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Alaska's Fiscal Situation: Where We've Been, Where We're Headed

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Alaska's Fiscal Situation: Where We've Been, Where We're Headed

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A presentation to the Alaska Interior Republicans to review Alaska's current fiscal situation, where it is headed and the various options for dealing with the continued fiscal gap.

A presentation to the Alaska Interior Republicans to review Alaska's current fiscal situation, where it is headed and the various options for dealing with the continued fiscal gap.

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Alaska's Fiscal Situation: Where We've Been, Where We're Headed

  1. 1. Alaska’s Fiscal Situation: Presentation to: Alaska Interior Republicans May 15,2020 Where are we now ... … where are we headed … what are the options
  2. 2. The backdrop: oil price & production * We were facing large revenue shortfalls before * They have become much worse in the last few months * FY 21 oil price 40% lower than forecast even 6 mos ago (Dec ‘19)
  3. 3. Where are we now ... * While revs are falling (⬇ 34% from FY19) ... * … spending has declined only slightly (⬇ 6% from FY19).
  4. 4. Where are we now … * Even w/ rising PFD diversions, con’t reliance on savings draw * But: CBR effectively depleted by end of FY21
  5. 5. Where are we now … * “Rainy day” funds (SBR/CBR) depleted * Under Constitution, CBR draws are a loan
  6. 6. Where are we headed ... * Key point: FY21 is only the tip of the fiscal iceberg * Even capping spending at inflation, 10 yr deficit avg’s $1.63B/yr
  7. 7. What are the options ... * OMB FY21 10-year plan: - Spending cuts - PFD restructuring - Substitute revs * Scenario 5: “Balanced”
  8. 8. Two comments about PFD cuts ... “ The impact of the PFD cut falls almost exclusively on residents, and it is highly regressive, so it has the largest adverse impact on the economy per dollar of revenues raised.” -- Short-Run Economic Impact of Alaska Fiscal Options (May 2016) “ A cut in PFDs would be by far the costliest measure for Alaska families.” -- How Much Might Closing the State Budget Gap Cost Alaska Families? (Feb 2017)
  9. 9. Two comments about PFD cuts … * Regressive * FY21: Diverts 3.5% of AGI from private to public sector * .. but takes most from middle & lower income brackets
  10. 10. Questions

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