other half of the earnings could be used for essential government services.”

By comparison, Governor Walker’s FY 2018 budget proposal only disperses 28% of the account’s earnings among Alaska residents, with the remaining 72% going to government.  By FY 2027 the share going to Alaska residents is down to 26%, with the government’s share at 74%.

As we discussed on the show and detail further in the slidedeck below, Walker’s proposed change hurts the overall Alaska economy, increases poverty among Alaskans and increases income disparity, all of which are bad for Alaska and Alaskans, even more so with the economy already in a recession.

Compared to that, we believe that using Governor Hammond’s original plan — which has never been fully implemented — is capable of fully addressing the state government’s current so-called fiscal crisis in a way that avoids the adverse baggage added by Governor Walker’s modification.

Here is the podcast of my discussion with Rebecca and Renee.  Below that is the slide deck to which the three of us continually referred during the segment.