Economy / Fiscal Policy

The state government provides considerable money to Alaska’s local governments—but so far there has been little analysis of how the precipitous decline in state revenues might affect local governments. A new report by Mouhcine Guettabi, an assistant professor of economics at ISER, assesses how much Alaska’s borough governments rely on state aid and considers how vulnerable they are to cuts in that aid.

The author found that overall, boroughs depend much more on state dollars now than they did 10 years ago—the average share of borough revenues coming from the state increased from 12% to 28% between 2005 and 2015. But he also shows that some boroughs rely much more than others on state money—and are therefore more vulnerable to inevitable cuts in state aid.

To learn more, download the report, A Regional Assessment of Borough Government Finances and Employment (PDF, 1.8MB). If you have questions, get in touch with Mouhcine Guettabi at mguettabi@alaska.edu or 907-786-5496.

How might steps Alaska's state government takes to balance its budget affect Alaska families? Different ways of closing the state's $3 billion budget gap—the result of lower oil prices and dwindling oil revenues—will have different effects on households with and without children, according to a new report by Matthew Berman and Random Reamey of ISER. They looked specifically at how state income, sales, or property taxes and a cut in Permanent Fund dividends would affect incomes of households with and without children. 

Permanent Fund dividends—payments the state makes to virtually all residents annually—lifted about 25,000 Alaskans out of poverty in 2015, reducing poverty in Alaska by about a third. Since 1990, PFDs have reduced poverty rates in Alaska by an estimated 2.5 to 4 percentage points annually. They have been particularly important for children, Alaska Natives, and rural residents, who are much more likely to be poor than Alaskans on average.

Those are estimates that Matthew Berman, a professor of economics at ISER, and Random Reamey, an ISER research professional, developed for their analysis of how PFDs have reduced poverty in Alaska over the past 25 years. They made their own estimates, because they discovered that the U.S. census data federal agencies use to calculate poverty rates for Alaska don't include all PFD income. So they adjusted census data to include all PFD income, and then estimated poverty rates with and without PFDs.

Download the summary (PDF, 955KB) or the full analysis (PDF, 994KB). If you have questions, call Matthew Berman at 907-786-5426.

Many countries are now using emissions-trading schemes as a policy to reduce pollution cost-effectively. But what incentives do tradable-permit markets offer companies to make investments in advanced pollution-abatement technology? Timothy Cason, the Rasmuson Chair of Economics at UAA this semester, and a colleague from the UK recently investigated that question through experimental economics.

The researchers used a laboratory experiment to assess how two methods of allocating tradable permits—auctioning permits or grandfathering them—might affect businesses’ decisions about investing in new technology to reduce pollution. Please join us at ISER to learn what they found.

When: Thursday, December, 1, 12 to 1
Where: ISER conference room,
Third Floor, 1901 Bragaw Street, Suite 301

Those who can’t attend in person can stream the talk live at: http://stream.iseralaska.org

Alaska lost nearly 2,300 jobs—about 1% of all wages and salary jobs— from March 2014 through March 2016. But not all areas of the state and sectors of the economy lost jobs. In a new paper, Mouhcine Guettabi, assistant professor of economics at ISER, examines jobs losses statewide and by area and economic sector. This is the first in a series of short papers that will examine various economic and fiscal issues important to Alaska.

Download the paper (PDF, 752KB). If you have questions, call the author at 907-786-5496 or email him at mguettabi@alaska.edu.

A growing number of immigrants and refugees call Anchorage home, and ISER is pleased to host a panel discussion of their economic contributions. The panelists are Ethan Berkowitz, the mayor of Anchorage; Bill Popp, the president of Anchorage Economic Development Corporation (AEDC); Delaney Mitchell, UAA student and researcher; and Mara Kimmel, a senior fellow at the Institute of the North.

The panelists will describe efforts in Anchorage to avoid “brain waste” among those coming from other countries, by ensuring they have access to markets and jobs, and also discuss ways to leverage the skills, experience, and education these newcomers bring to the city. The discussion is one of a number of events in Welcoming Week, sponsored by the Municipality of Anchorage, AEDC, and local businesses.

When: Monday, September 19, 12 to 1
Where: Room B05 (Basement), 1901 Bragaw Street

Note: Those who can’t attend in person can stream the talk live at: http://stream.iseralaska.org

Are state workers better paid than their counterparts in private industry? That question is likely to come up more often, as the state deals with a huge budget shortfall. The answer is generally no, but there are exceptions for individual occupations.

That’s the main finding of ISER economists Mouhcine Guettabi and Matthew Berman, who did the research for the Alaska Department of Administration. They analyzed the question in two ways, using different data sources. Both analysts reached the same broad conclusion: state workers are not on average paid more, whether you include just wages, or total compensation—wages plus benefits.

To see highlights of the findings, download the summary, Who Has Better Pay and Benefits—Workers in State Government or Private Industry? (PDF, 759KB) For more detailed information, download the full report, Overpaid or Underpaid? Public Employee Compensation in the State of Alaska (PDF, 3.04MB). If you have questions, get in touch with Mouhcine Guettabi, assistant professor of economics, at 907-786-5496 or mguettabi@alaska.edu, or Matthew Berman, professor of economics, at 907-786-5426 or mdberman@alaska.edu.

Total construction spending in Alaska will be about $7.3 billion in 2016, down 18% from last year’s $8.9 billion. That drop can be traced to the recent steep decline in oil prices, after several years of very high prices. Those high oil prices had stimulated construction spending throughout the state economy, especially in the oil and gas sector and in state government. Those are among the findings of the new 2016 Construction Spending Forecast, prepared by Scott Goldsmith and Pamela Cravez of ISER for the Associated General Contractors of Alaska.

Many sectors of the economy will see drops in construction spending, particularly the oil and gas sector, which had record spending in 2015. But spending in some sectors will be up or the same as last year. Spending for national defense projects will be up 27%, and spending by basic industries other than oil and gas (tourism, seafood, air cargo, and timber) will be up 39%. Spending for highways and roads will be the same as in 2015, as will spending by the mining industry.

Download the report, 2016 Alaska Construction Spending Forecast (PDF, 1.6MB). If you have questions, get in touch with Scott Goldsmith, professor emeritus of economics, at osgoldsmith@uaa.alaska.edu.

A recent issue of the Economic Development Journal is devoted to articles about Alaska’s economy and includes three by ISER faculty members Gunnar Knapp, Bob Loeffler, and Mouhcine Guettabi. The journal is published by the International Economic Development Council (IEDC), and this issue was released ahead of IEDC’s annual conference, held in Anchorage in October. The articles by ISER faculty are now available on the ISER website, with permission of the publisher.

Resource Revenues and Fiscal Sustainability: Lessons of the Alaska Disconnect (PDF, 522.9KB), by Gunnar Knapp, ISER director and professor of economics

Mining and Sustainable Communities: A Case Study of the Red Dog Mine (PDF, 482KB), by Bob Loeffler, ISER visiting professor of public policy

The Determinants of Small Business Success in Alaska: A Focus on the Creative Class (PDF, 240.6KB), by Mouhcine Guettabi, ISER assistant professor of economics

Read more to find summaries of the articles.