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.

  • 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

A sign welcomes people to Kenai United Methodist Church on Monday, Sept. 6, 2021 in Kenai, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
It’s time for a federal law against LGBTQ discrimination

When my wife and I decided to move to Alaska, we wondered if we would be welcome in our new neighborhood.

Terri Spigelmyer. (Photo provided)
Pay It Forward: Instilling volunteerism in the next generation

We hope to have instilled in our children empathy, cultural awareness, long-term planning and the selflessness of helping others

Hal Shepherd in an undated photo taken near Homer, Alaska. (Photo courtesy of Hal Shepherd.)
Point of View: Election integrity or right-wing power grab?

Dr. King would be appalled at what is happening today

Nancy HIllstrand. (Photo provided)
Point of View: Trail Lakes is the sockeye salmon hero, not Tutka Bay

Tutka hatchery produces a pink salmon monoculture desecrating Kachemak Bay State Park and Critical Habitat Area as a feed lot

A resident casts their vote in the regular municipal election Tuesday, Oct. 6, 2020 at the Kenai Peninsula Fairgrounds in Ninilchik, Alaska. (Photo by Megan Pacer/Homer News)
Alaska Voices: Break the cycle of failure, debt in 2022

Today, all Americans are coerced, embarrassed or otherwise influenced into one of two old political parties

A map of Kachemak Bay State Park shows proposed land additions A, B and C in House Bill 52 and the Tutka Bay Lagoon Hatchery. (Map courtesy of Alaska State Parks)
Opinion: Rep. Vance’s bill is anti-fishermen

House Bill 52 burdens 98.5% of Cook Inlet fishermen.

A sign designates a vote center during the recent municipal election. The center offered a spot for voters to drop off ballots or fill a ballot out in person. (Ben Hohenstatt / Juneau Empire File)
Opinion: The failure of mail-in voting

The argument that mail-in balloting increases voter participation never impressed me

Charlie Franz.
Point of View: Election integrity is not anti-democratic

The federalization of elections by the Freedom to Vote Act infringes on the constitutional right of states to regulate elections.

Snow blows off Mt. Roberts high above the Thane avalanche chute, where an avalanche blew across the road during a major snowstorm. (Michael S. Lockett / Juneau Empire)
An Alaska winter of discontent

It’s been a hard winter throughout the state.

Most Read