The 40-year oil boom that turned Alaska from a frigid backwater into one of the nation’s richest states is over. Not only have petroleum prices crashed, but Alaska’s supply of crude is running out. Thirty years ago the state was pumping 2 million barrels a day, a quarter of all U.S. output. Alaska’s output has fallen to 500,000 barrels a day…
“We are sort of damned if we do, damned if we don’t,” says Gunnar Knapp, an economist at the University of Alaska at Anchorage who’s advised Walker. Cutting spending or reducing the dividend would take money out of a weak economy, he says. But using the state’s savings to plug the deficit only delays the inevitable. “We face a trade-off, and it’s not like we have a lot of time,” Knapp says. “The hurt is going to come anyway.”
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