Back when the North Slope was pumping 2 million barrels of crude a day at its peak in 1988, and even for years after, oil provided upward of 90% of state general fund revenues in good years. But that was then, and now oil generates maybe 25% of the state's unrestricted dollars.
The king of the budget hill is the Alaska Permanent Fund. The annual draw on the fund to help pay for public services and the dividend will provide about two-thirds of the state's unrestricted general revenues this year.
"We've gone from being an oil state to being an investment state,"said Rep. Ivy Spohnholz, in her fifth year in the state House and first year as chair of the House Special Committee on Ways and Means.
"I think it's a big shift,"she said last Friday. "It's one of the most important shifts Alaskans need to be aware of."
Though a constant topic in the Capitol and at fiscal policy forums, Spohnholz said she is concerned that "a lot of Alaskans really are not keyed into"the major change - and likely permanent shift - in the state's finances.
The Ways and Means Committee is taking testimony on state finances, investments and Alaska's economy, and also will look at long-term spending as its members think about the best ways for the state to put itself on a sustainable budget path.
Reaching anything even close to a consensus on proposals will take more time than the couple of months left in this year's legislative session. The chairwoman said she expects the committee will meet at least monthly after the session ends, sharing information with Alaskans across the state.
After adjusting for inflation and population growth, state revenues from oil taxes and royalties are about where they were nearly 45 years ago, Spohnholz said, when she was 2 years old. Yet the public's expectations of school class sizes, highways, roads and other services still are based on the rich days of oil dollars, she said.
Without enough oil revenues, Gov. Mike Dunleavy and others have called for withdrawing more money from the Permanent Fund to cover budget gaps and pay super-sized dividends to Alaskans. The House member said that risks damaging the fund long term, spending more than it will earn.
As Alaska has shifted into its future as an investment state, overspending the Permanent Fund - on which it will depend for most of its general fund revenues - is a dangerous risk, Spohnholz said.
The Permanent Fund was worth $74 billion on Feb. 28, the latest monthly statement available. Under the formula in state law adopted three years ago to limit annual withdrawals from the savings account, the Department of Revenue projects a $3.069 billion transfer from the fund to the state treasury for the fiscal year that starts July 1.
Based on its latest oil-price forecast of North Slope crude averaging $61 barrel next year - about where it is this week - the department forecasts $1.286 billion in oil tax and royalty deposits to the state general fund next year, the highest since 2019 as oil prices have recovered from 2020 lows.
Higher oil prices could help, but only a little. Each $1 increase in the price of a barrel of oil could bring in an additional $35 million to the state next year, the department told the Ways and Means Committee on April 1.
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