All eyes were on the Senate Finance Committee this morning, where senators expected to finally hear the administration’s economic analysis of—and thereby the justification for—the budget proposed by Gov. Michael J. Dunleavy.
Instead they got a lecture about basic economics that seemed to be in service of undercutting of the dire modeling done by the University of Alaska Anchorage Institute of Social and Economic Research and continued praise for Dunleavy’s budget as a panacea for all things wrong with Alaska’s financial crisis.
Suffice it to say, legislators were not pleased.
“I actually thought this was going to be an economic analysis of impacts on some of the reductions that the administration proposed,” said Sen. Natasha von Imhof, R-Anchorage. “The university, we’ve got community campus ideas, four-year college, research, how does that translate into an economic impact across the state; The Department of Education, there’s a $1,000 decrease to the BSA (base student allocation), how’s that going to ripple effect; Medicaid, what are the economic impacts on rural hospitals, trauma hospitals, elder care with the Pioneer Homes; The ferry in Southeast Alaska, how much can a full PFD offset the loss of ferry service in Southeast?”
That would, uh, be coming at an undisclosed later date, said Department of Revenue Commissioner Bruce Tangeman. Office of Management and Budget Director Donna Arduin suggested modeling might be done on a “final budget.”
Von Imhof grimly commented that she would like to see it by June 30, 2019, the day before the new budget would go into effect.
Rep. Tammie Wilson, R-North Pole, was even less charitable in her takeaway from the House Finance Committee’s hearing with OMB economist Ed King in the afternoon.
“The takeaway from this presentation we have is the administration didn’t do any kind of economic analysis of this budget and what it would do to the economy of the state of Alaska,” she said. “Correct?”
King disagreed, saying they were looking at an “analysis on what different options look like and chose the option that has the least damage,” which was conspicuously absent from the presentation. Wilson said she wanted to see that analysis.
So far Arduin and others have told legislators that growth in the private sector would far outpace the losses from cuts to the state government, local government, schools, the University of Alaska and the Alaska Marine Highway that would all be forced by the budget.
When asked about the impacts of the budget cuts on various sectors, various communities and Alaska in general, the response has ranged from, essentially, “that’s not our job” to it’ll come soon.
The presentation itself was done by Office of Management and Budget economist Ed King and it had pretty much none of that. Instead, it spent much of the time essentially downplaying the estimated economic impacts forecasted by the team at ISER, which is scheduled to present its findings to the Legislature on Thursday.
ISER has done some research that suggests the cuts would force job losses somewhere in the range of 14,000 to 17,000, acknowledging that the full PFD would blunt some of the losses. It’s also working on a yet-unreleased study that its authors say will essentially show the PFD boost to jobs only lasts for about three months.
Still, King spent most of his time talking about why the ISER’s reports and people’s reading of those reports is flawed and that the job losses under Dunleavy’s budget will not be as bad as assumed.
“That’s not how a real economy works, and so you shouldn’t expect that the outputs of that computer model simulate what an actual impact to the real economy would look like,” he told the Senate Finance Committee. “In reality, when somebody loses their job they’re not just plucked out of the economy and their income is gone from the economy. They go out, they find another job or find a way to spend money out of savings or they adjust in some other way whether it’s early retirement or opening a business. They react to that loss of income by replacing that income so pulling that money out of the economy like what a static model will do doesn’t necessarily reflect the actual economy.”
There was no overall number produced by King’s presentation, which listed 1,000 lost state jobs, 3,000 education-related jobs, 1,500 University of Alaska jobs and an “unclear” for health chare jobs.
The entirety of the presentation’s analysis on broader budget impacts was contained in a vague slide late in the presentation that seemed more based on assumptions that anything else, including takeaways like “Every individual will be impacted differently, regardless of fiscal solution” and “There will be initial job losses from smaller budget” and “There will also be additional jobs from larger PFDs.”
Why it matters
While some legislators responded to the presentation with polite disapproval, others were outright mad that this would be passed off as the justification for such dramatically deep cuts to the budget.
Legislators have been feeling the brunt of public opposition while also facing a governor whose entire budget priority can be summed up in five bullet points (which he’s not exactly even following) and a plan to pay out a full PFD.
Dunleavy himself has largely been absent from the conversation, except to make public pleas to support the PFD repayment, and to write the University of Alaska students and employees to quibble about just how big of a cut he’s proposing, which is where he described his vision for state government:
“The Legislature now has a balanced budget before them. THEY now can decide priorities of the budget,” he wrote. “My administration is agnostic on this.”
Sen. Lyman Hoffman, D-Bethel, said he’s been frustrated with the budget situation and that legislators are essentially being held hostage by an administration that seems unwilling and uninterested to engage on the budget. He said the budget situation must be addressed with more tools than just deep cuts or seizing revenue from local communities all while paying a full PFD.
“It seems as though we, as the Legislature, need to consider those. I think that’s what this legislature has been trying to do these last two months. What are the other options that are available to us? It seems as though when we have presentations, such as this, we are not being given those options when we are requesting them from the administration,” he said. “It seems, to me, that our hands are tied behind our backs.”
When asked directly about the flexibility of reducing the dividend, Arduin reiterated Dunleavy’s position.
“That is not the governor’s proposal, the governor’s proposal is to pay a full dividend,” Arduin replied.
Hoffman pushed ahead, saying that if it’s just a proposal then what role can the Legislature have in shaping the budget. Can savings, cuts and a reduced PFD be part of getting the state on a proper financial path?
“Again, I think when Mr. King gets through his presentation, you’ll start to see how those will develop,” she said. “But to my earlier point once you have a full budget proposal, Mr. King can analyze in the same way that he’s analyzed the governor’s budget.”
“Thank you very much for that non-answer,” said the usually reserved Hoffman.
Sen. Donny Olson, the Golovin Democrat who’s been less shy about sharing his frustration with the administration, let the administration have it.
“I want answers, I don’t want gibberish,” he said, adding, “I want answers to the questions, not a rehashing of what’s going on.”
“Well they’ll be back before us tomorrow morning,” Sen. Bert Stedman, R-Sitka. “Maybe they’ll have a different answer in the morning after they talk to their boss.”