What do we know to date about the Alaska recession and the fiscal crunch?

We provide a broad overview of the state’s economic and fiscal conditions. We show how the economic contraction has spread away from natural resource and mining and state government to household spending dependent sectors. We also show that while the rate at which jobs are being lost has slowed, it is inaccurate to think about that as a sign of a recovery. That is because the engine of growth that is O&G employment as of June 2017 was only 75% of what it was in 2014. Additionally, the softness in spending activity may linger for an extended period of time. We also assess the regional effects of the recession and show the significant heterogeneity in experience. Unsurprisingly, areas with economic bases not associated with Oil and Gas and with relatively little dependence on state government spending are holding up best. After establishing an understanding of the economic conditions, we offer a back of the envelope calculation of the capital investment losses associated with the fiscal uncertainty. Then, we provide a comparison of Alaska’s taxes relative to the rest of the US, and a simulation of the effects of different withdrawal amounts on the permanent fund balance and the earnings reserve.Northrim Ban

What do we know about the effects of the Alaska Permanent Fund Dividend?

The Alaska Permanent Fund Dividend (PFD) has been distributed to Alaska residents for 37 years, providing each resident an equal share of a yearly government appropriation based on the earnings of the Alaska Permanent Fund. While support for the program is high, work assessing the PFD’s influence on the lives of Alaskans is limited. Recently, a number of researchers have analyzed the causal effect of the PFD on a variety of socio-economic outcomes including employment, consumption, income inequality, health, and crime. This paper summarizes this empirical literature and highlights future areas of research.Summary / Background on the Permanent Fund Dividend / Paper structure / Employment / Health / Consumption / Poverty / Income inequality / Crime / Where does the research on the PFD go

A Regional Assessment of Borough Government Finances And Employment

Alaska’s state budget revenues declined by more than 90% from 2012 to 2016, mainly due to a sharp drop in oil prices: oil revenues have paid for most state government operations since the 1980s. This loss of so much revenue has led to a shortfall of billions of dollars in the state budget and a sluggish economy. The health of a state’s tax revenues is critical to its economic growth and ability to finance public services. Considerable attention has been paid to the state’s fiscal woes, which are still ongoing. But the state also provides considerable support to Alaska’s local governments—and there has been little analysis of how the decline of state revenues might affect local governments. This analysis reports how much Alaska’s 19 borough governments rely on state aid—individually and as a group—and considers how vulnerable they are to cuts in state aid as time goes on. Alaska also has city governments, both within and outside organized boroughs, but here we look only at borough governments —which are essentially regional governments that, unlike cities, all have the same mandatory powers. We want to emphasize that our figures are estimates; boroughs report their revenues quite differently, and sometimes in ways that make it nearly impossible to identify allocations from the state. Alaska provides three main kinds of aid to local governments: aid for general government operating expenses (revenue sharing), grants for public works projects, and aid for schools. It has mostly relied on its oil wealth to fund that aid to local governments. Revenue sharing helps ensure that all areas of the state can pay for basic public services and have reasonably equitable and stable local tax rates. Aid to schools is a major part of the state’s budget, and it pays for a large share of school costs. State grants for local capital projects can vary sharply by year. In the years when oil prices were high—much of the time between 2008 and 2012—those grants were large. Since then, the state capital budget has shrunk to a small fraction of what it was a few years back.Northrim Bank General Communications Inc. University of Alaska Strategic Investment Fund

Current and Future Medical Costs of Childhood Obesity in Alaska

This study examines the medical costs of childhood obesity in Alaska, today and in the future. We estimate that 15.2% of those ages 2 to 19 in Alaska are obese. Using parameters from published reports and studies, we estimate that the total excess medical costs due to obesity for both adults and children in Alaska in 2012 were $226 million, with medical costs of obese children and adolescents accounting for about$7 million of that total. And those medical costs will get much higher over time, as today’s children transition into adulthood. Aside from the 15.2% currently obese, another estimated 20% of children who aren’t currently obese will become obese as adults, if current national patterns continue. We estimate that the 20-year medical costs—discounted to present value—of obesity among the current cohort of Alaska children and adolescents will be $624 million in today’s dollars. But those future costs could be decreased if Alaskans found ways to reduce obesity. We consider how reducing obesity in several ways could reduce future medical costs: reducing current rates of childhood obesity, rates of obese children who become obese adults, or rates of non-obese children and adolescents who become obese adults. We undertake modest reductions to showcase the potential cost savings associated with each of these channels. Clearly the financial\ savings are a direct function of the obesity reductions and therefore the magnitude of the realized savings will vary accordingly. Also keep in mind that these figures are only for the current cohort of children and adolescents; over time more generations of Alaskans will grow from children into adults, repeating the same cycle unless rates of obesity decline. And finally, remember that medical costs are only part of the broader range of social and economic costs obesity creates.Alaska Department of Health and Social Services Section of Chronic Disease Prevention and Health Promotion Sectio

Policy Implications of Freestanding Emergency Departments

Policymakers have a responsibility to look at both the short- and long-term implications of their decisions. The state’s current fiscal situation, coupled with rising health-care costs makes “budget neutrality” highly desirable in decision-making. In spite of efforts to bend the cost curve, health expenditures have grown inexorably in Alaska. As of 2009 our health expenditures per capita were the second highest in the nation. This means that the state spends a larger portion of its budget on health costs, employers allocate more of employees’ compensation to health premiums, and households spend more of their disposable income on out-of- pocket costs, premiums, and co-pays. The evidence we provide in this analysis consistently shows that freestanding emergency departments charge higher prices for services that are available for considerably less in traditional settings. Allowing freestanding emergency departments to enter the Alaska market goes against the many efforts being undertaken to contain health-care costs. Markets forces explain a significant portion of the high health-care prices charged in Alaska, but in this case the state has an opportunity to use its regulatory authority to help prevent even higher prices in the future. Putting costs aside, in considering emergency services one needs to rationalize the hospital and clinical capacity across a region and the needs of the population. In the Alaska health-care system there are problems with coordinating the delivery of care. Freestanding emergency departments pose the risk of exacerbating that lack of coordination, if people use them in lieu of seeing their primary physicians—which can disrupt the continuum of care and potentially hurt outcomes for patients.Providence Alaska Medical Cente

Economic Impacts of the Vetoes on the Alaska Economy

On June 28, 2019 Governor Mike Dunleavy announced line-item vetoes totaling $409 million from the State of Alaska budget for Fiscal Year 2020. These vetoes include significant cuts to the University of Alaska, Medicaid, payments to local governments, public assistance programs, state personnel headcounts, and numerous other categories. The full consequences of these cuts on the state economy, fiscal health, population, and policy outcomes will take years to develop. In this paper, we provide the short term impacts of the cuts, how they interact with the current state of the economy, and a descriptive outlook of the some of the future effects. We find the cuts will result in more than 4,000 jobs lost in the short run and will therefore return the Alaska economy into recession. While the short term losses represent a considerable negative shock to the economy, the consequences of these cuts on long term development could be even more pronounced.Introduction / Employment effects of the cuts / How strong is the Alaska economy? / What do the cuts mean for the recovery? / University implications / Takeaways and long run consideration

Public and Private Sector Earnings in Alaska

We compare earnings in the Alaska public and private sector labor markets from 2001 -2016. Public sector laborers are older and more likely to be female, suggesting that taking these differences into consideration will be important in our comparisons. We also focus on the public-private sector earnings gaps for men and women separately, as the magnitude and even direction of the gap depends on this distinction. We go about this in three ways: unconditional comparisons, conditional earnings gaps, and comparing the earnings and growth of individuals who remain with the same employer. Below are the main findings: • The unconditional average public-private earnings gaps for men and women are of opposing signs (see Table 1). – Men in the public sector earn about $2,129 less in quarterly wages than men in the private sector, on average. – Women in the public sector earn about$498 more in quarterly wages than women in the private sector, on average. • On average, across all occupations, men and women have higher initial earnings in the private sector at the beginning of a job spell. – For men, the difference is $3113 in quarterly earnings. – For women, the difference is$760 in quarterly earnings. • Among workers who remain with the same employer, earnings growth is 1% and 2% higher in the public sector for men and women, respectively. • For men, despite the faster growth, they don’t catch up to the earnings of private sector employees within 10 years of tenure in most occupations (See Tables 9 and 11, and Figure 12). 1 • Women in the public sector earn more than their private sector counterparts within a few years of tenure, on average. • There is substantial heterogeneity in the earnings gap across occupations (See Tables 10 and 12, and Figure 13).Alaska Department of Administratio

Alaska’s economy and the COVID-19 virus

The Alaska economy, similar to the rest of the world, will contract over the next few weeks and months due to the COVID-19 virus that has forced businesses to close or significantly curtail operations. While it is near impossible to identify the true economic consequences of these measures, we make educated assumptions about the size of the layoffs in the most vulnerable sectors. To get the full scale of the potential losses, we estimate multiplier effects from these losses using an input output model. Layoffs in the directly affected sector could exceed 27,000 with a payroll of almost 80 million dollars in the month of April. The indirect and induced effects of this shock could result in another 21,000 jobs lost if the employment separations are not temporary. In the second quarter of 2020, direct GDP losses due to the decline in economic activity -not including declines in oil prices- could amount to almost 2 billion dollars. If the disruption in economic activity is not short-lived, we could expect another 2 billion dollars in losses due to the indirect and induced effects. The significant Federal aid package which will provide a boost to unemployment insurance, direct transfers to households, and aid to businesses will certainly dampen some of the consequences we estimate. While the short term costs of social distancing are high, Alaska’s long term economic health depends on first containing the virus