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Alaska economist: Cut state spending by $1.5B

Goldsmith: Savings will disappear at current spending rate

Posted: November 13, 2013 - 1:05am

ANCHORAGE — The state should shrink spending by $1.5 billion to avoid more drastic cuts in a decade when savings accounts are drained, a University of Alaska Anchorage economist said Monday in a forum hosted by the Anchorage Chamber of Commerce.

Scott Goldsmith said Alaska’s savings will disappear if spending continues at the current rate. He and Brad Keithley, an oil and gas industry consultant, suggested cutting back to $5.5 billion, an amount the economist says the state can afford, the Anchorage Daily News reported.

Chamber President Andrew Halcro, a former state representative and gubernatorial candidate, argued against the idea. Goldsmith’s concept, which has been floated in past years, would “strangle the same economy that it hopes to save,” he said.

Halcro and economist Jonathan King of Northern Economics Inc. said cuts to state spending are necessary but a spending reduction of more than 20 percent would damage an economy in which public spending supports private jobs.

Halcro suggested combining cuts with new revenue such a sales tax and interest earnings from the Alaska Permanent Fund.

Goldsmith said Alaska has $149 billion in savings accounts, the permanent fund and petroleum reserves. If spending patterns continue, he said, savings will be gone in about 10 years, at which time state officials will have to make huge cuts felt by nearly all Alaskans.

“It wouldn’t be a temporary small bump, but rather a permanent downsizing of public services and the economy, reaching into every community and every sector,” he said. “Think about the pain of cutting basic government programs in this next legislative session by more than 50 percent, 50 cents on the dollar.”

Somewhere between 20,000 and 40,000 public employees would lose jobs, he said.

Halcro said state and private spending are intertwined. Private contractors, for example, are building the new $109 million UAA sports arena, he said.

The Legislature can only cut “unrestricted” general fund spending because much of the budget is devoted to the public employee retirement system, Medicaid and schools, King said. About a quarter of the discretionary spending would have to be cut, he said.

“Maybe we eliminate whole departments,” King said. “Goodbye, Military and Veterans Affairs. Goodbye, the governor’s office. Goodbye, Labor and Workforce Development.”

A state budget cut of $1 billion to $2 billion would mean the immediate loss of maybe 5,000 to 10,000 jobs around the state, he said.

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