As the state Senate now takes up the budget, the call for more spending cuts goes out again. However, since this sustained push for hard cuts, there has been an economic analysis worthy of consideration.
With the support of Northrim Bank, Mouhcine Guettabi, an Assistant Professor of Economics at Institute of Social and Economic Research (ISER), examined what the cost of legislative inaction has been on private investment spending. He concluded, “that the direct effects of policy uncertainty is costing the state somewhere between $200 and $600 million in private capital spending. In fact, the losses due to uncertainty are important and similar in magnitude to the ones the economy would experience due to a tax or further government cuts.”
This means that the economic cost of an income tax or more deep cuts is almost the same as what we’re losing in lost investment opportunity; only we’re not getting the bang of more of revenue or savings.
We’re just hurting the economy more.
Since both the House and Senate have already accepted that solving the fiscal gap is dependent on using part of the Alaska Permanent Fund earnings, why not stop the uncertainty and add revenues into the mix?
[https://www.alaskapublic.org/wp-content/uploads/2018/03/2018_01-AKRecessionFiscalCrunch.pdf ]
Yet, I fear this report will get overlooked in the stubbornness to draw hard lines around cuts and taxes. If we care about Alaska’s overall economic health, the emphasis must shift away from cuts and toward revenues. To legislators that believe we’ve not yet reached bottom, bear in mind that from the peak of 2013, the state budget has been reduced by a whopping 44 percent. Just since FY 2015, the state operating budget has been cut by 27 percent.
[https://www.adn.com/opinions/2017/12/15/alaska-has-indeed-cut-spending-and-here-are-the-numbers/ ]
These are major adjustments downward that are showing up as real impacts in our communities. Take Juneau for example. In fact, in between floor sessions, legislators could take a local tour of budget impacts. To start, go across the street to the Dimond Courthouse and visit the District Attorney’s Office that is coping with less staff and a major rise in “Part 1 crimes.” The result is crime triage. Deciding which lesser crimes to let go of for a later trial date undermines public safety. Misdemeanor crimes are all but gone from the court calendar as are court proceedings on Friday. In the same building is the closed child support office.
[http://juneauempire.com/state/news/local/2017-11-19/budget-cuts-hit-prosecutors-hard]
Next, on a tour of budget impacts would be the Marie-Drake and Mendenhall River School. These are both 30-plus old buildings languishing in disrepair since the elimination of the School Debt Reimbursement Program. Walking into Marie-Drake one would immediately notice the poor lightening and ventilation. Not so obvious is the antiquated heating controls that school officials worry will give out any day. Upon stepping inside the Mendenhall River Community School the need to replace old carpets and wall paint is striking. Less obvious is the water damage to the grounds.
While buildings are one way to show the budget strain, the other is to walk into any middle school and see one hard-working teacher addressing the instructional needs of 30-plus students. With the School District looking to eliminate 17 more teacher positions, over-crowded classrooms are now the norm. Also at the middle school, is the successful AVID program, a college readiness program designed for disadvantaged students. Facing less state funds, the School District is now poised to end this effective program.
Driving out the road, the first stop would be at the Alaska State Troopers office. While this trooper post is still open, eight such posts have been completely closed in rural Alaska. Driving further is the Auke Bay Ferry Terminal where the M/V Fairweather is tied up for the winter. This vessel represents a major loss in annual ferry service. As of 2019, the Alaska Marine Highway System will be providing Alaska communities with 345 weeks of service, instead of the 400-plus weeks of service seen in 2013. Because of the economic dependency many communities have on regular ferry service, these reductions generate negative impacts from Ketchikan to Kodiak.
The bottom-line is that from public safety to education to economic life-links, the impacts of state budget cuts are very real and worrisome for a state in recession. The pain is just as visible as is the solution to the fiscal gap. Perhaps after a budget impact tour, the Senate Majority could heed the advice of ISER economists and comprehensively (means including revenues) address the fiscal gap while saving millions in lost investment opportunities.
• Kate Troll is a former Juneau Assembly member with 22 years experience in climate and energy, fisheries and coastal management policy. She is the author of “The Great Unconformity: Reflections on Hope in an Imperiled World.”
