By James Brooks
Alaska Beacon 

Higher oil prices add about 2% to estimated state revenues

 

March 20, 2024



A new state revenue forecast based on modestly higher oil prices gives the Alaska Legislature some additional breathing room as lawmakers craft a new state budget.

The forecast, released March 13 by the Alaska Department of Revenue, updates a fall estimate and predicts that the state will collect $140 million more in revenue than previously expected during the 12 months that begin July 1.

That represents about a 2% gain in state revenues. That will help legislators as they write a budget bill that must be passed and become law before July 1, the start of the state fiscal year.

It’s not all gravy, said Palmer Rep. DeLena Johnson, co-chair of the House Finance Committee. While having additional money “certainly doesn’t hurt anything,” Gov. Mike Dunleavy is already planning to present some extra spending requests to the Legislature, she said.


Sitka Sen. Bert Stedman, Johnson’s counterpart on the Senate Finance Committee, said it’s also important to note that the new forecast also increases revenue expectations for the current fiscal year.

For the 12 months ending June 30, the Department of Revenue expects an additional $58 million.

Under the budget law passed last year, some of that extra money is reserved for a bonus to this year’s Permanent Fund dividend. Stedman said he now expects that bonus to be slightly more than $200, which will be added to whatever amount legislators set as this year’s dividend.


The bonus is tied to any surplus in state revenues for the current fiscal year. Higher-than-expected oil prices means more tax and royalty dollars to the state treasury, which means a larger add-on to this fall’s PFD.

After subtracting the dividend bonus, Stedman said there’s about $170 million in additional dollars available between the two fiscal years.

Fairbanks Sen. Click Bishop was among the lawmakers who said they hope some of the money will be spent on maintenance projects statewide. “We’ve got a lot of need out there,” he said. “That snow removal number statewide, maybe we’ve got some wiggle room now to help with snow removal.”

“In Western Alaska, it’s embarrassing to look at the black mold in those schools … fire alarm systems that are defunct, etc. So hopefully we can throw a lifeline for deferred maintenance at our K-12 schools,” Bishop said.


Oil revenue represents only about a third of the state’s general-purpose income, but it’s extremely variable from year to year and even month to month, dependent upon fluctuations in price and production.

The Alaska Department of Revenue uses 30 days worth of data from oil markets to estimate prices in the future. The forecast released March 13 shows prices about $2 per barrel higher than the forecast issued in December.

Production cutbacks by OPEC oil-producing nations and Yemeni rebel attacks on ships transiting the Strait of Hormuz on their way to the Red Sea and Suez Canal have driven up oil prices in recent months.

An annual transfer from the Alaska Permanent Fund to the state treasury is the state’s No. 1 source of revenue, accounting for more than half of its general-purpose revenue, but the stability of that transfer is overshadowed by the sheer changeability of oil prices, causing legislators to pay close attention to forecasts as they set the state’s annual budget.

Last year, members of the House Finance Committee drafted a balanced budget before the annual spring revenue forecast, only to see the document turn into a deficit after the forecast came in lower than expected.

This year, the committee is waiting for the forecast, amendments from the governor, and a decision by the governor on a multipart education funding bill.

The House’s version of the budget should be in front of the full House by the end of the month, Johnson said, and is expected to be sent to the Senate for amendments and debate on April 12.

The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com.

 

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