Effect of Alaska Fiscal Options On Children and Families

Abstract

Alaska’s state government faces an unprecedented challenge, with the need to close an estimated $3 billion gap between projected revenues and expenditures in fiscal year 2017. Total unrestricted state General Fund revenue in fiscal year 2016 (the 12 months ending June 30, 2016) was $1.3 billion, or about $1,800 per resident. That was barely more than the state dispenses annually to Alaska school districts, to support public education (Alaska Office of Management and Budget, Enacted Fiscal Summary). Despite low oil prices and declining production, petroleum revenues still accounted for 72 percent of these funds (Alaska Revenue Sources Book, Fall 2016, Alaska Department of Revenue, Tax Division). Alaska is the only state that does not have either state income or sales taxes. It is clear that Alaskans will soon have to accept some form of broad-based revenue measure to enable continued funding of basic public services. A 2016 analysis by ISER researchers discussed the potential effects on Alaska’s economy and households of various options to reduce expenditures and increase revenues.1 That study examined how the effects of revenue measures varied for Alaska households with different levels of income. These same revenue measures and expenditure cuts are also likely to have a much bigger effect on some households than others, depending on the presence and number of children in the family. This study extends the previous analysis by specifically examining how different options would be likely to affect families and children. Many large expenditures in the state budget can easily be identified as specifically benefiting children. These include state-funded programs such as the Alaska Public School Foundation program and the Division of Juvenile Justice and Office of Children’s Services, for example, as well as joint federal-state programs such as Medicaid and Denali Kidcare. Less obvious are the effects on children of potential measures to fund these and other state expenditures. This study focuses on describing and quantifying the effects of alternative state revenue options on Alaska families and children. In addition to considering how the revenue measures might affect families with children compared to households without children, we also consider how the burden of each measure might differ for rural and urban families.