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

An array of stickers awaits voters on Election Day 2022. (Clarise Larson / Juneau Empire file photo)
Opinion: The case for keeping the parties from controlling our elections

Neither party is about to admit that the primary system they control serves the country poorly

Voters fill out their ballots at the Challenger Learning Center in Kenai, Alaska on Election Day, Nov. 8, 2022. (Jake Dye/Peninsula Clarion)
Voter tidbit: Important information about voting in the upcoming elections

Mark your calendar now for these upcoming election dates!

Larry Persily (Juneau Empire file photo)
Opinion: State’s ‘what if’ lawsuit doesn’t much add up

The state’s latest legal endeavor came July 2 in a dubious lawsuit — with a few errors and omissions for poor measure

The entrance to the Homer Electric Association office is seen here in Kenai, Alaska, on May 7, 2020. (Photo by Brian Mazurek/Peninsula Clarion file)
Opinion: Speak up on net metering program

The program allows members to install and use certain types of renewable generation to offset monthly electric usage and sell excess power to HEA

Gov. Mike Dunleavy signs bills for the state’s 2025 fiscal year budget during a private ceremony in Anchorage on Thursday, June 25, 2024. (Official photo from The Office of the Governor)
Alaska’s ‘say yes to everything’ governor is saying ‘no’ to a lot of things

For the governor’s purposes, “everything” can pretty much be defined as all industrial development

Alaska Permanent Fund Corp. board members, staff and advisors meet Oct. 30, 2023. (Mark Sabbatini / Juneau Empire file photo)
Opinion: The concerns of reasonable Alaskans isn’t ‘noise’

During a legislative hearing on Monday, CEO Deven Mitchell referred to controversy it’s created as “noise.”

(Juneau Empire file photo)
Opinion: Crime pays a lot better than newspapers

I used to think that publishing a quality paper, full of accurate, informative and entertaining news would produce enough revenue to pay the bills

Mark Sabbatini / Juneau Empire file photo
Lt. Gov. Nancy Dahlstrom addresses the crowd during an inaugural celebration for her and Gov. Mike Dunleavy at Elizabeth Peratrovich Hall on Jan. 20, 2023.
Opinion: The many truths Dahlstrom will deny

Real conservatives wouldn’t be trashing the rule of law

Gov. Mike Dunleavy discusses his veto of a wide-ranging education bill during a press conference March 16 at the Alaska State Capitol. (Mark Sabbatini / Juneau Empire file photo)
Governor, please pay more attention to Alaskans

Our governor has been a busy guy on big issues.

Priya Helweg is the acting regional director and executive officer for the Region 10 Office of Intergovernmental and External Affairs, Office of the Secretary, U.S. Department of Health and Human Services. (Photo courtesy U.S. Department of Health and Human Services)
Happy Pride Month

This month is dedicated to acknowledging and uplifting the voices and experiences of the LGBTQI+ community

A roll of “I voted” stickers sit at the Alaska Division of Elections office in Juneau in 2022. (Ben Hohenstatt / Juneau Empire File)
Strengthening democracy: Native vote partners to boost voter registration

GOTNV and VPC are partnering to send over 4,000 voter registration applications this month to addresses and P.O. boxes all over Alaska

Hiroko Masuike/The New York Times
Former President Donald Trump arrives at Trump Tower after he was found guilty of all counts in his criminal trial in New York on May 30.
Opinion: Trump’s new fixers

Fixers from Alaska and elsewhere step in after guilty verdict