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Impact of Proposed PFDCuts on Alaska Income & Jobs (Supplement to 3.4.2021 LegFin Presentation to SFIN (3.8.2021))

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Impact of Proposed PFDCuts on Alaska Income & Jobs (Supplement to 3.4.2021 LegFin Presentation to SFIN (3.8.2021))

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This presentation is to supplement the 3.4.2021 LegFin Presentation to the Senate Finance Committee to analyze the impact of the PFDcuts discussed there on Alaska income & jobs.

This presentation is to supplement the 3.4.2021 LegFin Presentation to the Senate Finance Committee to analyze the impact of the PFDcuts discussed there on Alaska income & jobs.

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Impact of Proposed PFDCuts on Alaska Income & Jobs (Supplement to 3.4.2021 LegFin Presentation to SFIN (3.8.2021))

  1. 1. Impact of Proposed PFDCuts on Alaska Income & Jobs Supplement to 3.4.2021 LegFin Presentation to SFIN March 8, 2021
  2. 2. Why a Supplement 1. While LegFin’s 3.4.2021 Presentation to SFIN analyzed the impact on the overall budget of three sets of proposed PFDcuts, LegFin did not analyze the impact of those cuts on Alaska families (the so-called #WhoPays issue) or the impact on the Alaska economy 2. We analyzed the #WhoPays issue in our previous supplement (“Supplement 1”), “Distributional Impact of Proposed PFDCuts on Alaska Families by Income Bracket” (3.7.2021) 3. This supplement (“Supplement 2”) analyzes the impact of the PFDcuts on the Alaska economy (overall income & jobs)
  3. 3. Methodology 1. ISER’s March 2016 Report, “Short-Run Economic Impacts of Alaska Fiscal Options” calculates the impact of various budget balancing options on overall Alaska income and jobs 2. This analysis uses the data from that report to analyze the impact on the Alaska economy of PFD cuts for three cases: a. The reduction from the Statutory PFD to POMV 50/50, $1000 PFD and $500 PFD (the reductions analyzed by LegFin), b. The reduction from POMV 50/50 to $1000 and $500 PFDs, and c. The use of PFD cuts compared to various other balancing options 3. This analysis focuses on the anticipated FY 22 PFD, calculating the Statutory and POMV 50/50 PFD’s using data from the APFC’s January 2021 “History & Projections”
  4. 4. Conclusions 1. ISER’s 2016 report concludes that using PFDcuts to balance the budget (compared to various other types of revenue) “has the largest adverse impact on the economy per dollar of revenues raised” 2. This analysis confirms that, finding that PFD reductions at the levels analyzed in LegFin’s 3.4.2021 Presentation reduces both income and jobs more than any other revenue option analyzed in the ISER report 3. Consistent with ISER’s 2016 report, the analysis also finds that PFD cuts have a larger adverse impact on overall Alaska income than reducing the deficit through an equivalent amount of spending cuts, but that using spending cuts have a larger adverse impact on jobs

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