The Institute of Social & Economic Research

The Alaska Citizen's Guide to the Budget

Financial Assistance
provided by:

Fiscal Policy Council of Alaska

Comparisons
Comparisons
Outlays—Per Capita
Outlays—Big Items
Outlays—History
Outlays—Rankings
Jobs and Payroll—Per Capita
Jobs and Payroll—Big Items
Jobs and Payroll—History
Jobs and Payroll—Rank
Assets and Debt
Financing Govt.
Compare Wyoming
Why Alaska Spends More
Tax Burden
State Share

 

 

4. Comparison to Other States

4.12 Why Does Alaska Spend More Than Other States?

Alaska public outlays (state + local) per capita was 85% above the U.S. average in 1999 (cost-of-living adjusted). Netting out the BIG THREE—the Permanent Fund Dividend, Bonus Federal Transfers, and Extra Interest Expenses—Alaska spending was still 46% above the national average, about $2,874 per person—or $1.782 billion in total (at Alaska prices). A number of factors are suggested to help explain this residual premium.

  1. Special Management Needs of the Owner State. In 1998 the state spent over $172 million (the combined operating budgets of the Departments of Fish and Game and Natural Resources), or $275 per person, on the management of the fish, timber, mineral, land, and petroleum resources of the state. In addition, it cost about $48 million to manage the Permanent Fund and the dividend ($75 per person).

  2. Other Unique Programs. Every state has unique programs. We have many that are not typical of other states such as the Power Cost Equalization Program and the Longevity Bonus. These two programs cost about $80 million ($130 per person) in a recent year.

  3. Small Scattered Population Preventing Economies of Scale in Service Delivery. Part of the reason the cost of education is high in Alaska is due to small enrollment in the average school. In many parts of Alaska, a number of government services could be delivered to a larger population at little additional cost. The absence of economies of scale in the delivery of public services helps explain the high concentration of public employees in the state.

  4. Expensive Delivery Systems Due to Distance, Weather, and Other Conditions. The delivery of some public services must be done in person, and this results in high costs in some functional areas such as the court system.

  5. Loose Eligibility Requirements. One legacy of the 1980s is the absence of means tests for some government programs. The Power Cost Equalization Program, the Longevity Bonus, and the Student Loan Program are a few examples of this.

  6. Need to Bring Public Infrastructure up to Lower 48 Standard. Since Alaska has been a state for a comparatively short time, it is behind the rest of the Unites States in the quantity and quality of its infrastructure—roads, harbors, communications, utilities, etc. This means a higher rate of capital spending to catch up to the rest of the nation.

  7. Demographics. Children are an expensive age group to serve, primarily because of education. Eighteen percent of Alaskans are school aged (5-14) compared to the U.S. average of 15%. So for spending per student to be comparable to the U.S. average, spending per capita must be 20% higher in Alaska.

    Seniors represent another expensive age group to serve. Although only 5% of the Alaska population is over 65 (compared to 14% for the United States as a whole), seniors are our fastest growing population (the fastest rate in the nation except for Nevada)
    .

  8. High Public Wage Rates, Employee Benefits, and Other Costs. Labor agreements, local hire laws, resident bidder preferences, and other laws and practices drive up the cost of service delivery provided through the public sector. Providing the same services through the private sector can sometimes reduce the cost. This is a concern in every state.

  9. Fraud and Abuse. These factors always have and always will be present to some extent in every government. However, there is no evidence to suggest that these factors are more important in Alaska today than in other states.

  10. Waste. Some waste is the inevitable legacy of over two decades of high oil revenues.

 

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Page Updated April 16, 2003

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