Gaining and Losing Under State Fiscal Policies

Abstract

Sometime soon—just when is uncertain—Alaska’s legislators will run short of money to balance the state budget and will have to make big budget adjustments. Those budget adjustments will be especially difficult, because the generous fiscal policies of the 1980s have had major effects on the jobs and incomes of individual Alaskans. The dividend and bonus programs are reflections of Alaska’s oil wealth at the start of the 1980s—and examples of the many ways the legislature used oil money to make life sweeter for Alaskans. It established the Permanent Fund Dividend program to make annual payments to all residents. It expanded the Longevity Bonus program of monthly payments to older Alaskans. It abolished the personal income tax. It increased aid to local governments, allowing them to cut property taxes while they hired more workers and increased services. And it established loan programs and increased spending for services and facilities, spreading jobs and money throughout the economy. The problem is that the state’s oil revenues for the rest of the 1990s are likely to be smaller on average than they were during the past five years, and much smaller than a decade ago. This paper estimates the effects of selected state policies on different types of households and communities in the 1980s, and assesses the likely consequences of specific policy changes