Legislators left fuming after so-called economic analysis fails to answer basic questions about Dunleavy’s budget

Sen. Lyman Hoffman, D-Bethel, listens during Senate Finance Committee hearing on Feb. 6, 2019. (Photo by Alaska Senate Majority/Flickr)

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.”

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6 Comments on "Legislators left fuming after so-called economic analysis fails to answer basic questions about Dunleavy’s budget"

  1. https://www.linkedin.com/in/edward-king-762066a

    His training and experience are pretty limited. Just sayin’.

  2. Dear Alaska Legislators,
    Recently Governor Mike Dunleavy proposed $134 million dollars reduction in state funding to the University of Alaska for the 2019-2020 fiscal year. This would be the largest cut to the University of Alaska since the university began operations 100 years ago. I find this approach to be devastating to the welfare and economic growth of Alaska’s world renowned academic, international and national research programs which have contributed to the economic growth and welfare of our great State.
    My name is Ronald H. Brower, Sr. I was born at Utqiagvik, Alaska, and I remember when Alaska became a state in 1959. At that time, we had settled at Utqiagvik, abandoning our old community of Iviksuk about 30 miles south from there.
    At the age of 14, I went to work at the Naval Arctic Research Laboratories operated by the University of Alaska. I spent some of my early years working on the cleanup of the Atomic Energy Commission’s Project Chariot at Cape Thompson. I also worked on Fletcher’s Ice Island before and after my military service. At that location, and with University of Alaska, I was involved in international Arctic research programs for the military and civilian universities. Projects included working with unmanned submersibles with University of Washington Applied Physics Laboratory, Arctic Sea Floor Mapping and Soils Analysis for USGS and the University of Alaska, Migratory crustacean studies for the University of Tokyo, and AJAX Ice Dynamics Research by an international multidisciplinary research group. These experiences formed my future into a leader of our community both through the field of science and as a faculty member at UAF. I see the positive impact and benefits this advanced and applied research has made in today’s Arctic, making the University of Alaska Fairbanks an international participant in global academic growth in the sciences and wellbeing of the circumpolar north.
    Today the University of Alaska Fairbanks is a member of the University of the Arctic, representing the United States in important international scientific work of the Arctic Council. This supportive role is so important in maintaining high academic and Arctic research programs for our nation. The academic and scientific research; conducted by the University of Alaska Fairbanks brings prestige to the State of Alaska and places Alaska in at the forefront of global climate research. The budget cuts proposed by our new governor can and will have a devastating global impact to the ongoing programs at the University of Alaska in coordination with the other eight Arctic countries of the circumpolar north.
    As an elder I have joined the University of Alaska Fairbanks faculty as the only instructor of the Inupiaq language. UAF is unique because it is the only university in the United States that supports Alaska Native languages with Minor and Bachelor of Arts degree in Alaska Native languages including Yupik, Qwitchin, Athabaskan and Inupiaq. The Governor’s budget recommendation to cut the university’s budget may just wipe out the recent progress that has been made in perpetuating and revitalizing Alaska Native languages. If we measure the health of Alaska Natives by how healthy Alaska their native languages are, we are in dire need of critical attention.
    I say this because in my research, I find: In the Northwest Arctic Borough there is a population of about 7,300 residents. About 83% are Iñupiaq people. That would be around 6,060 Inuit who should be speakers of the Iñupiaq language. Out of that number, about 55% or 3,332 are children under the age of 18. That leaves us with 2,728 adults of whom about 40% speak Iñupiaq at home. This suggests that out of 6,060 Iñupiaq in the Northwest Arctic Borough there are now about 1090 or 11% fluent Iñupiaq first language speakers.
    The governor’s proposal to reduce educational opportunities at the University of Alaska and in School Districts, will destroy any opportunities to revitalize these dying languages. It is my hope that the state legislators do not follow through with this potentially harmful proposed budget.
    We are at a time where the state and the tribes need to work closer together to find a path that is not so harmful to academia and economic conditions within our great state. It is my hope that our state will remain the last frontier in a progressive manner for all of Alaska’s people. I also hope that my experiences will help guide our legislative leaders to find an alternative mechanism to resolve the state’s budgetary crisis without plunging into fiscal chaos beyond repair.
    Sincerely,

    Ronald H. Brower, Sr.
    Inupiaq Language Instructor
    University of Alaska Fairbanks

  3. Jeff mayfield | March 6, 2019 at 10:34 pm | Reply

    #wheresDunleavy

    He recently told APM (who’s budget he’s cutting) that he wants to engage with Alaskans. Here we are. Where is Dunleavy?

  4. They got the wrong King. Should have hired Jonathan.

  5. Judith Meidinger | March 8, 2019 at 6:10 am | Reply

    Truly we have lost our way, Alaska. The budget cuts show the priorities of this administration and, presumably, the voting public. I am a UAF graduate. The legislature is our last hope of saving the educational foundation we have so painstakingly built over the last 40 years as an engine for economic growth. I support taxing ourselves so that all Alaskans have a chance to grow and prosper through education in technology, environmental science, and renewable energy. But just as important is supporting teachers, health and social programs, and cultural awareness so we retain and pass on to our children the ability to govern ourselves wisely.

  6. Cheryl Sackett | March 11, 2019 at 12:28 pm | Reply

    When does it become the responsibility of management to spend appropriately vs always asking for money every year? Why, if it’s a university inability to devise a way of being fiscally responsible- just like in all households – you can’t spend more than you make – for some reason it amazes me that no one seems to understand that basic concept – money doesn’t grow on trees- no one seems to take in mind that the State shouldn’t have to fund 400 million every year to a university system that is so top heavy and loses accreditation so vital yet where is the rebuttal to the university to such a loss of teacher accreditation!! I’m amazed that no one feels responsible for their actions – thus I support Governor Dunleavy in making people grow up and take responsibility for their actions – expenditures ! He is allowing for legislators to make the decisions where and all they are doing is throwing a tantrum because they want to avoid making the necessary decisions!

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