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Episode 22: Alaska’s Fiscal Frontiers

By KTVA Alaska 10:43 PM September 27, 2015

I have a fascination about things created in garages. Think Steve Jobs, who started the Apple computer empire in the family garage. And where did that term “garage band” come from?

On Frontiers this week, we check out a project that was born in an East Anchorage garage — the brainchild of Gunnar Knapp, who conceived it, and Ian Laing, who built it.

Knapp is a longtime Alaska economist, who heads up the Institute of Economic and Social Research, based at the University Alaska Anchorage.

Laing is a former legislative aide, who has also worked for the Alaska Department of Revenue.

Their vision: to create an Alaska-style version of the “Wheel of Fortune,” in order to educate the average citizen about the deep financial hole the state finds itself in, due to the drastic drop in oil prices.

They created a giant scale to show how Alaska’s spending far outweighs its revenues, which mostly come from taxing oil.

The state budget is currently about $5.1 billion – with less than $2 billion of that funded by oil. The budget gap was closed, by digging into savings, stashed away in the Constitutional Budget Reserve (CBR).

Just a few years ago, with oil at more than $100 a barrel, the state had a bigger budget and surpluses.

Today, there’s about $7 billion left in the CBR. But with oil revenues expected to remain low for the foreseeable future, the state could burn through these reserves at the rate of about $2 billion a year, or more.

So what will close the gap? Downsizing the budget? Cutting oil industry tax credits? Imposing income or sales taxes?  Tapping into the Alaska Permanent Fund earnings, which could reduce or eliminate the annual Permanent Fund Dividend check?

The game Knapp and Laing developed gives Alaskans an opportunity to weigh the options by moving blocks of money around, each valued at $100 million.

We followed the construction of the game in Laing’s garage, to the testing of a prototype with real people, to the game’s debut at the Wendy Williamson Auditorium on Sept. 19.

It’s hard to believe addressing such a serious subject could be so much fun. But it seems to be a good way to get Alaskans to pay attention to a problem that threatens the state’s future.

The truth is: if you walked into just about any restaurant in Alaska and asked 10 diners what the state’s current budget deficit is, only one or two can answer that question correctly. I’ve tried it. You get answers way off the mark, despite the fact that Alaska’s airwaves and newspapers have been inundated with stories about multi-billion-dollar deficits for the past year.

But budget issues are complicated and, typically, inspire a collective yawn. We hope this edition of Frontiers will help you not only understand budget basics but pique your interest and tickle your problem-solving instincts.

There are lots of tools on the table, but which ones should we use — and when? Each has their pros and cons.

The appetite for using earnings from the Permanent Fund, now valued at more than $50 billion, to pay for government might not be much — especially after getting a $2,072 dividend check.

Our program also features an interview with Cliff Groh, one of the organizers of the fiscal forum, where the budget game was debuted.

We also invited Sen. Pete Kelly, a Fairbanks Republican, who co-chairs the Senate Finance Committee.

For Kelly, building a budget is no game but a difficult job in which no one is ever completely satisfied with the end result.

And yes, Kelly did weigh in on the recent dust-up over Hotel-Gate, in which $90,000 in public money was spent for lawmakers and their staffers to attend a conference in Seattle last month.

It won’t be long before the governor’s budget is out for the coming fiscal year – and lawmakers will once again face some difficult choices. Another foray into Alaska’s fiscal frontiers.

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