Perspectives on Business and Economics, Vol. 40

8 the state close its projected budget deficits in coming years by combining it with the first two options as a balanced approach. As for the impact on the Alaskan population, this option would have a progressive impact across the income distribution. The bottom 20% of earners in Alaska (with incomes below $25,000 per year) would pay an average of just 0.1% of their income in tax, whereas middle-income families would pay 0.7% and the state’s top 1% of earners would pay 2.8% (Davis & Davis, 2017). According to ITEP’s distributional impact analysis, most Alaska families would find that a graduated rate personal income tax would have less impact on their household budgets than either a sales tax or a cut to the PFD designed to generate an equivalent amount of revenue for the state (Davis & Davis, 2017). This finding holds true across the bottom 60% of the income distribution and for some families above this level, because income taxes can be fine tuned to require lower payments from taxpayers earning modest incomes and higher payments from those wealthy taxpayers who have benefited most from the economic opportunities that Alaska has made available to them (Davis & Davis, 2017). Conclusion There is no easy path forward to solving Alaska’s budget challenges. Nevertheless, doing nothing would simply delay the problem, which essentially is what has happened for the past eight years. Certainly, the state would far prefer to not act, but, given the current reality, it is difficult to see a path forward that does not involve spending cuts, further draws on the state’s reserves, and, ultimately and most importantly, new sources of revenue. Drawing down financial reserves to cover Alaska’s current budget deficits is not a sustainable option and only ensures a more precarious tomorrow. Instead, policy makers should adopt progrowth strategies and implement a balanced approach between ERA draw reallocations, reduced spending, and new revenue options. Were energy markets to mount an unexpected recovery, policy makers should regard this as excellent news, but not as a permanent solution. Prudent budgets do not assume economic booms will last forever; they plan for turbulent futures by saving for rainy days, and they do not outspend their savings. As for new revenue sources, the state must choose an option that has the least adverse impact on the state’s economy, and Alaskans must have confidence that these new burdens are necessary. A progressive income tax is the least painful option available that could also work to help level the state’s income inequality. With the state facing a $1.5B budget deficit each year, even after the existing POMV draw, a combined approach, with $500M coming from each—reallocations, spending reductions, and revenues—seems the most reasonable solution. Yet, that said, the question remains whether this is politically tenable. Not to resolve that question, however, would be tantamount to admitting failure. Can Alaska fail to do so and still survive financially?