The Alaska State Capitol. (Michael Penn | Juneau Empire File)

The Alaska State Capitol. (Michael Penn | Juneau Empire File)

Alaska Voices: It’s time for a spending cap that works

It is essential to minimize uncertainty and prioritize stability.

  • Ben Wilterdink
  • Wednesday, April 1, 2020 11:03pm
  • Opinion

Alaska is in the midst of a perfect fiscal storm.

The coronavirus has forced the temporary closure of many businesses throughout the state, and global events have pushed oil prices — and state revenues — to near historic lows. Even before the present crisis, our state faced large budget deficits and tough decisions about how to make ends meet. Just as Alaskans have come together to solve past crises, so too will these current challenges be overcome.

But as Alaskans look to the future and develop plans for an economic recovery, it is essential to minimize uncertainty and prioritize stability. That’s why adopting a functional limit on the growth in state spending is essential for long-term economic success.

By limiting the growth of state spending, Alaskans can ensure a stable and sustainable state budget that greatly reduces the risk that sudden changes in revenue needs will leave businesses and individuals picking up the tab.

Moreover, a functional limit in the growth of state spending decreases the temptation to dramatically increase spending when economic times are good, creating new budget expectations that are difficult to maintain during inevitable economic downturns, something that our state has struggled with in the past. Maintaining a predictable state budget, and the steady tax climate that accompanies it, greatly reduces the kind of uncertainty that discourages long-term investment. That kind of investment is the foundation of sustainable economic growth and development.

Technically, Alaska already has a constitutional spending cap in place, but the formula used renders it basically meaningless. Since its enactment in the 1980s, the cap has done nothing to control growth of the state’s actual spending, even during years with our highest levels of revenue.

While more than half of states currently have some form of tax and expenditure limit, the most effective is Colorado’s Taxpayer Bill of Rights (TABOR), which constitutionally limits spending growth to the rate of inflation plus estimated population growth. The stable budget and tax climate created by TABOR has served Coloradans remarkably well. Over the past decade, Colorado’s gross state product (GSP) has grown by 45.5%, personal income has grown by 59.5%, and non-farm payroll employment has grown by 15.8%.

By comparison, during the same time period, Alaska’s GSP growth was 0%, personal income growth was 33.5%, and non-farm payroll employment growth was 0.3%.

But it’s not just Colorado that has benefited from a functional tax and expenditure limit. Nationwide, states with tax and expenditure limits have outperformed states without them in GSP growth, personal income growth, and employment growth.

Based on the difference in economic performance between states with functional tax and expenditure limits and those without, a recent study estimated what Alaska’s economic outcomes would look like if a functional tax and expenditure limit had been adopted in 2008.

The results are striking. If Alaska’s economic indicators had tracked with the outcomes experienced by states with functional tax and expenditure limits, our GSP would be $20 billion higher, personal income would be between $4 and $5 billion higher, and we would have 25,000 more jobs.

While Alaskans can’t retroactively adopt a meaningful spending limit, we can ensure that those economic benefits are captured going forward. Right now, the state’s economy is being squeezed from every angle and securing long-term investment will be a key component in charting a path out of the current fiscal malaise. Adopting a functional constitutional spending cap can provide the certainty necessary for sustainable economic development far into the future.

Ben Wilterdink is a visiting Fellow at the Alaska Policy Forum and a resident of Anchorage.


• Ben Wilterdink is a visiting Fellow at the Alaska Policy Forum and a resident of Anchorage.


More in Opinion

Capitol
Opinion: Humanism and the billionaire class

Compromise is the right thing to do and they should do it.

tt
Opinion: The challenged truths of 3 elected representatives

“Politicians lying is nothing new.”

This photo shows the Mendenhall Glacier Visitor Center. (Ben Hohenstatt / Juneau Empire File)
Opinion: The wrong way to define demand

And as glaciers go, the Mendenhall is only a minor attraction.

Zachary Hamilton (Courtesy photo)
Borough mayoral candidate: ‘The best is yet to come’

Zachary Hamilton is running for Kenai Peninsula Borough mayor in the special election

Love, INC in Soldotna, Alaska, provides homelessness prevention and housing services to people on the Kenai Peninsula. (Photo by Brian Mazurek/Peninsula Clarion)
Opinion: COVID relief funds help homeless children in Alaska

We need to sustain this kind of investment.

Gov. Mike Dunleavy holds a press conference at the Capitol on Tuesday, April 9, 2019. (Juneau Empire file photo)
Opinion: Alaska must act now to capitalize on carbon markets

Alaska has vast forests and coastlines that can provide natural carbon management

1
Opinion: MLK Day clinics offered in the ‘spirit of service and advocacy for equality and social justice’

Attorneys across the state will be spending their holiday as “A Day On, Not a Day Off”

The M/V Tustumena comes into Homer after spending the day in Seldovia in 2010. (Homer News File)
Opinion: New federal funding could aid Alaska Marine Highway System

The evidence is clear that the AMHS is in grave danger of failing and moving into Alaska’s history books

(Mark Sabbatini / Juneau Empire File)
Opinion: I’ve seen the union difference

As a community we can show solidarity…

(Peter Segall / Juneau Empire File)
Sullivan’s irrelevance in defense of democracy

Two years ago this week, supporters of then-President Donald Trump stormed the U.S. Capitol…

People vote in polling booths at the Soldotna Regional Sports Complex on Tuesday, Nov. 8, 2022, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: What’s on your 2023 schedule so far?

There is a Kenai Peninsula Borough Special Mayoral Election coming up in February

Soldotna City Council member Dave Carey testifies in support of the Kenai Peninsula Reentry Coalition during a meeting of the Kenai City Council on Wednesday, March 16, 2022, in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: Vote Carey for borough mayor

I know the responsibilities and obligations of being borough mayor