Alaska's Dependence on State Spending

Abstract

It would be hard to exaggerate Alaska’s economic dependence on state government spending. State spending supports nearly one of every three jobs. Three of every ten dollars of personal income grow out of state spending. If state officials balance the budget entirely through spending cuts, economic growth could slow dramatically over the next decade, costing Alaska 35,000 new jobs. We can’t avoid the economic slowdown that the fiscal gap will produce, but we can help ease its effects by a combination of more efficient use of our assets, spending cuts, cost containment, and new taxes or other new revenues. This paper analyzes how different state fiscal policies could reduce economic disruption from the fiscal gap in the coming years.