Alaska’s state government can afford to spend about $5.5 billion in fiscal year 2014 (July 2013 to June 2014). That’s the most recent estimate of the level of General Fund spending the state can sustain over the long run, from a new paper by Scott Goldsmith, professor emeritus of economics at ISER. The $5.5 billion figure is based on the state’s current petroleum nest egg of about $149 billion. The nest egg is a combination of state financial assets (the Permanent Fund and cash reserves) and the value of petroleum still in the ground.
The paper finds that the state has over-spent in recent years, putting it on the path to major fiscal and economic problems in the years ahead. But the state can still get back on track, by saving much more and restricting the rate of spending growth.
Download the paper (PDF, 950KB).