State of Alaska projects revenues to crash due to COVID-19 oil slump

Trans-Alaska Pipeline System (KTUU)
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ANCHORAGE (KTUU) - The State of Alaska stands to see hundreds of millions of dollars wiped from its balance sheet due largely to plummeting oil prices.

On Monday, the Department of Revenue released its spring revenue forecast, making projections for the remainder of the current fiscal year and the fiscal year beginning in July. The department projects that there will be $527 million less in general funds for the ongoing fiscal year than was expected in the fall.

For the next fiscal year, the impact of lower-than-expected oil prices is expected to be worse. The Department of Revenue forecasts the state will have $815 million less general funds in its coffers than was forecast only a few months ago.

The precipitous drop in projected revenues is due in part to anemic economic activity but mostly to coronavirus-impacted oil prices.

On Dec. 6, the Department of Revenue forecast that Alaska would see North Slope oil prices of $63.54 per barrel for the current fiscal year and $59.00 per barrel for FY 2021.

On Monday, that forecast was ratcheted down drastically. North Slope oil prices are projected to remain below $30 per barrel for the remainder of FY 2020, seeing an annual average price of $51.65 per barrel.

For FY 2021, the oil price is projected to be $37 per barrel, rising to $53 per barrel by FY 2029.

The grim fiscal picture may even be optimistic for Alaska. As of Friday, the Alaska North Slope (ANS) oil price was $25.68 per barrel, according to data from the Department of Revenue. The sub-$26 price represented a spike from Thursday when North Slope oil was hovering below $22 per barrel.

Over the next year, revenue officials expect that North Slope oil production will only drop marginally from earlier forecasts. But there is an important caveat to those projections, the oil production forecast has not been revised since the ongoing crash in oil prices.

One bright spot could be the impact of federal help to state coffers. The Department of Revenue did not factor in the potential additional revenues from the federal coronavirus relief package.

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