Chief Economist Edward King from the Office of Management and Budget presented a data-driven outlook on the situation the state — and what the governor drafting his budget — faces today.
During his presentation at the Hangar Ballroom to the Juneau Chamber of Commerce at lunch on Thursday, he outlined the revenue forecast for Alaska for the next few years based on the expected price of oil, and said no matter which way you look at it, the economy is going to take a hit.
If the governor cuts state funding, it will affect jobs, which in turn will affect different aspects of the economy. But if legislators look at making new taxes to make up for the difference instead of cutting spending, those also will affect the economy negatively in their own ways.
“Every lever you pull is going to impact different people and different regions differently,” he said. “There are trade-offs we have to make between the public and private sector, and between current and future generations.”
But he said a change needs to be made structurally, because the decline in revenue from oil is not going to go away. He said in general, based on trends, the price of oil is not going to return to $100 per barrel anytime soon. While certain unforeseen events might change it for a time, the supply and demand predictions remain constant over the next few years.
“It’s not just a change, a cut to a budget for this year, then we’ll get it back next year, it has to be structurally,” King said. “We don’t know how it’s going to play out (at the Capitol). They have a real big problem to solve and they’ve known that it was coming for the past four years.”
A recent jobs forecast presented by the Alaska Department of Labor and Workforce Development stated that there will be modest growth in jobs this year after a downward streak of jobs for the past 39 months. But King said cuts to the state budget will most likely change that positive job prediction.
“If you look at the assumptions that go into those job forecasts, a lot of them include holding things constant. If you go and make a change to the way that things are — to be clear we have to (make a change) — there aren’t enough revenues. As soon as we know what those changes are those forecasts are going to change.”
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