While Alaska’s economy is recovering from the economic shutdown in response to the COVID-19 pandemic, the state’s growth is behind the national average and abysmal compared to economically well-performing states such as Florida and Texas. As policymakers return to Juneau to approve a new state budget, they must remember that however well-meaning, most additional government spending would harm, not help, Alaska’s economy. Instead, policymakers should show fiscal restraint to allow the private sector to thrive and should consider implementing a meaningful spending cap.
While Alaska Policy Forum has written extensively about the need for a strong spending cap — or expenditure limit — in Alaska, a report originally published by APF in 2020 specifically compares tax and expenditure limits across the nation. The report shows that states with modern expenditure limits have increased economic growth and prosperity — just what the Great Land needs now to move forward and flourish.
A similar report published in 2021 by the Commonwealth Foundation shows that increased government spending is correlated with reduced economic growth. Additionally, the author finds that a spending cap, when implemented correctly, can reduce state budget growth by approximately 1%.
Implementing a meaningful constitutional spending cap in Alaska would help reduce state budget growth, increase the state’s economic activity, and improve prosperity for all Alaskans.
To read a printable PDF version of APF’s tax and expenditure limits report, click here.