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No one has as yet declared the state of Alaska officially on the list of governments fighting recessions, and it is unlikely anyone will. But a top state economist Tuesday admitted the reality is the state has stepped in it.

Depressed global oil prices and government budget problems linked to falling oil prices have put a double-whammy on a state where oil and government are two of the biggest sectors of the economy. Both are now suffering for lack of oil revenue.

As a result , Alaska is on an economic slide. It is not alone. Marxist Venezuela, where the economy is even less diversified than Alaska, appears to be spiraling into chaos while frugal Norway is now spending some of its savings in an effort to buy economic stability.

Maybe. The Norwegians concede they will need a little help in the form of rising oil prices to stabilize their economic ship of state, but it could be worse….

South American hell

For a look at how much worse, there is Venezuela.

“Oil provides 95 per cent of export revenue and Venezuela has never succeeded in diversifying the economy,” writes Nick Butler of The Financial Times. “Falling prices have compounded the problem of falling production. The result is a deep recession with gross domestic product predicted to fall by 10 per cent this year. Unemployment is officially 20 per cent, and probably much more in reality. Inflation is 700 percent and rising, according to the International Monetary Fund. There are desperate shortages of imports, including of basic foods and medicine.”

Alaska is still awash in imports, but it does share some similarities with Venezuela. The unemployment rate is up and climbing. It was 6.8 percent in August up from a nation leading 6.7 percent in July when it was already more than twice that of the state of Nebraska.

And then there’s the recession.

“The given caveat there is that there is no official (statement),” economist Dan Robinson, chief of the Research and Analysis Section the Alaska Department of Labor said Tuesday “But by any definition…basically, yes,” Alaska is in it.

Alaska’s recession, like that of Venezuela, is driven by falling oil prices and the compounding problem of falling production. But Alaska isn’t Venezuela. Oil supports only about a third of the jobs in the state, though oil revenues do fund about 90 percent of state government.

Still there is a big difference between 95 percent of export revenue and 90 percent of government funding. Alaska’s export revenue is somewhat hard to calculate because this is a U.S. state. On paper, the U.S. Census Bureau says Alaska oil exports amounted to only 3.5 percent of all exports in 2015.

Zinc ores and concentrates from the Red Dog Mine near Kotzebue led the export list at 19.4 percent, although various sorts of fish products combined to surpass zinc. But the Census only tallies exports from the U.S., and most Alaska crude oil is exported south to other states.

Gross domestic product might be  better way to look at the Alaska economy than exports. Oil accounts for about 24 percent of what has been a steadily falling state GDP closely linked to the steadily falling price of oil.

Like no other state

In this regard, Alaska is more like Venezuela than any of the other 49 states. No other states are as tightly harnessed to oil. Texas, where the oil “bidness” still accounts for a sizable share of GDP, gets 11 percent from the oil industry, according to data from the Business Insider.

Texas is number two on the list of states with significant GDP from oil, but it is not a good state with which to compare to Alaska. Texas adds a lot of value to its crude. Texas is home to 27 refineries producing fuel and high-value petrochemicals. Alaska has three small commercial refineries producing only fuels.

Alaska’s economy is way more dependent on crude oil exports than that of any other state. And in that regard, it’s like Venezuela, but fortunately buffered by U.S. monetary policy. Alaska can’t print its own money like Venezuela can.

And Alaska has been far more prudent with its oil wealth than Venezuela, which borrowed heavily to expand state services through the decade when oil prices were high. Alaska expanded state services, but it didn’t borrow much and saved a good chunk of oil earnings in the Permanent Fund and other accounts.

It’s now sitting on more than $61 billion in savings, which makes Alaska more like a little Norway than another Venezuela.

The Norwegian way

When it comes to government savings, Norway is Alaska on steroids. The Scandinavian country is sitting on an a $890 billion savings fund – a fund almost 15 times larger than that of Alaska.

On the one hand, the Norwegian fund is huge. But in human terms, it isn’t really all that much bigger than Alaska’s Permanent Fund. There are about seven times as many people in Norway as in Alaska. So, on a per capita basis, Norway’s fund is only about twice the size of that of Alaska.

Norway is using its fund to fight recession the old-fashioned way – by spending.

Alaska has responded to its recession, which history might eventually conclude started in fourth-quarter of 2015, by trying to protect its savings. The Legislature cut government spending slightly this year before Gov. Bill Walker ordered massive savings by refusing to pay credits due oil companies enticed to Alaska to explore for new oil (a saving of $400 million) and cutting the permanent fund divided about in half (a saving of about $666 million).

Walker billed those two cuts totaling more than $1 billion as part of $1.29 billion in vetoes that he said were “best for Alaska’s future.”

A different view

While Alaska was reducing spending to protect its piggy bank, Norway was taking money out of it piggy bank to bolster its economy.

“For the first time, it’s reaching directly into its $890 billion sovereign wealth fund, withdrawing an estimated 84 billion kroner ($10.5 billion) to cover budget needs while keeping well within a rule that limits oil money spending to 4 percent of the fund’s value,” Bloomberg Markets reported today.

Bloomberg called the spending an economic stimulus and left unclear what Norway’s plan for next year.

“The big question is if the government will have to dig even deeper into its piggy bank. It has this year predicted about 130 billion kroner in net income from its petroleum industry, down from more than 300 billion just two years ago,” Sveinung Sleire reported.

“Given forward oil prices, income from oil activity ‘won’t rise much next year,’ said Kari Due-Andresen, chief economist at Handelsbanken in Oslo.

“’We are very unsure of how strong the recovery’ for the Norwegian economy will be, she said. ‘But it’s natural to expect less stimulus next year than what we saw this year.’”

Oil prices are projected to climb next year, but there is little certainty. The Organization of Petroleum Exporting Countries (OPEC) at the end of September announced plans to cut production. Iran, an OPEC member, shortly thereafter began calling on other major oil-producing countries to crank back supply to aid that effort to boost prices.

This week, however, oi prices were again falling as Iranian production hit a peak not seen since long before U.S. President Barack Obama signed a nuclear deal that lifted sanctions on Iranian oil exports.

“Oil prices down on Iranian export surge,” The Week headlined today.

Governments counting on rising oil prices to help bail them out are clearly in for a bumpy ride. But what they should do near term is a tough call.

Norway spent what Walker saved

As a percentage of wealth funds, the $10.5 billion the Norwegians withdrew to use to stimulate their economy is near equal to the more than $650 million from the Alaska Permanent Fund that Walker “vetoed” to help with Alaska’s budget crisis.

What exactly that veto meant to accomplish, however, remains unclear. At the time of the veto, Walker suggested the state could use the money to offset some of the draw down on the savings. But that now appears to be clearly impossible without the Legislature appropriating the money to the general fund.

So the $666 million appears to bs stuck in the fund account where it earns less than it would if it had stayed in the Permanent Fund investment portfolio while the courts deal with a lawsuit arguing the governor lacks the legal authority to unilaterally stop payments to Alaskans from a constitutionally dedicated fund.

Meanwhile, growing numbers of Alaskans protest Walker’s action as harming the poor and disadvantaged, or blast him for taking cash out of an economy now clearly in need of a stimulus.

Anchorage attorney Brad Keithly has led those pounding away on the governor with a University of Alaska Institute of Social and Economic Research (ISER) study that concluded that “the PFD cut … has the largest adverse impact on the [overall Alaska] economy.”

Keithly sees the use of PFD money as little but ploy to prop up an over-stuffed bureaucracy. It is, he writes, a government effort “to preserve money for itself and for those that it chooses to benefit through continued government spending. Want to blame someone or something? Blame it on the ‘government knows best’ mentality that has prevailed in both the executive and legislative branches since roughly 2010.”

Public protests against Walker’s PFD cut have been growing. Stories of Alaskans who needed the extra $1,000 to pay for medical expenses or heating fuel are everywhere. And an online petition to “stop the cap” has been growing by hundreds of people per day. It now has more than 15,000 people signed on.

But Alaska has a very real fiscal problem and it is not simply solved. The state faces a budget shortfall of more than $3.5 billion, and there is no sign of the problem getting better anytime soon. Despite hopes of rising global oil prices and hints of increasing production – both Armstrong Oil & Gas and Caelus Energy have announced the discovery of significant new reserves on the state’s North Slope – it appears unlikely oil revenues will be able to carry the state budget going forward.

That has led to calls for new or increased taxes, or use of the state’s permanent fund earnings or, in Walker’s case, “all of the above.”

The choices there, however, are not easy. Another ISER study predicted significant Alaska jobs losses no matter what is done. To make a $100 million dent in the deficit, that study  concluded, the state would need to lay off 962 state workers and by the time the employment cost of those layoffs rippled through the economy a total of 1,677 jobs would be lost.

The study pegged a savings of about $60,000 per job.

An income tax penciled somewhat better. It resulted in a total loss of only 971 jobs – not 1,677. The deficit-cutting value there came to $103,000 per job lost. Using earnings from the Permanent Fund to help fund the budget worked out even better.

The deficit reduction per job loss was calculated at $137,000, but the plan still cost the economy 727 jobs.

“Cutting state spending by $1 billion by cutting the state workforce could cause a loss of about 17,000 Alaska jobs, or about 5 percent of total employment: each lost job would reduce the deficit by about $60,000,” the study said.

“Reducing the deficit by collecting income taxes or reallocating Permanent Fund Dividend payments to pay for state government would have smaller total impacts on employment and income than cutting state government—because there would be no direct cuts to jobs or income of state employees or contractors. There would be “multiplier” impacts due to impacts on household disposable income and spending. Collecting $1 billion in income taxes or Permanent Fund Dividend reallocations could cause a loss of about 10,000 jobs or 7,000 jobs, respectively.”

Alaska politicians, the study noted, face “difficult choices between these options, none of which are popular.”

Let it ride

There are, of course, almost endless combinations of options and even other alternatives when it comes to economic planning. The state could, as it has in the past, make some minimum cuts in the budget and let everything else ride in the hopes oil prices will rise, and that the new oil discoveries on the Slope prove up.

That is largely what happened in the Alaska in the 1980s, and the economy emerged into decades of growth. A dozen years ago, with the economy then relatively healthy, Gov. Frank Murkowski predicted what has come to pass now and tried to alter state finances to avert a crisis.

Murkowski’s plan then was to use permanent fund earnings to backstop the state budget. Nobody bought it. He also proposed a deal with the oil companies to build a gas pipeline to the Lower 48. Nobody bought that either.

After one term, he was tossed as governor. He didn’t even make it to the general election. Former Wasilla Mayor Sarah Palin beat him in the Republican primary and went on to a very short stint as governor before becoming a national pol-ebrity.

Walkers is today talking about tapping the Permanent Fund, just like Murkowski; and building a gas pipleine, just like Murkowski.

DISCLOSURE: The author of this story worked for a brief period as a consultant for GCI, Inc. editing commentaries and letters from individuals Alaskans who supported using some of the earnings of the Permanent Fund to backstop the state budget. The contracted end months ago. The author no longer has any financial interest in the issue, but personally believes some use of the Permanent Fund earnings might be the best solution to the state’s budgetary problem in the short term. He could also write a dissertation on the social ills he sees associated with giving people money they didn’t earn. But with all of that said, he is now also of the opinion that given the economic state of the state in the moment, the sort of “stimulus” provided by releasing the rest of the PFD dividend money to Alaskans along about the time of the Christmas shopping season, might provide enough of an economic boost to help some Alaska small businesses get through another winter between tourist seasons. And he recognizes that surving this year is the first and most vital step to surviving next year. But, most of all, he believes economic decisions like this are complicated, and even what seems the perfectly the right thing to do today can turn out to be the perfectly wrong thing a year on down the road.