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Alaska Legislature

State economists say Dunleavy budget will mean job losses, but details are lacking

From left to right, Department of Revenue Commissioner Bruce Tangeman, Office of Management and Budget economist Ed King, and Office of Management and Budget director Donna Arduin testify Wednesday, March 6, 2019 in the Senate Finance Committee. (James Brooks / ADN)

JUNEAU — Two state economists told lawmakers Wednesday that budget cuts proposed by Gov. Mike Dunleavy will cause some Alaskans to lose their jobs, but the extent of the job losses is not known.

That pronouncement disturbed members of the House and Senate finance committees who had requested an economic analysis of the governor’s budget plan. Dunleavy has proposed extensive budget cuts and other measures to pay a larger Permanent Fund dividend and erase a $1.6 billion deficit without new taxes or spending from the Constitutional Budget Reserve.

“We don’t begin to understand the details of (the governor’s budget proposal) well enough to even take a rough stab” at estimating job losses, Department of Labor economist Dan Robinson told members of the Senate Finance Committee.

Sen. Lyman Hoffman, D-Bethel, expressed frustration with the lack of information and his lack of knowledge about the governor’s willingness to compromise on elements of his budget.

“It seems as though when we have presentations such as this, we are not being given those options when we are requesting them of the administration. It seems to me our hands are tied behind our backs,” Hoffman said.

“In a nutshell, that’s absolutely what we’re battling with in a short time,” said Rep. Tammie Wilson, R-North Pole and co-chairwoman of the House Finance Committee. “I don’t know how we make some of the decisions that are being put before us without that data.”

Economists from the University of Alaska Anchorage’s Institute for Social and Economic Research are scheduled to offer their insight Thursday in committee. One of those economists, Mouhcine Guettabi, has projected the state will lose more than 8,100 jobs if the governor’s cuts are approved. A separate analysis by David Teal, director of the nonpartisan Legislative Finance Division, estimated in February that there would be more than 5,000 direct layoffs.

On Wednesday, it was the turn of Robinson and Ed King, head economist with the Office of Management and Budget. King was accompanied by Department of Revenue Commissioner Bruce Tangeman and Office of Management and Budget director Donna Arduin. King did not finish his presentation but spoke to reporters afterward.

The bottom line is that the effects of the governor’s proposal on the wider economy are uncertain, King said.

“There’s no way anybody can tell you exactly what’s going to happen,” he told reporters in a press conference.

The governor’s office isn’t able to explain the economic effects of its privatization plans, doesn’t know how municipal governments will react to losing state funding for school districts and doesn’t know the indirect effects that job losses will have on the economy.

“It’s going to depend on a lot of different circumstances,” he said.

From left, Office of Management and Budget economist Ed King and Department of Revenue Commissioner Bruce Tangeman talk to Sen. Mike Shower, R-Wasilla, Wednesday, March 6, 2019 after a meeting of the Senate Finance Committee. (James Brooks / ADN)

While Guettabi’s analysis indicates significant losses, King said that figure doesn’t take into account the gains that Alaskans will experience with a larger Permanent Fund dividend.

The governor’s proposal would increase the dividend by almost $1,400 from last year’s payout.

“We do know that just looking at the negative components of these budget cuts is an incomplete analysis,” King said. “You also need to look at what happens when we give Alaskans more money.”

Robinson, speaking to the Legislature’s finance committees, said the answer is not much, at least when it comes to employment.

Robinson offered a case study comparing employment between 2007 and 2008, cautioning lawmakers to take the study with a grain of salt: other factors could have affected the result.

In 2007, the state paid a dividend of $1,654. The next year, the dividend was $3,269. The difference between the two years’ payments was greater than the difference would be between 2018 and 2019 under the governor’s proposal, but Robinson’s chart showed no significant difference in dividend-driven employment statewide.

Examining retail employment alone, Robinson found retail employment in 2008 was a few hundred jobs greater than it was in 2007 — but only in October, the month the dividend was paid. By November, the bump had disappeared.

“If you’re looking at the dividend making very large changes to the economy … you just don’t see it in our data,” he said.

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