Presentation to the Associated General Contractors of Alaska Sustainable Budget Task Force on our views on achieving long-term fiscal sustainability.

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AGC Legislative Affairs Committee /
Sustainable Budget Task Force
Achieving Long-Term Fiscal Sustainability
Brad Keithley
Managing Director
November 30, 2023
AKforSB.com

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… a project focused on developing and
advocating for state fiscal policies that are
economically robust, equitable and durable.
Alaskans for Sustainable Budgets …

3. Problem: Long-Term Budget
Deficit
Alaska has a
deep &
persistent
“current law”
budget deficit.
Potential Solutions
What are the
potential solutions:
● Spending cuts
● Add’l Revs (taxes)
● PFD diversions
(which have
elements of both)
Evaluation Criteria
What matters:
● Impact on the
overall Alaska
economy &
jobs
● Impact on
Alaska
families
Solution
What has the least
negative impact on
the overall economy
& Alaska families.*
Our Alaska Fiscal Decision Process
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* PFD cuts have the “largest
adverse impact” on the
#AKecon and are “by far the
costliest to #AKfams” of the
revenue options.

4. The Status Quo Outlook:
Continuing, deep deficits
● “Current law” deficit: Statutory PFD
● Revenues: Updated for most recent oil futures and PFC projections
● Spending: Most recent LegFin baseline
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5. Potential Solutions & Impacts
Detailed studies:
● UAA ISER (2016, 2017)
● ITEP (2017, 2021)
● DOR (2022, solutions only)
Spending cuts (ISER): Workers, pay, capital, balanced
Taxes (ISER & ITEP): Progressive income tax, sales tax, payroll tax,
investment tax, property tax, various types of “flat tax”
Taxes (DOR, potential solutions only): adjustments to oil taxes,
lottery/gaming, other misc
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6. Impacts on Alaska economy & families
ISER (2016, economy & 2017, families):
● “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.”
● “A cut in PFDs would be by far the costliest measure for Alaska
families.”
Sometimes discounted due to study’s focus on “short term” impacts, but
both causes (regressivity and impact only on residents) are long-term in
nature.
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7. Impacts on Alaska economy & families (con’t)
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ITEP (2017):

8. Solutions: Administration
“The past several legislative sessions have illustrated that solutions
need to be moderate to earn the people’s approval. Previous
proposals involving budget reductions, PFD decreases, and taxes
faced skepticism when the Alaskan citizenry believed that they went
too far. Proponents of a balanced approach suggest that everyone
give a little so that no group of Alaskans faces undue harm.”
Option 5, “Balanced Approach”
FY2021 Budget Overview and 10-Year Plan
Office of Management & Budget
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9. Legislative “Fiscal Policy Working Group” (2021)
Recommends an “all of the above”
approach:
● Some PFD cuts (to POMV 50/50)
● Some spending restraint
● Some oil tax adjustments
● Some broad based (individual) taxes
● An updated spending cap
“The FPWG believes the legislature must
pass a comprehensive solution. FPWG
members do not support addressing only one
or two issues to the exclusion of others.”
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Backup Materials

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FY24 Budget & Distributional Impact (#WhoPays)

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