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4. Budget Comparisons with Other States

4.1 Alaska Spending Compared to Other States and the Alaska Premium

Taking into account Alaska's heavy reliance on state rather than local government and the higher cost of living, per capita public spending was 85 percent higher than the U.S. average in 1999. ( If we net out three uniquely Alaska factors—the Permanent Fund Dividend, Extra Federal Grants, and Extra Agency Interest Payments—the ratio of Alaska to U.S. average spending is 1.46 in 1999. See Section 4.2.)

Alaska State Expenditures Per Capita Were 2.75 Times the National Average in 1999

But a Disproportionate Share of Public Services in Alaska is Delivered by State Government

In Alaska about 60% of combined state and local government spending takes place at the state level, compared to about 40% for the U.S. overall. (See the section on State Share.) Concentration at the state level is most pronounced in K-12 education but is evident in virtually all expenditure categories. Because of this concentration of expenditures, if not ultimate responsibility for service delivery, combined state and local government spending, net of transfers from state to local government, is the best representation of the size of government spending in Alaska. Combined state and local government expenditures were 2.24 times the U.S. average of $5,129 ($11,502 vs. $5,129).

But the Cost of Living in Alaska is Higher than in Other States

To get a figure that represents the cost of providing the U.S. average per capita public service level in Alaska, we adjust the U.S. average figure of $5,129 upward by the Alaska cost of living differential. (We estimate this differential to be 21% [$1,091] taking into account the distribution of public services over the urban and rural (higher cost) parts of Alaska.) The resulting U.S. average per capita expenditure at Alaska prices was $6,220. Combined state and local public spending in Alaska was 1.85 times this cost-adjusted U.S. average.

Go to Outlay—History to see how the differential has been falling.

This definition of spending is Outlays.

The Alaska Spending Premium = $5,282 per person.

The Alaska "Premium" is the difference between Alaska per capita public spending and the COLA-adjusted U.S. average. This is the Premium at the Alaska Price level.

We could also measure the premium at the U.S. average price level. In 1999 it was $4,355.

Fiscal Policy Papers