JUNEAU, Alaska (KTUU) — The state’s spring revenue forecast predicts that rising oil prices will cut the state’s projected $2-billion-plus deficit by about $256 million this year and $212 million next year.
The revenue forecast, published Friday at noon, is eagerly awaited by the Alaska Legislature, since it usually comes in the middle of the budgeting process for the next year.
Senate President Pete Kelly, anticipating the revenue forecast would show at least $200 million more money for next year than originally thought, told reporters Friday morning that it was evidence that the state’s economy was improving.
“With any luck, it brings down the deficit to a manageable level,” said Kelly, a Fairbanks Republican. “I think it kind of bolsters our position that tax isn’t needed.”
But Revenue Commissioner Sheldon Fisher urged caution. In a prepared statement issued with the release of the forecast, he said:
“Unfortunately, even after this additional revenue, Alaska continues to face a budget deficit in excess of $2.3 billion. The administration will continue to work with the Legislature to address the fiscal gap during this legislative session.”
Both the House and Senate expect to use a portion of Permanent Fund earnings to fill the budget deficit. House members have also proposed an income tax and higher taxes for oil, but Kelly and other leaders in the Senate say they won’t go along with either.
The House has also suggested that a large part of the cost of education — about $1.2 billion — should be paid through the Constitutional Budget Reserve, a savings account that would take a three-fourths vote of both the House and Senate to crack open. The House was unable to get to three-fourths in an early education budget it passed last month.
The revenue forecast used Alaska’s fiscal year, from July 1 to June 30, to track revenues and other economic data. It predicted a decline in oil production in the current fiscal year by about 11,600 barrels a day from the fall forecast. But the price increase, estimated to rise on average from $56 to $61 a barrel, more than made up the difference for the spring.
The state said Alaska North Slope crude sold for $65.01 a barrel Thursday, up 20 cents from the day before.
For next year, the forecast predicted an average rise in production by 1,000 barrels and a $6-a-barrel price increase from the previous forecast.
Though oil production has declined, it’s still the single most important source of revenue for the unrestricted general fund, which is usually considered the source of money for the state budget. The state collects revenue on oil through taxes and lease royalties on state land.
The official forecast extends for 10 years, but the deeper into the future it looks, the more speculative it becomes. The spring forecast predicts total oil production will decline in fiscal year 2027 to 493,000 barrels daily from the current average of about 521,800 barrels a day. It suggests the price in 2027 will be $75 a barrel, up from the current average of $61.
The forecast is available on the state’s revenue department tax website.