Governor's office skips budget analysis, opting for economics doubletalk
The Dunleavy administration still hasn’t bothered with an economic analysis on what it would mean to eliminate the ferry system, slash education funding, dismantle the University of Alaska, subtract $700 million from the state health care system and confiscate hundreds of millions in local property taxes.
Nothing about the Dunleavy slash-and-burn plan is positive for Alaska communities or the Alaska economy. A real analysis would show that the crisis is Dunleavy’s doing and it doesn’t have to be this way.
Perhaps that is why the Dunleavy administration treated the Senate Finance Committee to a rambling discourse on economic theories Wednesday, heavy on irrelevant and extraneous information. It appeared the goal was to confuse and distract every legislator. It was a success.
State economist Ed King, who works under temporary budget director Donna Arduin, gave what was supposed to be an analysis of the governor’s budget, but he strayed as far as possible from details that could actually help sort things out. There is no analysis of the Dunleavy Disaster.
“The ceteris paribus assumption only holds in a synthetic environment,” King wrote on one of his first slides, proof that the KISS principle and the virtue of simplicity is unrecognized in the budget office.
His presentation featured untested assumptions and wishful thinking, such as the claim that the biggest cuts to services in state history would lead to fiscal stability and “should generate additional investment.” Crippling schools and the University of Alaska is not the way to stability or additional investment.
The battle comes down to this: Dunleavy wants to pay many hundreds of millions more in Permanent Fund dividends and he doesn’t want any tax increases or new taxes. What he wants to do is cut a wide array of state and local services and claim he has no choice. That’s not true. He’s made a series of wrong choices.
He created this crisis by his refusal to consider options or tradeoffs.
The way out of this is to limit the dividend to some reasonable figure, perhaps $1,000 or $1,500 per person, institute taxes and raise others while preserving state and local government services.
Those who say that this would force Dunleavy to break his campaign promise need to realize that he’s already broken his campaign promises about not cutting the ferry system, K-12 schools or the University of Alaska. Or that a sustainable budget could be reached with no cuts to any services.
On one of the slides King didn’t get to—he continues his presentation Thursday morning—he says the Dunleavy budget would not eliminate 17,000 jobs, but he does not say how many jobs would be eliminated.
“It will not be 17,000 jobs,” he wrote on slide 23. “There will also be additional jobs from larger PFDs.”
That might be a complaint directed toward the work of economist Mouhcine Guettabi of the Institute of Social and Economic Research, who had made a rough estimate that the Dunleavy budget cuts would eliminate 17,000 jobs.
But Guettabi also says that jobs would be created by larger PFDs. Guettabi, who is also scheduled to testify, had estimated that with higher dividends the net job loss would be about 12,700 positions. He has refined his estimate and in a presentation Thursday told legislators that the net loss would be about 7,000 jobs.
The added jobs created by higher dividends would likely be short-term jobs, many in retail and lasting three months or so, that would pay less than the long-term jobs that would be eliminated with the Dunleavy budget.
All of these numbers are guesses, part of a pointless exercise that can be avoided if the Legislature shows the leadership missing from the governor’s office.
UA President Jim Johnsen said it best when he responded to Dunleavy’s spamming of UA staff and students: “The governor justifies cuts to education, healthcare and other government services by citing a $1.6 billion deficit. However, the budget proposal includes a $1.9 billion appropriation for PFDs. This budget then is a policy choice for Alaskans, not a fiscal necessity.”
There are better choices within reach.
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