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Alaska’s Fiscal Situation:
Presentation to:
Alaska Interior Republicans
May 15,2020
Where are we now ...
… where are we headed
… what are the options
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)
Where are we now ...
* While revs
are falling (⬇
34% from
FY19) ...
* … spending
has declined
only slightly
(⬇ 6% from
FY19).
Where are we now …
* Even w/
rising PFD
diversions,
con’t reliance
on savings
draw
* But: CBR
effectively
depleted by
end of FY21
Where are we now …
* “Rainy day”
funds
(SBR/CBR)
depleted
* Under
Constitution,
CBR draws are
a loan
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
What are the options ...
* OMB FY21
10-year plan:
- Spending
cuts
- PFD
restructuring
- Substitute
revs
* Scenario 5:
“Balanced”
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)
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
Questions

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

  • 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. 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. Where are we now ... * While revs are falling (⬇ 34% from FY19) ... * … spending has declined only slightly (⬇ 6% from FY19).
  • 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. Where are we now … * “Rainy day” funds (SBR/CBR) depleted * Under Constitution, CBR draws are a loan
  • 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. What are the options ... * OMB FY21 10-year plan: - Spending cuts - PFD restructuring - Substitute revs * Scenario 5: “Balanced”
  • 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. 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