Alaska’s Economy: More Confirmation (If You Needed It)


Lessons in fixing a flat tire: don't slash the other three

Lessons in fixing a flat tire: don’t slash the other three

The Alaska Dispatch News columnist Charles Wohlforth, in an opinion piece last week, reported on an interview with private Alaska economist Jonathan King  and Alaska Department of Labor’s Dan Robinson. Wohlforth wrote:

A recession is unfolding of similar severity to what the nation endured after the 2008 financial crisis, but with a critical difference, King said. The U.S. economy recovered. He expects Alaska’s economy to shrink long-term to a smaller base.

The projections show job losses bottoming out in 2018 to 2020, but no bounce-back through 2026. Population predictions are uncertain because they contain more unknowns than job numbers, but Northern Economics projects decline continuing for at least a decade, with net loss of more than 30,000 residents.

Alaska’s gross state product, the total value of all the goods and services we produce, has declined for five years and is down 22 percent due to lower oil prices and production. With that much money subtracted from the economy, it has to shrink, with slower business, fewer jobs and a smaller population.

The State Senate seems determined to make even more severe cuts to the state budget. Anyone who has had a class in macroeconomics understands that will trigger a very serious worsening of the current recession, perhaps by as much as another 20-25%. As Wohlforth points out, a state income tax, which spreads the economic cost of government across a much broader group, would have a much less severe impact on the economy.

None of this takes an awful lot of intelligence. Even WC was able to see this crisis coming, and has been warning, well, railing, about this for almost four years. The Legislature’s response to the risk has, at every step, been to worsen the crisis, including nearly exhausting the Constitutional Budget Reserve so its earnings aren’t available to cushion the crash. Former Governor Sean Parnell’s cargo cult thinking didn’t help, either.

So now Alaska is at the crossroads: whether to balance the budget with new revenue sources like a state income tax or state sales tax, or aggravate the present recession by further slashing state spending and completing the process of looting the budget reserve. The former preserves at least a chance of preserving the Alaska we know; the latter is a steep, brutal path to a smaller Alaska, with fewer opportunities for the best and brightest young Alaskans.

It really is that stark. Given current leadership in the State Senate, WC is afraid the outcome is nearly certain. And it’s not good. But maybe, just maybe, if enough voters make enough noise, even the likes of Senator Kelly will wake up to the crisis. Yes, it’s a long shot. Yes, it’s a rebellion. But, to paraphrase a recent movie, all a rebellion has is hope.

And it really is the last chance.

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