xThe recent back-and-forth between an economist at the Institute of Social and Economic Research and the Dunleavy administration revealed a great deal about the challenge of saying exactly what would happen if the state eliminates the ferry system, cuts funding for every public school in Alaska, dismantles the University of Alaska, removes $700 million from the Alaska health care system and confiscates $500 million from local governments.
It is impossible to give precise numbers on how much damage the Dunleavy Disaster would do to Alaska.
But two things stand out in the Guettabi/King smackdown.
First, the Dunleavy administration has refused to attempt an economic analysis, probably because the results would confirm just how bad these haphazard cuts would be for Alaska. The administration has added more confusion than clarity by saying everything is “unclear.”
The governor’s budget office has fallen back on the simplistic theory that budget director Donna Arduin has brought up in her baggage from Outside, claiming that the more spending is cut, the greater will be the future increase in economic growth, ignoring key details about why that doesn’t add up.
Second, the 2016 ISER report by Gunnar Knapp, Mouhcine Guettabi and Matt Berman of the University of Alaska Anchorage remains the most valuable document we have about the short-term impacts of budget cuts.
Guettabi said that applying ISER’s 2016 analysis to Dunleavy’s budget shows that about 17,000 jobs would be lost. That’s based on ISER research showing that every $100 million reduction in state spending would cause the loss of about 1,000 jobs.
Is this a precise number? No. It is an estimate about an uncertain future. Call it informed guesswork.
The cuts would include about 7,000 jobs lost from cuts in the state operating budget, 5,000 jobs lost from local government cuts and 5,000 jobs lost from cuts in federal funding.
I was disappointed to hear Revenue Commissioner Bruce Tangeman and economist Ed King make misleading statements to the Senate Finance Committee on Thursday afternoon about the ISER analysis. I don’t know whether this was intentional or a mistake.
Tangeman made this misleading statement: “I think Dr. Guettabi cleared some of that up as well because the walking around number I think was 1,000 jobs for every $100 million, but then in his summary slide on the governor’s plan, he actually backed that down to about 7,100 jobs lost. “
King made this misleading statement about job loss estimates by Guettabi:
“If you believed the ISER numbers that number would be somewhere north of 14,000 jobs. I already said I don’t believe those numbers. I think ISER this morning said they don’t believe those numbers. I think the Department of Labor said yesterday they don’t believe those numbers.
“I don’t think anybody really believes those numbers are real. But there is a impact and it needs to be accounted for. When you net everything out it’s something less than 5,000 jobs total.”
Contrary to Tangeman’s statement, Guettabi’s “walking around number” did not change. And, contrary to King’s statement, ISER researchers believe the ISER numbers that about 1,000 jobs would be lost for every $100 million cut in government spending.
What Guettabi did with his presentation was to go beyond his guess about 17,000 jobs lost. He included an estimate of how many extra short-term jobs would be created if the Legislature increases the dividend this year by $1.3 billion, giving each Alaskan about $4,000 instead of $1,800.
Guettabi said that extra money, if it is spent, could create nearly 10,000 short-term jobs, lasting about three months. Subtract 10,000 from 17,000 to produce the estimate of 7,000 lost jobs. But let’s place a giant asterisk next to that number.
For one thing, destabilizing the Alaska economy by slashing public services would have an impact on household spending and saving.
Guettabi said additional jobs created by the $1.3 billion in added dividends would not last long. “The employment effects of the PFD may be short-lived. Our recent (yet to be published) work shows that the employment effects are concentrated in the three months post distribution,” he said.
In other words, short-term jobs created by extra dividend money in the retail sector would not be the same as jobs lost for good at the University of Alaska, public schools, local governments, community hospitals, health clinics, the ferry system and other institutions that would shed workers under the Dunleavy plan.
Dermot Cole is a longtime Alaskan, an author of several history books and a former Daily News-Miner staff columnist. His email address is firstname.lastname@example.org.