As Alaskans debate Gov. Mike Dunleavy’s budget cuts, a different state occasionally enters the conversation to serve as a kind of cautionary tale: Kansas.
In 2012, Kansas also had a newly elected Republican governor institute changes that forced residents to reckon with cuts to government services. It was known as “the Kansas experiment.”
Some economists say it’s fair to see parallels between Kansas’ experience and what may be in store for Alaska. But others urge caution against drawing too many parallels given Alaska’s unique financial situation.
Here’s a short version of what happened in Kansas: In 2012, Gov. Sam Brownback cut tax rates for both individuals and businesses.
“The famous phrase he was quoted at an event as saying is that the tax cuts would be ‘a shot of adrenaline’ for the Kansas economy,” said Kenneth Kriz, a professor of public finance at the University of Illinois at Springfield.
But as Kriz and many other academics point out, the Kansas experiment didn’t unfold the way Brownback hoped.
“There were some early signs that there was some increase in economic activity, but that very quickly faded,” Kriz said.
Kansas’ economy did not boom. State revenue fell, as did Brownback’s poll numbers. Highway projects were put on hold. And one thing that really got people’s attention, Kriz said, was when the state started making cuts to K-12 education.
“Once you start closing schools, the word gets out pretty quickly that something’s amiss,” said Kriz.
In the end, Kansas voters decided to end the experiment. Brownback was re-elected to a second term, but many of his allies in the legislature were voted out, replaced by more moderate Republicans and Democrats. Those legislators reversed his tax policy and overrode Brownback’s veto of that reversal.
Governor Mike Dunleavy’s budget vetoes have some Alaskans wondering if they can learn anything from Kansas. Dunleavy’s budget director, Donna Arduin, comes from the same firm as economist Arthur Laffer, who advised Kansas governor Brownback on his tax cuts. Laffer is a famous proponent of supply side economics and recently received the Presidential Medal of Freedom from President Donald Trump.
Economist Mark Partridge, a professor of rural-urban policy at Ohio State University thinks it’s reasonable to see similarities between Kansas and Alaska. Partridge points out that Brownback’s and Dunleavy’s policies both add up to more money in people’s pockets at the expense of state services.
“Except the Alaska case might be a little bit worse, in that at least in the Kansas case, they were cutting things like tax rates, which, at some point, would increase incentives to work harder, or invest, or something,” Partridge said.
Partridge does not think Dunleavy’s cuts bode well for the state’s economy, and is particularly concerned about cuts to the university system and what that signals to Outside businesses about Alaska’s future labor market.
“In the long term, I see this as something that could be particularly problematic, and I hope cooler heads prevail,” Partridge said.
But Ralph Townsend, Director of the University of Alaska’s Institute of Social and Economic Research, cautions against making too many economic comparisons between Alaska and Kansas.
“In terms of the actual policy settings, there’s not a lot to compare,” Townsend said.
Townsend argues the two governors’ starting points are fundamentally different. Brownback of Kansas cut taxes, hoping to boost the state’s economy, and that eventually forced cuts to government services. Dunleavy went straight to the ‘cut government services’ part. Both have economic impacts, but the drivers are different.
And while Dunleavy and others in his administration do bring up the economic upsides of the Permanent Fund Dividend, the idea that a $3000 dollar PFD will help the state’s economy isn’t central to their messaging.
Townsend notes that the fact that Alaska has the Permanent Fund to argue over at all is entirely unique.
“The situation in Kansas was people were debating what size government they wanted and how much they were going to pay for it,” Townsend said. “In Alaska, we’re debating not how much we pay for it, but given the money that we have, are we going to spend those funds on public services or are we going to give it to ourselves?”
So the lessons Alaska can learn from Kansas may be more political than economic. The question is, if Alaskans start losing government services they’ve gotten used to, will voters respond the same way as voters did in Kansas?
Or will the thing that sets Alaska apart from Kansas and every other state — the PFD — drive voters here to make a different choice?
