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Recovery and Budget Cuts:  Preliminary Evidence for Alaska and Anchorage���Harvard Yale Princeton Club�Dec. 3, 2019

Ralph Townsend

Director

Institute of Social and Economic Research

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2015-18: Mild Alaska recession

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Job losses and gains in the recession and recovery

The (mild) recession:

July 2015-July 2018: 13,700 jobs lost

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The (very modest) recovery:

July 2018-July 2019: 1,700 jobs gained.

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Source: Alaska DOLWD

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Job losses during recession

2015 2018 Loss/Gain

Oil & Gas 14,800 9,400 - 5,400

Construction 17,800 15,800 - 2,000

Retail 36,700 35,800 - 900

S & L Gov’t. 67,100 65,600 - 1,500

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Health Care 34,300 38,000 + 3,700

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Private and public sector �losses, 2015-2108

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Private sector losses: 3.6%

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Public sector losses: 8.4%

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Rental Vacancy Rates

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Alaska (2015-19): Modest Recession�US: Booming

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Source: Alaska DOLWD

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The FY20 state budget cuts�(Total, incl. Federal)

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Operating Budget: -$442 million

Capital Budget: -$293 million

PFD: +$ 45 million

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Source: Legislative Finance

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Estimating short-run job impacts

ISER 2016 report: “Short-Run Economic Impact of Alaska Fiscal Options” by Guettabi, Knapp and Berman.

    • $100 million of spending cuts cause 1000 job losses in short run.

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    • $100 million of PFD cuts or tax increases cause about 700 job losses in short run.

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Job impacts of budget cuts

  • $440 million in budget cuts, but only $250 million in cuts to agency operations.
  • Would imply 2500 to 4400 jobs lost in short run.
  • $45 million extra PFD adds 300 jobs

Net loss of 2200 to 4100 jobs?

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  • Capital budget impacts run into future and harder to predict impacts. Another $300 million. 3000 jobs/year if sustained.

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Back to recession?

The recession: 13,700 jobs lost

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The recovery: 1,700 jobs gained

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The budget impacts:

2,200 to 4,100+ jobs lost ??

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Uncertainties

  • Medicaid cuts. Bigger federal reductions? Supplemental appropriation?
  • How will communities respond to reduced debt reimbursement?
  • Momentum in economy, esp. oil and gas.
  • Impact of budget on expectations
  • Impact of Hilcorp purchase of BP assets?

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Alaska Population

Source: AK Dept. of Labor and Workforce Dev.

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Net Migration for Alaska

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Source: Alaska Population Projections 2017-45

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Competing future paradigms

  • A low-tax, low-public spending, high PFD environment will attract business.

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  • Declining investments in infrastructure, in education, and in health and social services will not attract high-skill workforce.

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  • Stable or falling population is OK. Spread Alaska’s oil wealth over fewer people.

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�Recovery and Budget Cuts:  Preliminary Evidence for Alaska and Anchorage���

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