By Matt Hickman
‘Make it Monday’ events, put on each week by the Anchorage Chamber of Commerce, are typically casual affairs as attended for networking and door prizes as the topic of the guest speaker.
Such was not the case this Monday on the second floor of the Dena’ina Center, where a banquet room so packed there wasn’t enough lunch buffet to go around, listened to Mouhcine Guettabi, an economist with the University of Alaska Anchorage’s Institute of Social and Economic Research speak to the results of the study he conducted alongside fellow ISER economist Nolan Klouda.
At issue was the more than $400 million in vetoes announced by Gov. Mike Dunleavy last month and what impact those cuts, if not repealed by the Legislature this week, would have on the Alaskan economy in the short-term.
Guettabi’s assessment was scathing, saying that the cuts to the University of Alaska system — 31 percent of the overall vetoes — alone were virtually certain to push the state back into recession even after eight consecutive months of job growth.
“As we know, layoffs or cuts or income reduction lead to a reduction in spending and what we sought to study was the economic effects from those reductions,” he said. “The takeaway is that, yes, the economy has started its recovery. It’s still far away from getting back all the jobs that were lost (in the recession of 2015-2018).”
The ISER study estimates that if the Dunleavy cuts stand, the state would lose 1,300 jobs directly, and 2,000 jobs from the UA vetoes alone, and with the further cuts proposed by Dunleavy to Medicaid and the public school system, that indirect loss of jobs will total approximately 4,200.
“For that not to happen — for us not to dip back into recession — there would need to be about 4,000 jobs gained from other sectors of the economy,” Guettabi said, adding that the last time the Alaska job market grew at a rate like that was in May 2014. “For me, it’s fairly clear that, yes the economy has come out of recession, but it is a fragile recovery.”
Guettabi said that should the state fall back into recession, the pain felt by Alaskans would be greater than what was felt in the 2015-2018 recession because much of those job losses were suffered by non-permanent residents, whereas the brunt of a next recession would be taken on almost exclusively by Alaskans.
“The pushback I get from a lot of people on this is that these people being laid off (at the university) will find employment elsewhere,” he said. “But 1), it’s not like the rest of the economy is hiring 10,000 people a month, and 2) University cuts, for example, force people into national markets. The vast majority will have to move… How are affected people going to react to this shock?”
Guettabi also spoke about so called ‘brain drain’, the effect of future workers leaving the state for better education opportunities and then never coming back to work.
He said that currently, 53 percent of Alaska high school students attend college in-state, while 29 go out of state. An even more diminished UA system would surely increase the numbers of students who leave.
“Those kids who stay in state are considerably more likely to remain in the state post-grad than if they went to, say, Missouri State,” the Oklahoma State University grad said.
When the presentation of his admittedly ‘vanilla analysis’ concluded, Guettabi took many written questions from the audience.
One question asked whether a full, $3,000 PFD would off-set some of those job losses. He said past studies indicated that, on average, each $1,000 in dividend payout equates to about 700 short-term jobs that last two-to-three months.
“Those jobs are typically in retail and only created if people actually go out and spend the money,” he said.
Another question asked whether Dunleavy’s cuts would lead Alaska into a depression, akin to the crisis of the 1980s.
“That’s a really strong word,” Guettabi cautioned. “I hesitate to use that word, but what’s clear is that’s it’s fairly unarguable that this will push us back into a recession. I don’t think there’s even real debate about that. Our recovery has been good, but fragile and this will put additional pressure on the economy.”
The legislature has until Friday to overturn Dunleavy’s vetoes.