Ralph Townsend, ISER director, gave presentations on Alaska’s economy and the state budget (PPTX, 701KB) to the Board of Directors of the Alaska Federation of Natives, CIRI’s Tikahtnu Forum and the Fairbanks Chamber of Commerce in early May. Townsend’s main areas of discussion included employment and the state budget, the inter-relationship between the Earnings Reserve Account, Permanent Fund Dividend, and the state budget, and how changing demographics will shape Alaska’s future economy.

slide 23, summary of short run effects, economy starting to grow, large cuts risk return to recession. No agreement on path to sustainable state budget. Earnings Reserve mechanics not fully appreciated.

Employment in Alaska is poised to start to increase after three years of decline; however this growth is projected to be modest. Four to five years of growth may be required to recover to pre-recession employment levels. Townsend told audiences that large reductions in the state budget have a serious risk of delaying that recovery or even returning the state economy to a recession.

The legislature is currently considering important changes in how the Earnings Reserve of the Permanent Fund is managed. Townsend discussed the importance of understanding the interrelated mechanics of the Earnings Reserve, the PFD, and Percent of Market Value draw to funding general government. Economist Roger Marks does a good job of explaining this relationship in an opinion piece in the Anchorage Daily News, according to Townsend.

slide 24, summary of long run effects: economy shaped by a new demographic context: flat population, getting older fast, workforce depends upon non-white growth. How will our decisions about state spending priorities shape Alaska's future?
Townsend also discussed how major changes occurring in Alaska’s population demographics could impact the future economy. These changes include a much larger retired population, a possible decline in the working age population, and an increase in the share of the working age population that is non-white.