Legislature(2019 - 2020)ADAMS ROOM 519
03/06/2019 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Potential Economic Impacts of Policy Changes, Employment Trends | |
| Presentation: Economic Impact Analysis of the Governor's Proposed Fiscal Plan | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 6, 2019
1:33 p.m.
1:33:39 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:33 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Tammie Wilson, Co-Chair
Representative Jennifer Johnston, Vice-Chair
Representative Ben Carpenter
Representative Andy Josephson
Representative Gary Knopp
Representative Bart LeBon
Representative Kelly Merrick
Representative Dan Ortiz, Vice-Chair (via teleconference)
Representative Colleen Sullivan-Leonard
Representative Cathy Tilton
MEMBERS ABSENT
None
ALSO PRESENT
Dan Robinson, Research Chief, Research and Analysis
Section, Department of Labor and Workforce Development; Ed
King, Chief Economist, Office of Management and Budget,
Office of the Governor; Donna Arduin, Director, Office of
Management and Budget, Office of the Governor;
Representative Steve Thompson.
PRESENT VIA TELECONFERENCE
Representative Dan Ortiz
SUMMARY
PRESENTATION: ECONOMIC IMPACT ANALYSIS OF THE GOVERNOR'S
PROPOSED FISCAL PLAN
PRESENTATION: POTENTIAL ECONOMIC IMPACTS OF POLICY CHANGES,
EMPLOYMENT TRENDS
1:34:27 PM
Co-Chair Foster reviewed the meeting agenda.
^PRESENTATION: POTENTIAL ECONOMIC IMPACTS OF POLICY
CHANGES, EMPLOYMENT TRENDS
1:35:00 PM
DAN ROBINSON, RESEARCH CHIEF, RESEARCH and ANALYSIS
SECTION, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT,
introduced himself. He detailed that the agency produced
many of the economic statistics seen in numerous places,
including publications on the Department of Labor and
Workforce Development's (DLWD) website. He elaborated that
the agency was responsible for producing data on wages,
employment, wage rates, unemployment rates, population, and
migration. The agency worked with federal statistical
partners, including the U.S. Census Bureau and primarily
the Bureau of Labor Statistics to produce data.
Mr. Robinson explained that the department had different
levels of control over the data, as the federal government
made some of the rules for how the data was produced. Even
when the agency had little control, it still had
significant familiarity. The agency's expertise was
understanding the details of the data. The agency published
its data in the Alaska Economic Trends publication, which
was intended to be useful and accessible to smart, non-
specialists; the publication was not targeted at Ph.D.
level economists or other groups. He hoped the committee
members were readers of the publication.
1:36:47 PM
Mr. Robinson provided a PowerPoint presentation titled
"Alaska's Economy: Insights from Current and Historical
Data" dated March 6, 2019 (copy on file). He began with a
bar chart on slide 2 showing the components of population
change for Alaska from 1947 to 2018. He detailed that the
blue bars represented natural increase (births minus
deaths), which had been a steady positive over time. He
pointed out there had been a bigger positive in the 1980s
when there had been a younger population (a higher
percentage of the population in childbearing years) that
resulted in a higher natural increase. He noted that the
natural increase was decreasing in recent years as the
average age of the state's population was increasing.
Mr. Robinson continued to address slide 2. The orange bars
represented net migration change (the number of people who
came to Alaska minus the number of people who left Alaska).
He addressed several themes depicted on the slide. First,
he highlighted that the military had significantly impacted
Alaska's economy and population in the past, present, and
future. Second, oil and gas had an outsized impact on
migration flows and economic growth. He noted there had
occasionally been some giveback when the pipeline was done.
He thought a better example was the oil bust - when oil had
buoyed the economy and had gotten too hot, things had
fallen apart and there had been some negative years in the
1980s. Third, the relationship between Alaska's economy and
the U.S. economy had some influence on migration flow. For
example, there had been net migration gains in Alaska
during the Great Recession because its economy was better
than the U.S. economy. More recently, the U.S. economy had
been strong, while Alaska had experienced a recession.
Mr. Robinson explained that the agency's primary use to the
public was not in telling the future. The agency did
forecast employment, which he would discuss later in the
presentation, but the agency primarily provided a good
reading of current and historical economics and some of the
things that were driving the trends. He noted it was
difficult to identify what drove trends because there were
myriad things happening in the economy all of the time.
1:40:01 PM
Mr. Robinson moved to slide 4 and reviewed three plus years
of job losses. He detailed that in late 2015, the state had
begun to lose jobs, precipitated by the oil price plunge.
He reported that it had been 39-plus months and the most
recent data showed the state was still losing jobs. He
elaborated that losses were relatively minor since the
summer of 2018. He kept thinking job growth would begin,
but it had not yet occurred.
Co-Chair Foster acknowledged Representative Steve Thompson
in the audience.
Representative Sullivan-Leonard asked what jobs were still
at a loss at present.
Mr. Robinson answered that oil and construction were
beginning to grow again, though not yet significantly. He
reported that healthcare had continued to grow through the
entire period. There were a handful of other sectors that
were also starting to grow. He explained that one year ago
almost all sectors (excluding healthcare) had been
stagnant, but at present it was more of a mix.
Representative Knopp looked at the peak of job losses
between 2016 and 2017. He asked if the chart showed
quarterly information or other.
Mr. Robinson replied that the bars on slide 4 showed
monthly data compared to the same month one year earlier.
The first red bar was October 2015, which showed there were
700 fewer jobs than in October 2014.
Representative Knopp highlighted the peak loss of 8,400
jobs. He asked for verification that the chart showed a
gain of 2,400 jobs the following month. He pointed out the
job loss on the chart was not cumulative, but no job growth
was shown. He was trying to understand the chart.
Mr. Robinson agreed. He explained that Alaska's economy was
very seasonal. He elaborated that similar comparisons in
other states tended to be done with seasonally adjusted
data. He relayed it was difficult to seasonally adjust
Alaska's data; therefore, the agency tended to use the same
month previous year lookback. As long as the bars were red,
the state was continuing to lose jobs. He expounded that
losses could get smaller, but it was not the same thing as
growth.
Representative Knopp asked for verification the chart was a
year-to-year comparison for prior months. Mr. Robinson
replied in the affirmative.
1:43:39 PM
Mr. Robinson turned to slide 5 and addressed that
losses/gains had varied throughout the state. He clarified
that the data was by place of work. For example, the chart
showed that 4,200 jobs had been lost on the North Slope,
but he advised members to keep in mind that most of those
people did not live on the North Slope (most of the
individuals throughout the state and about one-third lived
outside the state). Anchorage had lost the largest number
of jobs at 6,084. He highlighted that on a percentage
basis, the North Slope job loss was the largest. Mat-Su
stood out because it had not lost jobs over the three-year
period (it briefly fell below one year ago levels) but had
added about 770 jobs (450 were healthcare and 150 were
local government). Mat-Su was the outlier in the state in
terms of strong population growth. He likened Mat-Su to
healthcare, it just continued to grow. He noted that growth
always resulted in healthcare and local government growth.
1:45:36 PM
Mr. Robinson pointed out that for the first time in the
state's history there had been migration losses in six
consecutive years (slide 6). He shared that the losses were
not particularly large (the losses in the 1980s had been
much higher, particularly on a percentage basis). The
longest consecutive period of job loss in the past had been
four years. Slide 6 showed how large Alaska's migration
flows were. He elaborated that for many years, Alaska had
the largest migration flows among states (the second
largest was Nevada).
Mr. Robinson highlighted there was a strong pull to Alaska
and a push away from Alaska. He noted that Hawaii was
similar in that it was a big move to Alaska, whereas it was
not necessarily a big move from New York to New Jersey. The
data showed mathematical growth, but information also
showed insight into the decisions people made about their
desire to live in a place and how important jobs were to
driving the numbers. There had not been a big increase in
people leaving, but there had been a big decrease in people
coming. He referenced his use of the word big and noted
that the numbers were not enormous.
Representative LeBon asked if the numbers included military
coming in and out of the state.
Mr. Robinson answered that the data included military
members who defined Alaska as their primary state of
residence. He clarified that some military stationed in
Alaska may identify another state as their real home.
Representative LeBon asked how typical it was for a new
military member or family to declare Alaska their primary
home.
Mr. Robinson replied that the agency included military and
their dependents. He would follow up more specifically on
the question at a later time. He explained that the
population of Alaska was significantly impacted by active
duty military, which suggested that most military were
included in the data. He added that the way the agency
tracked and identified residency in other context was
asking people whether Alaska was their primary residence.
He thought there was some nuance with military and would
follow up.
1:48:40 PM
Mr. Robinson advanced to slide 7 and addressed a bar chart
showing employment by state from November 2015 to November
2018. He reported that Alaska's economy had underperformed
the country and every other state over the three-year
period of job loss. Other states that had not performed
particularly well over the period included North Dakota and
Wyoming. He detailed that Wyoming had the smallest
population in the country and North Dakota used to have a
smaller population than Alaska, but its current population
exceeded Alaska's by about 20,000. He noted the other state
with a smaller population than Alaska was Vermont. He
elaborated that North Dakota and Wyoming depended heavily
on natural resources (oil and coal) to drive their
economies.
Representative Josephson remarked that the slide was
noteworthy because the other producing states had suffered
as Alaska had. He noted there were two approaches to
Alaska's recession - one approach was to intervene in some
way to incentivize growth. He asked if Alaska had been
frequently been off-cycle from other locations. He
referenced the Great Recession [beginning in 2009] and
noted that Alaska had not suffered. He asked for detail.
Mr. Robinson answered that Alaska had independent drivers
from the U.S. He used large scale manufacturing in the U.S.
as an example. He elaborated that when the U.S. was losing
millions of manufacturing jobs there had been no impact on
Alaska because it had never had that kind of employment.
High oil prices were the most consistent example of
something that was good for Alaska, bad for the U.S., and
sometimes bad for Alaskans due to high diesel and other
transportation costs. For the state as a whole, high oil
prices brought in substantial revenue, but had a negative
impact on the U.S. He reported that Alaska was not counter-
cyclical and did not lag consistently enough to expect it
to continue. He believed a better way to look at the issue
was to recognize that Alaska had different drivers.
1:52:06 PM
Mr. Robinson considered why the state had not been growing.
He moved to a bar chart on slide 9 showing the employment
percent change in oil dependent states from 2015 to 2018,
which included Wyoming, North Dakota, and Alaska. He
recognized that Alaska was very different from Wyoming and
North Dakota, but it had strong similarities. He pointed
out that Wyoming and North Dakota had downturns during the
same timeframe as Alaska, but the depth of their losses
were substantially more than Alaska's. He relayed that
Wyoming had resumed growth in mid-2017 and North Dakota had
resumed growth in early 2018, whereas, Alaska was 39 months
into its recession (if there had been any growth it was
very minimal).
Mr. Robinson moved to slide 10 and showed a comparison in
employment percent change in Alaska between the 1985 to
1988 period and the 2015 to 2018 period. He highlighted the
1980s recession had been deeper and shorter. He pointed to
the left of the line graph and explained that the state had
been growing rapidly in the early 1980s, which was part of
the reason for the depth of the recession. Oil prices had
played the biggest role in the recession in the 1980s and
in recent years. He noted the almost mirror image of the
degree the state went into the recession in the 1980s
compared to the degree it came out of the recession. He
noted the same was somewhat true with the current
recession; the state had been growing modestly as it went
into the recession and the trajectory indicated when the
recession ended it would not be with a roar.
1:54:16 PM
Vice-Chair Johnston looked at the comparisons and remarked
that North Dakota had a relatively new oil play. She
thought it was interesting to see how similar the graphs
were between Alaska and North Dakota (slide 9).
Mr. Robinson agreed. He underscored that North Dakota's oil
industry was very young and was akin to Alaska's oil
industry in the 1980s. He noted it was difficult to isolate
oil in data for different states, but North Dakota had gone
from about 7,000 jobs in the category including oil and gas
to 30,000 very rapidly; it had subsequently lost about half
that number rapidly, but that number had replenished. He
characterized North Dakota's oil industry as young,
volatile, quick to arrive, and quick to go away. He noted
that Alaska's oil jobs had not gone away quickly.
Co-Chair Wilson asked how the number of government workers
(state and federal) in Alaska compared to numbers in
Wyoming and North Dakota.
Mr. Robinson answered that the agency had written about the
topic a couple of years earlier. In response to a similar
request, the agency had updated the data to be as current
as possible. He reported that for state and local
government jobs per capita, Alaska hand ranked third,
Wyoming had ranked number one, he was almost certain North
Dakota had ranked second. He remarked that Alaska's state
government did much of the work that local county
governments did in other states. The agency had looked at
state and local government jobs separately and had joined
them together to rank them. He would be happy to share the
information.
Co-Chair Wilson referenced North Dakota's young oil
industry and thought it would be interesting to see whether
its government would increase the same way Alaska's had.
She asked if the other states had seen the same kind of
budget issues in the last five years as Alaska had.
Mr. Robinson replied that he was not a budget expert. He
shared that he had many of the same questions in the past.
He relayed that going into the recession, North Dakota had
collected about $2 billion from state income and sales
taxes. He noted that Wyoming only had a sales tax. He
continued that spending data had been more difficult to
understand. Broad-based sales tax was the smaller of the
two, but combined with income tax, the taxes had generated
about $2 billion before the recession; the revenue had
dropped to around $1.1 billion and was beginning to
rebound.
1:57:37 PM
Co-Chair Wilson asked if there was a comparison between
government and private sector job loss in the other states.
She noted that in the past there had been incentives to
move businesses across state lines in the Lower 48. She
remarked that the same thing did not take place in the
government sphere.
Mr. Robinson replied that the information would be easy to
get. Unlike oil, which was harder to isolate in the state
data, public and private sector data was easy to obtain. He
would follow up with the information.
Mr. Robinson turned to a pie chart on slide 11 showing the
length of 259 state recessions from 1961 to 2016. He
defined a recession as a broad-based economic downturn. He
discussed that when oil prices fell and it appeared Alaska
would head into a recession, the agency had looked at the
extended period of time where states had suffered some kind
of extended downturn period. He pointed to the chart and
detailed that 259 times states had lost jobs for at least
nine months compared to year-ago levels; of the 259 times,
17 percent of the time job growth resumed in less than a
year and 58 percent of the time it had resumed in less than
two years. He detailed that 75 percent of the time, state
downturns last two years or less; 93 percent of the time,
state downturns lasted three years or less. Alaska's
current recession was shown in red, reflecting a loss of
jobs for over three years. The one time a state had lost
jobs for a longer period was Michigan in the 2000s due to
job loss in the auto industry. He noted that the auto
industry was not gone, but the old way of making cars was
gone.
1:59:57 PM
Mr. Robinson moved to slide 12 and addressed the percentage
of time states were adding jobs from 1961 to 2016. He
pointed out that Alaska had been growing in 89 percent of
the months over the 55-year period. During the same period,
the U.S. had grown at 82 percent. Michigan had seen the
smallest growth at about 67 percent. He informed the
committee that the default status of an economy was job
growth. Throughout the history of the U.S. and Alaska even
more so, showed that growth was normal. He elucidated that
if the percentages were recalculated to include the past
four years, because it was a long period of time, it would
not change significantly, and Alaska would still be at 84
percent.
2:00:57 PM
Mr. Robinson addressed why the state's recession was
lingering on slide 13. The reason the agency had researched
why recessions sometimes last longer was to gain insight
into Alaska's economy. He shared that when recessions
extended beyond three years there was typically a fairly
specific reason. He cited Oregon as an example and reported
that in the early 1980s the state had been losing its
timber industry for good. He highlighted Michigan and
Connecticut as other examples. He elaborated that there had
been a period when Connecticut had been losing
manufacturing, defense spending, and its financial sector
simultaneously. He likened the situation to a hypothetical
scenario where gold, zinc, and salmon prices all fell at
the same time in Alaska; the declines were unrelated, but
it may be enough to push numbers negative.
Mr. Robinson addressed the first bullet on slide 13 on
uncertainty related to foundational questions about the
amount of state government Alaska would have and how it
would pay for it. One of the agency's conclusions had been
that when oil prices fell and the state started to lose
jobs, it looked like it would precipitate the need for a
structural change in how Alaska did state government. For
years, oil had paid the states bills.
Mr. Robinson addressed sustainability and discussed oil
production, revenue, and the growth in population; it had
appeared at some point the state would have to wrestle with
the what it was currently facing around the size of
government, dividends, and taxes. Savings had given the
state some time, but as the state was navigating difficult
political and economic questions it created uncertainty,
which brought the economy down. The second bullet on the
slide was more concrete - the state had made some
subtractions from its economy. He pointed out that anytime
money was taken out of an economy, growth was less likely.
2:03:32 PM
Mr. Robinson addressed the third question: "Are we coming
out of our recession?" on slide 14. He reported that jobs
were the primary measure over time of economic health
because they represented many things and went with many of
the other economic metrics. He looked at a line chart on
slide 15 showing a recovering economy. The chart included
gross domestic product (GDP), the value of all of the goods
and services produced in Alaska. He explained it meant the
value of the state's oil. He clarified that GDP was not
reflective of value remaining in Alaska; it was the value
that originated in Alaska. He detailed that some of the
value went to shareholders of oil companies; there was
significant leakage of the value to other locations. He
noted the volatility of GDP on the chart. The metrics on
the chart all represented over-the-year percent change. The
straight black line at 2 percent represented average
inflation over the 2006 to 2018 period. He pointed out that
GDP had been up for several quarters (the most recent data
was through the third quarter of 2018). He did not have any
doubt that the trajectory would continue to go up. He
remarked that the number may flatten out somewhat due to
oil prices; production was flat, and oil moved the numbers
around more than anything else.
Mr. Robinson addressed the wages line shown in green on
slide 15. He reported that wages had been up above
inflation for a couple of quarters. Personal income was
based on wages plus income from investments and included
dividends, interest, rent, and transfer payments (social
security, unemployment insurance, and the Permanent Fund
Dividend). All three of the metrics shown on slide 15 gave
strong signs of the state coming out of recession.
Co-Chair Wilson asked whether cutting government services
or taking more out of the Permanent Fund Dividend (PFD) and
money going to communities had a bigger impact on
recession.
Mr. Robinson answered that it depended. He stated that the
dividend was very specific and concrete. He explained that
what really mattered was how government spending was cut.
He used K-12 education as an example and asked the
committee to consider what would happen if it received a
$100 million budget cut by taking all of the money out of
teacher salaries. Another end of the spectrum would be the
discontinuation of any activity related travel or art
supplies. He explained that the net impact on jobs between
the two scenarios would be very different.
2:07:34 PM
Co-Chair Wilson discussed that the first year the PFD had
been reduced, it had been reduced abruptly, it had not
resulted in a reduction in spending because people knew
they would receive the dividend again the following year.
She discussed how the dividend impacted the state's
economy. She wondered whether the dividend had more impact
on the recession. She reasoned that under Mr. Robinson's
example, people did not know whether they would have a job
the next day, which meant they would not spend money in the
same way. She observed that both scenarios took money out
of the local economy.
Mr. Robinson shifted focus to the PFD. He shared that the
agency had looked hard for employment impact and it was
difficult to see a positive or negative impact of the PFD.
He clarified it did not mean that when the PFD got bigger
or smaller that Alaskans did not get richer or poorer. In
terms of impact on the economy, the pertinent question was
how Alaskans spent the PFD, whether they spent the money,
and whether they spent it in Alaska. He thought it probably
changed over time. For example, if a person thought they
may be likely to lose their job, they would be much more
likely to spend the PFD on credit card bills than taking a
trip.
2:09:55 PM
Vice-Chair Johnston discussed that in 2008 there had been a
PFD and an additional dividend to reflect the high cost of
heat. She recalled the total amount had been about $3,300.
She thought it would be interesting to see how it had
impacted labor. She noted that it had been a time when the
state was not in a recession and had been rich with jobs.
She stated that the market had been tumbling, but Alaska
had not.
Mr. Robinson answered that he would address the issue on an
upcoming slide.
Representative Knopp observed that in the 2009 timeframe on
slide 15 GDP, wages, and personal income went in the same
direction; however, in 2015/2016 GDP dropped, but wages and
personal income increased. He asked for details on the
difference.
Mr. Robinson replied that in the period highlighted by
Representative Knopp, oil prices fell, which had an
outsized impact on GDP. Around 2011, about $20 billion of
the state's $60 billion GDP was tied to oil; a few years
later that $20 billion had become $5.6 billion (oil had
gone from one-third of the state's GDP to about one-tenth
over a very brief period). He explained that plunge was
nowhere near matched by declines in wages or personal
income, which measured money that stayed in Alaska. He
pointed out that in 2008, when a large PFD and resource
rebate had been distributed, personal income had increased,
while wages had not. The large dividend amounted to an
extra $1.1 billion in personal income going into the
economy (the total had been $2.2 billion, but it had been
$1.1 billion more than the previous year). He explained it
was a nice example of what a supersize dividend may do to
an economy (with the caveat that all time periods were
different).
2:13:05 PM
Mr. Robinson relayed that with several formal exceptions,
the agency primarily produced current data and examined
trends, with the goal of being relevant to questions about
how the state's economy worked and how changes in one area
impacted other areas. He moved to the agency's 2019
employment forecast on slide 16. He noted that the agency
developed the forecast at the end of each year for January
publication. He shared that initially the 2019 forecast had
been for growth, but at the time the forecast had been
developed there had been no talk of a $1.6 billion budget
cut. The forecast projected a decline of 200 state
government jobs. The assumption had been that the existing
downward pressure on government jobs would remain in place.
Mr. Robinson noted that the state had taken the first big
step of solving its budget issue with the percent of market
value (POMV) revenue stream; however, there was still work
to be done and no reason to expect that suddenly state job
numbers would jump back up. He reiterated that at the time
of the forecast, there had been no notion of the $1.6
billion budget cut. He stressed the importance of the issue
for chronology. He did not want anyone to say DOL had said
that a $1.6 billion job cut would not stop the state from
growing in 2019.
Mr. Robinson considered the agency's forecasting accuracy
with a line chart on slide 17. He relayed that generally,
the agency had a fairly good sense of where the economy was
headed. In 2009 and 2016, the forecast identified that
employment would stop growing. He pointed out that there
were enough factors going on that the agency did not always
get the forecast to the tenth of a percentage point, but it
was fairly close. He explained that economies and jobs did
not move the way oil prices did; they moved fairly slowly
within a fairly narrow band. He added that the current
recession had been shallow, and changes had been slow
moving.
2:15:43 PM
Mr. Robinson moved to slide 18 and continued to address
that the proposed budget would change the forecast. He
highlighted items that would change in the forecast had the
department had known there was a possibility for budget
cuts of the proposed magnitude. He did not know how
significant the changes would be because the agency did not
yet know the details or the likelihood that the [governor's
proposed] changes would go into effect. Forecast changes
would include local and state government, leisure and
hospitality (locals would spend less), healthcare, retail
trade (a measure of confidence and the amount of disruption
in an economy), total private sector, and total nonfarm
employment.
Mr. Robinson turned to slide 19 and addressed Vice-Chair
Johnston's previous point. He highlighted that in 2007
there had been a PFD of about $1,600. In 2009, the
statutory formula had produced a number of $2,069. He
elaborated that oil prices and revenue had been very high.
Alaskans had been suffering from high oil prices and the
decision had been made by the administration and
legislature to return $1,200 of the revenue back to
Alaskans in the form of a resource rebate; effectively
increasing the PFD from $1,600 to $3,200. The slide showed
a line chart of Alaska employment by month for 2007 (blue
line) and 2008 (red line). Sometime in August, legislation
had passed that would add the resource rebate would be
added to the statutory formula; the specific amounts were
announced in September and the PFD had been distributed in
October as always. The slide did not show a discernable
employment impact, but it did not mean that Alaskans were
not $1.1 billion richer overnight. He expounded that the
increase almost certainly increased retail sales and
college savings funds and reduced credit debt. He
communicated that the department had looked at the issue
over the years because of its importance.
Mr. Robinson moved to slide 20 and addressed the study of
the PFD's short-term job impact of the higher dividend. The
slide included a chart showing retail trade employment by
month for 2007 (blue line) and 2008 (red line). He pointed
to a small temporary employment boost from the higher
dividends. He detailed that 2008 began above the year-ago
levels. He reminded members the time period was just before
a short, very deep recession for the U.S. He reviewed that
the numbers dropped below the year-ago levels in the summer
of 2008, popped back up in October, and decreased again a
few months later. He cautioned members against putting too
much weight on the results because of the numerous factors
impacting the economy. He explained that impacts of the
dividend, even large dividends, were not visible in the
agency's data.
2:19:52 PM
Co-Chair Wilson asked for an update of slide 18 with the
governor's proposed amended FY 20 budget. She thought the
information on the slide had been calculated prior to the
governor's amended budget.
Mr. Robinson asked if Co-Chair Wilson was requesting
updated figures based on the governor's amended budget.
Co-Chair Wilson replied in the affirmative.
Mr. Robinson answered that the request would require an all
hands on deck approach for months and it would mean the
agency would stop producing the current data. The agency
had never done something like that. He explained the agency
publications were a bit like the [Department of Revenue]
Revenue Source Book; there was a schedule and long process
that included art and science. He gave a hypothetical
scenario where the legislature gave the agency $300,000 to
stop its current work and make the changes based on the
governor's amended budget. He underscored that the agency
did not yet have nearly enough of an understanding about
what the budget would do and where. The level of cuts to
the University and the Alaska Marine Highway System (AMHS)
was new territory.
Co-Chair Wilson stated that if the legislature had
$300,000, she would be happy to give it to the agency, but
that was not the case. She respected the answer and noted
the difficulty facing the legislature in the short period
of time. She relayed that she read the Alaska Economic
Trends book religiously. She did not know how the
legislature could make some of the decisions it was facing,
without having the data. She understood that it would take
a lot to make the changes to the data. She would appreciate
if there was even a shot the agency could take at the data
without receiving the additional money. She noted jobs lost
in the oil industry and the consideration of taxes on the
fishing industry. She asked if merely discussing the
changes impacted the private business world and jobs based
on what may happen.
2:23:00 PM
Mr. Robinson replied that it may be helpful to think of the
items as additions or subtractions to the state's economy.
For example, if the dividend was reduced by $1 billion, it
would be an extraction from the state's economy. Although,
even then it would be important to consider where the money
was coming from and where it would go next - there were
partially offsetting economic forces. He used taxes as
another example and explained that if a tax was implemented
that generated $1 billion in revenue, the revenue source
was known. He elaborated that a sales tax would come from
resident and nonresident consumers and an income tax would
come from resident and nonresident income earners. He
explained the taxes represented an extraction from the
state's economy; what was done with the revenue would
offset the money taken out of Alaskans' pockets.
Co-Chair Wilson considered companies putting hundreds of
millions of dollars into projects in Alaska that evaluated
projects with spreadsheets showing what they would get.
She pointed to the numerous times the state's oil tax
structure had been changed over time. She wondered how the
changes impacted jobs, especially on the oil fields. She
remarked that the oil production had been higher in the
past and it seemed like everyone was on hold at present.
She asked how to create incentive to go after high paying
jobs to create an environment where individuals could live.
Mr. Robinson responded that uncertainty was likely the key
anchor the state was dragging. He elaborated that
businesses and individual consumers did not like
uncertainty; it made them conservative in their spending
and less likely to invest. He cited research indicating
that annually between $200 million and $600 million in
private capital investment did not happen because of
uncertainty. He elaborated the difficulty of developing a
five-year and ten-year plan because there was uncertainty
about Alaska's future tax structure. He did not believe the
dividend had a big impact on companies' willingness to
invest in Alaska, albeit it was possible. He spoke to
answering foundational questions about the type of state
Alaska would be. For example, how much would be spent on K-
12, the University, public safety, healthcare, and other.
2:26:31 PM
Co-Chair Wilson pointed to the inability for the
legislature to get data. She emphasized the enormity of the
decisions before the legislature. She stated that the issue
was about employment in addition to services. She thought
the information was needed in order to understand the
consequences of cuts when making budgetary decisions.
Representative Josephson looked at slide 20 of the
presentation related to retail trade employment by month in
2007 and 2008. He observed that when the PFD had been
doubled it seemed discernable improvement in retail trade
employment for a couple of months. He was trying to gauge
the value of that thing, which he observed was
coincidentally moving into the holidays at the time. He
considered the Institute of Social and Economic Research's
(ISER) studies that showed a loss of about 1,600 jobs per
$100 million, which would suggest 16,000 jobs lost
statewide and possible outmigration. The dividend resulted
in 700,000 people spending the money as opposed to 16,000
individuals earning a living that paid a mortgage and all
other costs of living. He asked Mr. Robinson to help make
sense out of the different findings.
2:28:27 PM
Mr. Robinson answered that part of the answer was timing.
He explained that anytime money went into an economy it
would create economic growth over some time horizon. He
clarified that the fact there was no discernable blip in
the agency's data, did not mean there was no employment
impact (especially longer-term). He clarified that he was
not saying there was no impact on employment; it merely did
not show a discernable impact over the short-term period.
Representative Josephson asked about the loss of employment
vis a vie the dividend not being doubled.
Mr. Robinson explained that anything modeled was built on
historical relationships. For example, when a given amount
of increased wages went into an economy, there was an
assumption that a given amount of employment increased. The
dividend was special in that way. He listed several ISER
economists and shared that the individuals knew Alaska's
economy well. He believed the best answer to avoid people
thinking the agency and ISER had contradictory conclusions
was the time horizon and the possibility that because the
numbers were so large and specific, a visible blip could be
expected.
Mr. Robinson provided a couple of examples with discernable
employment impact. He highlighted the 1964 earthquake, the
Exxon Valdez oil spill, and Medicaid expansion were all
visible and showed employment increase in DOL's data. He
referenced the stimulus as another item looked at by DOL,
but he did not recall the results. He explained there was a
short list of items that were big enough to have a
discernable employment impact.
2:31:10 PM
Vice-Chair Johnston asked Mr. Robinson to share his
background with the committee.
Mr. Robinson replied that he had a degree in economics and
in law. He had spent time working for economic consultants
doing energy related work for the U.S. Department of Energy
in Washington D.C. Additionally, he had worked for the
McDowell Group for a couple of years in Juneau. He
elaborated that he had not practiced law since 2001 and had
been doing economic work for DOL since 2001 with the
exception of the time he spent working for the McDowell
Group.
Representative LeBon commented that when he had worked as a
banker, he had used the Economic Trends publication to help
calculate the bank's allowance for loan and loss. He
detailed it was a quarterly calculation and the FDIC
[Federal Deposit Insurance Corporation] had appreciated the
analysis. He thanked Mr. Robinson for the work. Separately,
he was frequently asked why the state did not implement a
state income tax to tax North Slope workers from out of
state. He asked how much new revenue a tax would bring in.
Mr. Robinson qualified that an income tax was a policy
decision. He answered that how much an income tax would
generate would depend on the tax rate. He used the
opportunity to highlight data the agency produced annually.
He detailed that about 20 percent of all workers in Alaska
were nonresidents; in the oil industry, the number had been
as high as 37 percent a few years ago and had dropped to 34
percent in 2017 (the most recent data available). The
agency also had information about the wages that went to
residents and nonresidents. He offered to provide the
report to the committee.
Representative LeBon asked if Mr. Robinson had stated that
out of state workers accounted for 18 or 20 percent of the
employment in Alaska.
Mr. Robinson clarified the data was a bit different than
employment; it reflected workers. He explained that DLWD
tallied all of the people worked in the state over a
calendar year; of that group, 80 percent were residents and
roughly 20 percent nonresidents. The data used the PFD
definition of residency, which was rigorous and required an
individual to live in Alaska for a full calendar year.
2:34:31 PM
Representative Carpenter referenced earlier questions by
Co-Chair Wilson. He rhetorically asked whether the
legislature should pass a budget and then updated the
forecasts to see what it would do. He thought it would put
the cart before the horse. He thought of no better tool for
legislators to use than science and data to help understand
what a transformational budget would look like. The
governor had asked the legislature to pass a budget that
would change the size and scope of state government, which
appeared to put a burden on local governments to pick up
some of the things the state had previously paid for. He
questioned whether it was even plausible. He could think of
no better person than Mr. Robinson and his agency to get
the data. He did not like the answer that the agency could
not do the work.
Mr. Robinson shared the frustration when considering the
sequence. The agency was not the economic expert on
economic modeling of scenarios; it was rarely work
performed by the agency. He remarked that they would
wrestle with the issue in 2020 when looking ahead. He
clarified that the work referred to by Representative
Carpenter was a separate type of work performed by ISER
that considered "if this, then what" scenarios using
sophistic economic models that were constantly under
constructions. He explained that his section was
responsible for "meat and potatoes" information on the
number of jobs. He elaborated that trying to understand
what was moving them was a task that could never be
completed with 100 percent satisfaction. He characterized
the process as part science, part art.
Mr. Robinson recalled at the beginning of the recession
long-time people familiar with Alaska's economy projected
that the state may lose 100,000 jobs. At the time he had
disbelieved the idea and thought that people had
temporarily forgotten Alaska's history because it had been
out of the range of possibilities. He had also considered
that it could be possible because many things were
possible. The extent to which it was possible to know the
response of the economy to the decisions facing the
legislature was very limited. He stated it was conceptual
and broad-based. No one would be able to predict with a lot
of precision what would the impact would be of cutting a
department's budget by a given amount.
2:38:22 PM
Representative Knopp remarked on the testimony that 80
percent of the state's workers were residents and 20
percent were nonresidents. He asked if the percentage had
ever been gauged for seasonal employment. He referenced
discussion on an income tax and high wage earners. He
considered combining employment information for the
hospitality, fishing, and other seasonal industries. He
wondered if the percentage of instate versus out of state
workers was significantly impacted based on the season.
Additionally, he asked about a state income tax. He noted
his concern that there were not people available to be
hired. He wondered if an income tax would be detrimental to
the state's workforce, particularly to the seasonal
workforce. He stated that the hospitality, Alaska Railroad,
and others utilized the seasonal workforce.
Mr. Robinson addressed the seasonality of nonresident
workers. The department had quarterly employment wage data
and the agency published a report that included the worker
count by quarter. He highlighted that nonresident workers
were more likely to work one, two, or three quarters of the
year, whereas, resident workers were more likely to work
all four quarters (especially when looking at construction,
seafood processing, and other similar jobs). He would
provide the report to the committee.
Mr. Robinson addressed Representative Knopp's second
question. He communicated that many of the decisions the
legislature faced in terms of solving the structural issues
were policy choices. He noted that all of the items had
different economic impacts. For example, taxes created less
of an incentive to do whatever it was that was being taxed;
however, taxes paid for federal, state, and local
government. He sometimes wondered whether people believed
given options were more powerful in the economy than they
really were. Conceptually, he recommended considering how
much of an extraction something was from the economy, where
it came from, and where the money was going. For example,
he considered a tax on high income earners versus low
earners. He pointed out that a low earner's income was more
likely to be spent and circulated into the economy, whereas
the money of a higher earner was more likely to be saved
and not circulated. He concluded there were numerous
important questions, most of which were not economic, but a
policy preference.
2:42:00 PM
Representative Josephson spoke to the past passage of SB 26
[Permanent Fund legislation passed the legislature in
2018], which had introduced a new source of income into the
economy that was anomalous and had never happened before.
He suspected the action had done the state some good. He
asked for Mr. Robinson's opinion.
Mr. Robinson replied "Absolutely." He detailed that the
action had done some good in several ways. He noted there
was an exchange between short-term and long-term. First,
the action had brought in an annual amount of $2.5 billion
to $3 billion that had been on the sidelines into the
state's economy. Second, the action had diversified the
state's revenue flow. Instead of being really tied into
oil, the investment was tied to national and international
markets and the ability for managers to generate money
based on how the world was doing. Third, the action went a
long way towards solving the structural problem of state
government, albeit not all of the way.
Representative Sullivan-Leonard looked at slide 5 that
showed the total job loss or gain across Alaska since 2015.
She asked if there was an ability to breakdown where the
workers lived who worked in the North Slope. She
highlighted that workers were not North Slope residents.
Mr. Robinson replied in the affirmative. He detailed it was
in the report he had mentioned. About one-third of the
individuals did not live in Alaska. Very few of the workers
lived in Southeast Alaska and many lived in Fairbanks,
Anchorage, Mat-Su, and the Kenai Peninsula Borough. He
explained the areas were oil and gas fields suppliers and
had people with connections to the industry. Additionally,
it was easier to get to the slope from Fairbanks and
Anchorage easier than from Bethel or Nome and other areas
in the state.
2:44:52 PM
Representative Sullivan-Leonard asked Mr. Robinson to
follow up with the breakdown. She remarked that a large
percentage of the Mat-Su population worked on the North
Slope and when many of the individuals had returned home,
some of the jobs available had all been in retail. She
highlighted the available jobs were not the livable wage
jobs the individuals had on the slope.
Representative Merrick asked whether the one-third of North
Slope workers [from out of state] were taking jobs from
Alaskans or if the state did not have the workforce to
support the industry.
Mr. Robinson replied that the slope jobs were high wage
jobs and filling positions with Alaskans benefit the state.
He discussed that the state could tailor and think about
the training done (e.g. university curriculum) to maximize
the number of Alaskans in the jobs. He highlighted the
freedom of the two-week on, two-week off schedule that
allowed individuals to live anywhere. Some of the workers
were former Alaskans who decided it was cheaper to live in
Spokane or Houston for example. He discussed that people
sometimes acted like there was a "taking" that happened
when a nonresident worker showed up on the slope. He
stated, "Kind of." In 16 of the past 20 years, when the
number of resident workers increased, the number of
nonresident workers also increased. Most recently, both
numbers had decreased. The data strongly suggested that it
was not "there are 10,000 jobs, are they going to Alaskans
or non-Alaskans," but that there was an oil and gas
industry trying to make money and do its work and companies
hired whoever was qualified to do the work.
^PRESENTATION: ECONOMIC IMPACT ANALYSIS OF THE GOVERNOR'S
PROPOSED FISCAL PLAN
2:47:30 PM
ED KING, CHIEF ECONOMIST, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR noted that he is an economist and
not a policy person. He had not built the budget and
directed policy related questions to others in the
administration. He explained that when talking about
macroeconomic impacts, it related to how the state economy
was impacted. He clarified macroeconomic impacts pertained
to the state as a whole, not the individuals living in the
state. There was a difference between the economy doing
well and some people in the economy doing worse and others
doing better. He did not want to belittle the impacts
affecting individuals and he was not saying that the
impacts did not occur.
Mr. King identified a difference between economic impacts
and societal impacts; the impact to social wellbeing was
different than the economic impacts. He noted that those
things were often confused, especially when talking about
things like government services. He explained that
government services, by nature, were designed to improve
social wellbeing, which may not be captured in things like
gross domestic product (GDP). He highlighted the importance
of considering that there was much more information
surrounding the conversations than the economic data only.
2:49:48 PM
Mr. King provided a PowerPoint presentation titled
"Macroeconomic Impact of Fiscal Options" dated March 6,
2019 (copy on file). He mentioned the Institute of Social
and Economic Research (ISER) report "Short-Run Economic
Impacts of Alaska Fiscal Options," dated March 30, 2016,
shown on slide 2. He intended to discuss what the report
meant, how the numbers had been created, and what the
numbers did and did not imply. He moved to slide 3 and
provided an illustration showing how a 10x multiplier
effect worked. He explained that economic impacts occurred
not just because of the initial injection or withdraw from
the economy.
Mr. King explained that the initial injection - whether it
was $100 million or $1 billion - when put in the pockets of
the people, the people went out and did things with the
money. As people spent the money, businesses collected the
money, which created additional needs for labor. In turn,
businesses hired staff or increased the hours of existing
staff and those individuals spent their bigger paychecks on
things like movies, restaurants, and other. He explained
that the cycle continued; the money was not only spent once
- it flowed through the economy in a fluid structure.
Mr. King clarified that when discussing economic impacts or
an economic impact analysis like ISER's, it included all of
the impacts to the economy over all time. He stated the
discussion was not about what would happen the following
day; it was about the total impacts. He explained that it
may take months, years, or decades for the impacts to
ripple through the economy. He cautioned it was important
to be careful when hearing a number like $100 million had a
1,000 job impact. He explained it did not mean 1,000 jobs
the following day or following year, it meant 1,000 jobs
total; it could take some time before the effects
materialized.
Mr. King noted it was important to remember that once money
stopped being spent, the initial injection went away and
all that remained was the rippling effects. He elucidated
that as soon as an injection of cash ended, the economy
would contract back to its normal levels. If the goal was
to improve the economy in a structural way, the spending
had to occur repeatedly (e.g. $1 billion every year instead
of $1 billion in the current year only). He continued that
if the threshold for whether or not cuts could be made to
the budget or a change in government spending was that it
could do no harm to the economy, the spending could never
be discontinued. Once money was put into a budget it would
have a positive impact and as soon as the money was
removed, it would have a negative impact. He stated it was
necessary to be careful when talking about how the impacts
flowed through the economy because it was not possible to
ever step back down if the negative consequences were not
acceptable.
2:52:59 PM
Co-Chair Wilson asked if Mr. King was saying that to keep
the economy going it would be necessary to continue
increasing the budget.
Mr. King answered that if the desire was to maintain the
same level of economic activity it was necessary to
maintain the same level of spending. As soon as spending
reduced, the economy would contract back to its new level.
Co-Chair Wilson considered whether it was the
administration's philosophy that the state was not only
decreasing government spending because some of the
government spending would be picked up by the private
sector. For example, several years earlier the Department
of Transportation and Public Facilities had been planning
to contract design out to the private sector. She thought
it was likely the work would have been picked up to some
extent, meaning the spending would not have been lost. She
wondered how the legislature was supposed to understand
things that would get picked up by the private sector
versus things that perhaps should never have been [provided
by the government] and would come out to a different form
in the private sector.
Mr. King agreed it was the other side of the equation. He
stated it was necessary to always think about where the
money was coming from and about the consequences that
followed. He considered an economic analysis where $1
billion was taken from the economy and everything else was
held constant, which resulted in everything falling apart.
He explained it was not how things actually worked in the
real world. When the money was pulled from the economy in
one way and injected in another way (e.g. through
privatization, PFD payments, or reducing taxes) it was
necessary to look at all of the impacts in concert, not
only one piece of the equation.
Co-Chair Wilson surmised the committee could not make the
informed decision on the proposed budget cuts without the
economic analysis the legislature had been requesting since
beginning the budget process.
Mr. King replied he would consider what the alternative
options were. He stated that if he was the decision maker
facing a similar decision and he did not like the outcome,
he would consider what the alternative options were and
what their impacts would be. He understood the
legislature's desire was to have specific numbers showing
the consequence of a given option. He stated it was an
impossible task. He relayed it was necessary to look at the
other options and their associated impacts and to choose
the least bad option. The best that could be done, under
the circumstances, was look at the relative impact of the
options and not the precise number. He stated that ISER's
report had done a good job laying out what the relative
impacts looked like. He reviewed that the report had stated
budget cuts were the least bad option, PFD cuts were the
worst option, and taxes fell somewhere in the middle
depending how they were structured.
Co-Chair Wilson did not want to just pick the least bad
option. She wanted to make an informed decision. She
underscored that without having the analysis from the
entity proposing the budget, the committee may as well take
a dart and shoot at various numbers on a wall to make a
decision. She asked Mr. King what questions he would ask to
make the right decision based on facts if he was sitting in
her seat.
2:57:21 PM
Mr. King replied that he would consider the costs and
benefits of the services and whether there was willingness
to take the money out of the economy in one form in order
to provide the services in another. He would not approach
the situation by thinking that because all of the options
had negative consequences, he would not choose any of them.
He stated it was not an option.
Co-Chair Wilson asked the administration to provide the
detail an analysis on all of the governor's proposed
decreases.
Representative Knopp spoke about the socioeconomic impacts
of the one-time financial injection to the economy on slide
3. He asked if the one-time injection would create a false
economy or sine wave in the structure shift. He provided a
scenario where there was $1 billion injected into the
state's economy on a quarterly basis. He wondered if it
would create a vicious cycle. He observed that the one-time
injection would do more harm than good compared to a slow,
steady growth. He asked for Mr. King's thoughts.
Mr. King answered that one-time injections were usually
things a government did in order to stimulate the economy
and get out of a recession. He referenced tax rebates at
the federal level as an example. Alaska did not have many
one-time injections. He explained that the PFD was not
considered a one-time injection because it was recurring
(it was a structural shift and the economy adjusted to the
expectation of the money; because the amount moved every
year there was some volatility). How quickly the money
moved through the economy was one important part of the
equation. How the money was injected into the economy,
whether it was once every month, quarter, or year, would
have different impacts on how people evaluated their
financial circumstances.
3:00:01 PM
Representative Knopp agreed the key was how quickly the
money moved through the market. He elaborated that because
the injection only occurred once per year, he believed the
money moved far too quickly. He thought the injection was
unhealthy and that it created a false economy.
Vice-Chair Johnston noted the ISER report had been
published in 2016 and budget adjustments had been made
since that time.
Mr. King agreed.
Representative Josephson thought back to January 2016 and
recalled the criticism of the previous administration was
its panoply of taxes on every industry with no production
of impacts of all of the proposed taxation. He believed the
criticism, broadly speaking, was fair. He was making the
same criticism at present. He did not believe he was
comparing one unknown to another unknown. He knew what a
$4.3 billion budget would produce in benefits and how it
would impact the state's treasury. However, he did not know
what it would mean, for example, to remove $400 million
from the North Slope or have large class sizes that were
unprecedented or require local governments to raise their
mill rates. Therefore, he viewed the impact wearily. He
asked for comment.
3:02:36 PM
Mr. King understood the desire to have numbers. He thought
that through the process the legislature should ask
questions that generated some of the numbers. He stated
that the people with that data should provide it to the
legislature. He reported significant work was currently
being done to evaluate what the impacts looked like and how
to transition from the previous year to the proposals for
next year. He explained the work was substantial and took a
lot of time. He pointed out that if the legislature was
going to reject the proposed reductions, it was necessary
to consider where the money would come from. How the gap
between current revenues and proposed expenditures was
covered would have consequences that would need to be
evaluated.
Representative Josephson remarked that there did not seem
to be much discussion about the broad swath in the middle -
where there was a sharing of concepts and an appreciation
in the value of increasing the dividend (perhaps not
increasing it up to its statutory requirement) and not
reducing the budget by $1.6 billion. He considered a budget
that included "a little less experimentation and a little
more a la carte," where a bit was selected from each
category. He asked if the administration had considered the
idea. He recognized there were infinite possibilities.
Mr. King answered there were an infinite number of
combinations to achieve a solution. The administration's
proposal was one proposal to reach a solution. He
elaborated that the proposal was the only solution
available to do any analysis on. He hoped it would be
possible to have the conversations as the process
proceeded.
3:04:57 PM
Mr. King continued with slide 3. He continued that when
talking about injections into the economy, it was necessary
to consider where the money was coming from. He explained
that if certain impacts were desired, they would have to
come from some money that was sitting on the sideline being
injected into the economy. He explained that if money was
being taken out of the economy in order to inject it into
the economy, it was necessary to look at both of the
affects. It was not possible to look at one side of the
equation. He underscored that it was not possible to build
the economy by taking money out of the economy, just like
it was not possible to fill out a swimming pool by taking a
bucket of water out of it and pouring it back in. All of
the facts had to be considered.
Representative LeBon asked about the best way for the
private sector to create money in the economy.
Mr. King replied that the economy grew by population growth
or resource growth (i.e. labor, capital, and natural
resources). He elaborated that deploying new resources
created economic growth or the productivity and efficiency
of existing resources could be increased. An economy either
increased because there were more people or resources, or
the existing people became richer. The economy created
value finding resources and combining them with labor and
transforming it into something with a higher value that
people wanted. The economy was always finding ways to
improve the value of the things it has, which was how money
was generated. The government had the sideboards for
society to work through and the infrastructure for the
economy to function, but it did not have the capacity to
generate value in the way the private sector could.
3:07:11 PM
Representative LeBon highlighted the importance of the
private sector banking community in Alaska. He shared that
he had spent 42 years working in the industry. He detailed
that if a bank originated a new commercial loan to a
borrower, it created the money in the sense that it was new
to the economy. He detailed that the bank did not pull the
money from the public sector or print it in the basement;
it was creating new money. He stressed the importance of a
vibrant banking community to the private sector. When he
had worked in the industry there had not been many loans to
government, 99 percent had been to private sector
businesses. The confidence of those businesses to borrow
money in Alaska was paramount to the state's future and its
success. He asked Mr. King if he agreed that a strong
private sector was incredibly important.
Mr. King did not disagree.
3:09:02 PM
Mr. King moved to slide 4 and addressed the proper way of
thinking about the impacts of the ISER report. He had heard
a tendency for people to look at the report and say that
$100 million meant 1,000 job losses or $100 million in
taxes meant a given number of job losses or $100 million in
PFD meant a given impact. He acknowledged the temptation to
dismiss the options given the negative numbers they
presented and to stick with the status quo. He explained it
was not an accurate way of using the report. He elaborated
it was necessary to create a scenario, such as the
governor's proposal. He stressed that if a proposal
increased spending by $100 million, it was necessary to ask
where the money would come from. There were benefits from
the additional money being spent on government, but there
were negative consequences in the area the money came from
(i.e. a tax, PFD cut, or savings accounts).
Mr. King underscored that as comparisons were made it was
not prudent to only look at one side of the equation. He
moved to slide 5 and provided comments on the ISER report.
He spoke to the high quality of the report and thought it
was unfortunate that some of the information in the report
was misconstrued. He cautioned readers to be careful when
drawing conclusions about the report. He stated that one of
the talking points related to job numbers. He wanted people
to understand that when talking about job numbers there
were different ways that economists talked about jobs. He
detailed that jobs were talked about in terms of head
counts where an oil field worker and a retail cashier
counted as one job each. He explained that those positions
had different impacts on the economy and calling them equal
was not necessarily the best way of thinking about what the
impacts were. He referenced seasonally adjusted jobs or
full-time equivalent jobs and pointed out the importance of
being consistent in the definition of a job and not drawing
false conclusions.
Mr. King spoke to the importance of making realistic
comparisons. He explained it was not prudent to compare
spending versus 2019 or PFD payments versus 2019 and think
it was the conclusion. He stated it was necessary to create
a scenario that worked for FY 20 and compare it to an
alternative scenario that worked for FY 20. He elaborated
that comparing scenarios to the previous year did not
generate valuable information. He underscored that
discussion about economic impacts referred to impacts over
multiple time periods. He cautioned against confusing the
timing of the impacts.
3:12:48 PM
Mr. King continued to the second point on slide 5: "The
ceteris paribus assumption only holds in a synthetic
environment." He clarified the phrase meant that economic
modeling forced everything to stay constant and the impact
was plucked out of the model. The assumption was static and
did not allow for the participants in the economy to adjust
to the changes made in the economy. He provided an example
about static thinking. He noted the importance of being
careful when talking about what a computer output generated
compared to the expectation of what would actually happen
as the scenario unfolded in the real world. Even though the
impact analyses were relevant and generated important
numbers, they did not necessarily translate into the types
of impacts one would expect to see when the numbers came
out.
Mr. King stated that a projected 10,000 job impact may end
up being a 100 or 200 job impact once all of the impacts
were accounted for. He clarified it did not mean that the
1,000 people had not been impacted. He acknowledged that
whatever those individuals had to do to get through the
difficult period would be negative and important. However,
from the perspective of the entire economy, as the
individuals were finding new jobs, drawing off of savings,
and making other decisions to replace the income, the
static assumption made by the model that spending went to
zero when a person lost their job did not necessarily
reflect what actually happened when a person lost their
job. He explained that the outputs of the models overstated
the indirect impacts actually seen in the economy.
3:15:20 PM
Mr. King continued with slide 5 and defined a model as a
simplification of reality. He explained that models
endeavored to provide insight on the relative impacts of a
decision, not instruction on what to do. He elaborated that
a model would not to choose a specific option, but it would
identify whether one option was better than another. A
model would not specify the exact number, but it would
specify the rankings of the options. He continued there
were impacts other than economic that needed to be
considered. For example, the value to society was generated
by the service provided, which was not necessarily captured
in an impact analysis and was worthy of conversation. He
elaborated that it was not an easy concept to measure. For
example, it was difficult to measure the value of a road
not having a pothole. He elaborated that one option was
obviously better than the other, but it was difficult to
place value on the difference and identify how much one
would be willing to pay.
Mr. King stated there was very good information in the ISER
report, especially the relative rankings between the
options provided. He believed the strength in the report
was in how different options impacted different regions and
different people. He believed there was valuable insight in
the report that he would use if he was analyzing the
proposals.
Mr. King turned to a chart showing UGF Surplus/Deficit on
slide 7. The slide represented the historical difference
between revenues and expenditures and projecting forward.
The chart highlighted the deficit between revenues and
expenditures. The chart showed the state's multibillion
deficit for the past several years, which had been filled
by spending from the state's savings accounts. Looking
forward, the deficits were not going away, but savings
accounts were. There was a need to address the ongoing
structural issue.
Co-Chair Foster handed the gavel to Co-Chair Wilson.
Representative Josephson asked for verification that the
slide did not reflect the drawdown from the percent of
market value (POMV).
Mr. King responded affirmatively. The chart included
revenues generated from state activities and did not
include draws from savings accounts. He detailed that
deficits in the past four years had been filled via draws
from the Constitutional Budget Reserve (CBR). He
acknowledged that future draws from the Permanent Fund
Earnings Reserve Account (ERA) would offset some of the
deficit, but they constituted draws from savings.
Representative Josephson clarified that the POMV draws were
sustainable draws from savings under a structured model.
Mr. King agreed but countered that the draws were not
revenues generated from unrestricted general funds (UGF).
The draws did help solve the deficit problem, but they were
still transfers from the ERA to the General Fund. The point
was that the difference between revenues and expenditures
was how much money the state was collecting through its
state activities versus how much it needed to spend to
provide a given level of service.
3:19:14 PM
Representative Josephson explained that everyone understood
the need for a structured draw [from the ERA] was due to a
gap in revenue. He stated that it went without saying that
the draws were designed to fill the gap in revenue,
hopefully in perpetuity. He added that the draws were
partly a reflection of a lack of political will to raise
other revenue.
Mr. King agreed. He stated that the bill [SB 26 passed in
2017] allowed transfers from the ERA to fill the deficit.
He elaborated that allowing the spending of some of the
revenues for the purpose of the General Fund rather than
for the growth of the Permanent Fund or payment of PFDs,
was a conscious decision made by the legislature, but it
did not change the fact that it was a draw from a savings
account.
Representative Knopp remarked that Mr. King was referring
to the transfer as a draw from savings but not an
additional revenue source. Historically, people put away $1
million, drew 4 percent in retirement and lived on the
funds forever. He stated it could be a draw from savings,
but it could also be a revenue source. He found it
interesting that Mr. King kept referring to the ERA
transfer as a draw from savings and not a new form of
revenue. He stated the draw was structured and sustainable.
He asked why it was not being considered as a different
form of revenue.
Mr. King answered that the money spent from the ERA did not
impact the problem any differently than spending money from
the CBR. He stated that it was still a draw from activity
that was not generated by the state. He elaborated the
money was not from taxes, royalties, or anything the state
was doing. He continued that the revenues generated from
the Permanent Fund belonged to the Permanent Fund. He
contended that the fact the legislature gave itself
permission to use some of the funds for the General Fund
did not change the fact that the funds were generated from
the Permanent Fund.
Representative Knopp highlighted that while the funds may
not be revenue from activity the state was currently doing,
it was revenue from activity the state had done in the
past.
Mr. King agreed that the money was revenue, but not General
Fund revenue.
3:22:04 PM
Mr. King moved to a chart on slide 8 showing the FY 19 ten-
year plan. Expenditures were shown in red and revenue was
shown in green. He elaborated that green bars were divided
into oil revenue (bottom), non-oil revenue (middle), and
the allowable transfer from the ERA after the PFD was paid
(top). He pointed out that even with the allowed draw from
the POMV, if the PFD statute was followed, there would be a
$1.6 billion deficit that needed to be filled in FY 20 in
some way.
Representative Sullivan-Leonard asked to hear from the OMB
director. She considered the takeaway specifying that the
state had a structural fiscal problem, not a temporary
budget problem. She asked for detail on the takeaway,
especially as it related to the chart on slide 8.
DONNA ARDUIN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR, was trying to understand the
question. She stated what Mr. King had outlined was from
the previous ten-year plan showing a mismatch between
revenues and expenditures (including the draw from the
ERA).
Representative Sullivan-Leonard asked how the
administration had developed the particular chart (on slide
8) showing a structural fiscal problem.
Ms. Arduin asked if Representative Sullivan-Leonard was
asking for the data sources.
Representative Sullivan-Leonard replied in the affirmative.
Ms. Arduin deferred the question to Mr. King.
Mr. King replied that the red bars on slide 8 represented
the FY 19 ten-year plan. He explained the chart showed the
trajectory the state was on if a change was not made. The
governor's ten-year plan, which would come out the
following week, aligned revenues with expenditures.
3:25:03 PM
Representative Josephson agreed that the chart reflected
what would happen if a change was not made, but it did not
consider any other sort of reform (i.e. any other sort of
revenue, taxation, a more modest PFD); it was purely status
quo. He remarked that the information was not especially
creative in terms of problem solving.
Mr. King replied that the slide was not intended to be
creative. The slide was intended to communicate that a
problem existed that would not go away on its own. He
clarified that the slide was not intended to offer up any
type of solution; there was a gap that needed to be filled.
There were multiple ways to fill the gap including cutting
the PFD, cutting the budget, raising taxes, and drawing
more from savings. The point of the slide was to illustrate
that the problem did not solve itself.
Co-Chair Wilson believed everyone at the table already
understood that. The committee was looking forward to Mr.
King's analysis of what the governor's proposed budget
would do to the economy.
Mr. King turned to slide 9 and stated there were multiple
options, all of which had consequences. He remarked that it
did not matter how the problem was solved, there would be a
negative consequence associated. He stated that if the
standard for passing a budget was to do no harm, he
reported that the option was off the table. He detailed
that a reduction in spending would result in job losses and
a reduced level of services; raising taxes would result in
lost economic activity and a lower standard of living;
cutting the PFD would impact different people and was a
more regressive form of increasing taxes, which would
result in a lower standard of living; and drawing savings
by going deeper into the ERA would solve the near-term
problem, with long-term consequences. He reiterated that
any solution needed to address the existing structural
issue. Despite $3 billion in budget cuts over the past four
years, the problem had not been solved. He stressed that it
needed to be solved.
3:27:59 PM
Mr. King moved to a chart on slide 10 titled "The 'Avoid
Budget Cuts and Taxes' Scenario." The slide reflected the
FY 19 budget going forward including inflation and
population growth. He noted that the chart did not account
for the fact that every legislature would react differently
to the circumstances; however, the chart gave insight into
the magnitude of the problem and the solution the scenario
would generate. He stated that the legislature could cover
the $1.6 billion deficit with PFD cuts in the current year,
which would leave a dividend of approximately $400 or $500.
Mr. King continued that if the same strategy was used the
following year, factoring in budget growth and fund growth,
the dividend would be around $400 and the following year it
would be about $300. Eventually, all of the POMV would be
consumed by budget growth and there would be nothing left
to distribute. At that point, if the budget still could not
be cut and the same level of growth was maintained,
something would need to be done. If taxes and budget cuts
were off the table and PFD cuts were no longer an option,
the only remaining tools were to dip into savings and later
to increase taxes.
Vice-Chair Johnston what rate of inflation had been used in
the assumptions.
Mr. King replied 2.25 percent.
Vice-Chair Johnston asked what population increase had been
used in the assumptions.
Mr. King replied 1 percent.
Vice-Chair Johnston noted she had seen a presentation by
Mr. King related to the Permanent Fund. She relayed that
while she did not always agree with some of Mr. King's
modeling in the presentation, the basic premise was that he
felt the Permanent Fund was growing at such a rate that by
taking smaller PFDs the fund would grow to such an extent
that future generations would not have to pay anything.
Mr. King replied that the graph (on slide 10) used the
assumptions used by the Alaska Permanent Fund Corporation
(APFC). The chart showed a draw down rate at the 6.55
percent return.
Vice-Chair Johnston asked for verification that the 6.55
percent reflected the top of APFC's stress test.
Mr. King replied in the negative. He clarified that the
mid-bull case for APFC earnings average was 6.55 percent.
3:31:55 PM
Vice-Chair Johnston asked for verification that the
modeling [shown on slide 10] was on the 6.55 percent even
though the structured draw was on something else.
Mr. King replied that the total fund balance generating the
POMV was shown in the background of the chart and was
earning 6.55 percent. The ERA balance was growing at 6.4
percent because some unrealized gains occurred. He relayed
that if the Permanent Fund did a stellar job and beat its
forecast, many of the problems took on a different shape.
For example, if APFC earned 10 percent per year it would be
necessary to consider if the state was saving too much
money. Currently, the best numbers available were those
provided by APFC and the chart reflected the scenario under
those assumptions.
Co-Chair Wilson expressed confusion about the presentation
topic. She thought the presentation was the economic impact
analysis for the governor's fiscal plan. She did not
believe that was what was being presented. She stated there
was no one at the table who did not understand the need to
decrease the budget. She did not believe there were any
taxes currently on the table or that had been proposed. She
wondered if there was some place in the presentation where
Mr. King would provide the economic impact of the
governor's budget.
Mr. King replied that no one knew the answer to the
question including ISER and others. He stated that no one
knew exactly how the future would unfold. He wished he
could provide an answer to the question. He relayed that
the proposals were all being evaluated by the departments
and local impacts were being assessed by local communities.
He did not have the information.
Co-Chair Wilson stated it was the administration's
presentation. She relayed the committee had been told that
the presentation was the economics of the proposed budget.
She communicated that most of the information being
presented was something the committee members already knew.
She asked if there was some place in the presentation where
Mr. King would help the committee better understand the
economic impact of the proposed budget.
3:34:35 PM
Ms. Arduin replied that earlier in the presentation Mr.
King had talked about the value of the distributional
analysis - the relative ranking of one option versus
another. She believed that was the direction Mr. King was
going with the presentation. He had highlighted there were
a limited number of options and the presentation showed
what happened in certain options where there was an
economic issue and the state would run out of money or turn
to taxes. She noted that Mr. King had been discussing that
each option had a different weighting. She asked Mr. King
to return to the beginning of his presentation where he had
stated that some options had more of an economic impact
than others. For example, budget reductions versus cutting
the PFD versus taxes.
Co-Chair Wilson stated that with due respect, the committee
was the House Finance Committee responsible for financial
matters. She stated that the [governor's] proposed budget
included approximately $1.1 billion cuts and $600 million
from local communities. She appreciated the desire to show
the committee the range of possibilities, but she believed
that first the committee needed to know what the budget
would do to the economy.
Representative Carpenter highlighted that slide 17 was
titled "Impact of Proposed Budget."
Co-Chair Wilson asked to advance to slide 17.
3:36:18 PM
Mr. King complied. He reported there were [economic]
consequences that needed to be compared with something
else. He underscored that the conversation could not simply
be whether a cut could or could not be made. He stressed
that the conversation needed to be broader (i.e. what the
option was if the cuts were not made). He could not tell
the committee what the budget impact of the proposed budget
would be because he did not have anything to compare it to.
Co-Chair Wilson countered that it was the administration's
budget. She asked if Mr. King worked for the
administration.
Mr. King responded affirmatively. He stated that anytime a
relative impact was considered it had to be compared to
another option. He stated that if the legislature's
proposal was different than the governor's, they could talk
about what the differential impacts of the proposals looked
like. There was not currently another proposal to compare
the governor's budget to. He informed the committee that it
was improper to compare the proposed budget to FY 19
because it was not a realistic scenario.
Co-Chair Wilson asked what the governor's budget had been
compared to.
Mr. King replied that there had been nothing to compare it
to.
Co-Chair Wilson responded, "So the administration just put
this out with no comparison."
Vice-Chair Johnston diverged from the subject and remarked
that she believed the ten-year plan would be helpful for
the committee. She asked for verification that Mr. King
would be working on it.
Mr. King replied affirmatively.
Mr. King spoke to the volatility of the state's budget from
year to year on slides 18. He noted there had been a 20-
year period where there had not been many changes in the
budget. He stated that the proposed budget was not
necessarily dramatic in terms of historic volatility of
year-to-year budgets. He turned to a chart on slide 19
illustrating how the job market had reacted to changes in
the budgets [from FY 90 to FY 16]. He relayed that when
comparing the expected impact of increased spending did not
show the corresponding impact in the type of magnitude the
ISER report would suggest. He explained that static model
outputs did not necessarily translate directly to what real
data looked like. He elaborated that when someone talked
about $1 [$100] million impact resulting in 1,000 job
losses, it was true in the model, but it did not
necessarily mean it was true in reality.
3:39:14 PM
Representative Josephson asked about slide 18 related to
state budget volatility. He referenced the second takeaway
on the slide specifying that the proposed budget returned
the state to 2005 levels of inflation adjusted spending. He
noted that David Teal's [Director, Legislative Finance
Division] equivalent look at the data had factored in
population growth and Mr. Teal's office had concluded that
the budget would return the state to somewhere below 1990s
levels. He wondered if the population growth would change
the 2005 result [shown on slide 18].
Mr. King replied that he was sure population growth would
change the result but did not know to what extent. He could
not validate the numbers cited by Representative Josephson,
but he offered to follow up.
Representative Josephson moved to slide 19 and believed the
slide was trying to show that large cuts did not
necessarily make jobs crash, nor did increases make jobs
grow. He noted that most of the spike coming down in FY 13
was capital. He detailed that ISER had reported that those
job impacts were spread over more years and generated half
as many jobs per dollar spent compared to cutting the state
workforce. He thought that if the dollars were operating
budget dollars and not so significantly capital budget
dollars, the analysis could be different.
Mr. King answered there were statewide and capital items
within the budgets. The chart [on slide 19] was intended to
show the magnitude of the impact changing the budget had on
the workforce. The way the budget was increased or
decreased would have differential impacts on the economy.
He detailed that when talking exclusively about the capital
budget, the impacts were likely to be smaller than to
education for example. The economy did not react to changes
in the timeframe that may be expected from a static output
model. The jobs would be spread over several years, as he
had discussed at the beginning of the presentation. He
explained that budget impact did not necessarily translate
into a spike in jobs immediately after the expense or a
loss in jobs immediately after a cut.
3:42:11 PM
Representative Josephson thought it meant the pain that
could be caused to Alaskans could be delayed, which did not
assuage his concern.
Mr. King empathized with anyone who lost their job. His
point was that the economy did not react as a whole in the
way that was as dramatic as some of the numbers he had
heard thrown around. He continued on slide 20 and addressed
a chart pertaining to the budget impact on total jobs. The
chart included operating budget agency operations only and
was adjusted for population and inflation growth. He
reported that changes in the operating budget agency
operations did not create jobs. Historically in Alaska,
increasing spending on government programs was not a job
creation endeavor. He explained that spending was
beneficial and created valuable services, but it was not
intended to create jobs. If the goal was to create jobs, it
would mean employing individuals who were currently
unemployed.
Mr. King elaborated that when government jobs with
programmatic services were created, it was not done for the
sake of creating jobs and it did not have the effect of
creating jobs. He explained that the people within the
population who would fill the jobs were coming from
somewhere; it merely constituted moving a job from the
private sector to the public sector.
Mr. King turned to slide 22 and addressed expected jobs
impacts. He stated that everything was up in the air. He
noted there was a sense of what the magnitudes may look
like - state job losses could range from the low hundreds
up to 1,000; it depended how things played out with the
privatization proposals. He addressed the education sector
and explained that if the school districts reacted by
exclusively laying off teachers, the job loss would be
around 3,000; however, if the districts lowered healthcare
costs, reduced heating bills, aggregated different
facilities, or if local governments picked up a higher
portion of the loss, it would mitigate the losses. He
stated it was impossible for the administration to say what
the impact would be. It was possible to identify things to
consider, to understand what drove the different numbers;
however, he stated it was not possible to specify the
precise outcome of a given action.
3:45:48 PM
Mr. King continued to review expected jobs impacts on slide
22. He began with the University and shared that he had
heard a projected job loss number of about 1,300 and when
he had run the numbers, he had come up with a maximum of
1,500 if the University solved the reduction to its budget
exclusively by laying off faculty and staff. He stated that
if the University raised new revenues to offset some of the
losses or increased efficiencies, the job losses would be
less. He discussed projected job losses in the healthcare
industry and explained that the change to the Medicaid
program and payment structure would impact the sector. He
characterized healthcare as a growth sector and did not
anticipate it would lose jobs, but the rate of growth would
slow. He pointed out that regional hospitals and medical
providers would be impacted differently, but on a statewide
level, the healthcare industry was expected to grow
(potentially at a slower rate).
Mr. King reviewed expected job impacts in the trade sector
of the economy. There was an expectation the injection from
the PFD would spur some additional spending, which would
likely result in some additional labor demands. The ISER
estimate was approximately 14,000 jobs [per $100 million],
but he did not believe that was tenable. He remarked that
it was not proper to compare all jobs because all jobs were
not equivalent. He noted that some of the job increases
from the trade sectors would be offset by reduced income
from people losing jobs elsewhere; however, their
behavioral responses would mitigate some of the direct
impact because some individuals would retire, some would
draw off savings accounts, and some would find other jobs.
He clarified it did not mean losing a job was not
detrimental, but it did mean that spending patterns would
not merely go to zero in perpetuity.
3:48:04 PM
Mr. King stated that in theory it could be expected that
the removal of the uncertainty on how the state would
address its fiscal issues, would create certainty for
investors and those additional dollars should grow the
economy. However, it was not possible to tell what the
impact would be.
Representative Josephson could not help but think of the
State of Kansas and former Governor Brownback's effort to
slash government and reduce taxes. He stressed that the
outcome had been a disaster and had not been increased
fiscal stability. He remarked that the other plains states
had been doing much better. He highlighted that Kansas had
done a 180-degree shift from the model and elected a
Democrat as governor (which was rare for Kansas). He
pointed out that the budget would marry the state to the
price of oil. He wondered why industry should not be
worried about becoming a target of new taxation to help
fund what government would remain.
Mr. King replied that the idea floated in Kansas was a
little different than the governor's proposal. He explained
there had been an idea that cutting taxes would mean the
savings would be reinvested and the reinvestment would
generate growth. The governor's proposal was different
because there were no taxes being cut. He explained that
the governor's proposal would remove uncertainty about how
the state would finance its checkbook. As long as there was
uncertainty, every person with money who was willing to
invest in the state, if they did not know what the taxes
looked like they could not know what their returns would
look like.
Mr. King continued that as long as the structural problem
existed, investors had to assume their returns would be
lower than the current tax rate. He elaborated that it was
a deterrent to investment; if it was not clear how the
state would generate revenues, it was prudent for
successful businesses to anticipate that the state would
take some of the earnings. Dealing with the uncertainty
should generate some stability and some increased
investment. He did not know to what extent it was true, but
the theory supported the idea.
3:51:25 PM
Ms. Arduin stated that the Kansas situation had also been
one where expenditures had exceeded revenues, which had
created uncertainty.
Mr. King advanced to slide 23 and addressed expected
impacts of the proposed budget. He reported that the
regional impacts would be more pronounced than total state
impacts. He believed many legislators were more interested
in how the budget would impact their constituents. He
explained that at a state level, many of the negatives in
one area and positives in another would wash out, which may
not be the way legislators were individually viewing the
proposals. He stated the same was true at the individual
level - all people would be impacted differently. He
highlighted different ways impacts could be experienced
such as job loss and removing $10,000 out of the pockets of
a family of four. From an economics perspective, a
concentrated impact and a spread out impact elsewhere were
equal; however, those things were not equal in reality and
in individual perceptions.
Mr. King relayed that every available solution to solving
the state's fiscal problems would result in job losses,
including the governor's proposal. However, he did not
believe the employment numbers would change as
significantly as had been reported (after the budget
passed). He reported that the budget would have negatives
and positives; it was necessary to look at all of the
effects in concert. The numbers in the model were static
that assumed when a person lost their job their income
would go to zero, but in reality, people did other things.
He was not claiming job loss was preferable. He addressed
that many people in Alaska were on the verge of retirement,
which had been beneficial during the last recession (the
state had not seen the types of consequences it may have
anticipated). Moving forward, some of the same impacts
would be mitigated by the same effects.
Mr. King discussed that household incomes would be higher
[as a result of PFDs] and how Alaskans decided to spend the
money would be up to them. He stated that whether the money
turned into jobs was not a question the government should
be asking. He continued that the government should be
asking how it could best provide the quality of life for
Alaskans. He explained that giving money to people, by
definition improved their quality of life. Taking the money
away and spending it on a service also improved quality of
life, but it was necessary to think about how the two
things compared to one another.
Mr. King reported that the administration did not know
exactly how local governments would react to the budget
proposals. If the budget passed, some local governments may
raise taxes, make budget cuts, or dissolve. He stated that
local governments may raise taxes from the same industries
the money was being diverted from. He understood that the
Alaska Municipal League was looking at the issue and it was
much more equipped to have the analysis. For example, he
did not pretend to know the particulars of North Pole. He
stated it was much better for communities that were
directly impacted to bring forward what they expected the
impacts to be and for the administration to weigh the
impacts against what it would expect.
3:56:22 PM
Mr. King stated the analysis was underway but had not been
done by his team because the administration did not know
how it would play out.
Representative Josephson thought Mr. King had stated that
some local governments may dissolve.
Mr. King replied that he had no idea what the local
governments would do. He stated it was an option and he did
not believe it was not possible, especially for a very
small community with less than 50 people. He considered
that if a small community was not getting any state
support, the benefits of being an organized city may not be
as lucrative. He did not know. He stated it was a decision
that local governments would have to make. He could not
tell the committee how local governments would react.
Representative Josephson stated, "The point is made for
me."
Co-Chair Wilson stated the takeaway was that the
administration had not done any kind of economic analysis
on the proposed budget and what it would do to the state's
economy.
Mr. King disagreed. He relayed that the administration had
been doing analysis on what different options looked like
and had selected the option that did the least damage to
the economy, which was through budget cuts.
Co-Chair Wilson requested the other analyses.
Co-Chair Wilson reviewed the schedule for the following
day.
ADJOURNMENT
3:58:31 PM
The meeting was adjourned at 3:58 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HFIN-DOL.March 6 2019.pdf |
HFIN 3/6/2019 1:30:00 PM |
HFIN - DLWD Presentation |
| Economic Impacts of Policy Decisions 3.6.19.pdf |
HFIN 3/6/2019 1:30:00 PM |
HFIN- OMB Ed King Econ Impacts of Policy |