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Alaska Under Duress - 7/29/16

Many observers of the economy are aware of the stress that diminished oil prices have placed on nations like Venezuela and Russia.  But there are a handful of U.S. states that are also under duress due to the availability of cheaper oil, and one of them is Alaska.  Governor Bill Walker, an independent, recently imposed one point three billion dollars in state spending cuts in Alaska. 

As reported in the New York Times, among the impacted segments are public schools, the University of Alaska, and the state court system, which began closing at noon on Fridays to save money.  Taxes paid by oil and natural gas companies, who generate output from the fields at Prudhoe Bay to Cook Inlet near Anchorage, comprise approximately ninety percent of the state’s general fund revenues. 

Alaska has no sales tax, it has no income tax.  But the price of crude has slipped more than fifty percent from its high a couple of years ago, and Alaskan production has been in longer term decline.  In response, the State aims to reduce its prison population by thirteen percent over the next eight years to save money.  The State has also been slashing tax credits that oil companies receive for exploration.  

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.