JUNEAU — A forecast calling for higher-than-expected revenue this year and next will help Alaska’s fiscal situation, but it doesn’t eliminate the need for a comprehensive plan to address Alaska’s multibillion-dollar deficit, the state revenue commissioner said Friday.
The Revenue Department, in a new report, projected for this fiscal year and next increases of about $200 million in unrestricted general fund revenue compared to last fall’s forecast. Unrestricted revenue can be used as lawmakers wish.
Revenue Commissioner Randall Hoffbeck told The Associated Press that’s not insignificant but it doesn’t eliminate the need for a full fiscal plan.
Tax division director Ken Alper attributed the increase for this fiscal year, which ends June 30, to higher-than-expected oil production and prices.
He said much of the projected increase for the coming year stems from a change in how credits can be applied by companies in calculating oil taxes.
Senators requested more information on the impact that oil production might have on next year’s revenue estimates. Production forecasts are made in the fall, meaning Friday’s report did not include updated production projections for the fiscal year starting July 1.
Current-year production is expected to average 523,700 barrels a day, outpacing the fall estimate by about 33,000 barrels a day. The Senate Finance Committee was told Friday that the major North Slope oil companies outperformed their own estimates.
Each increase of about 50,000 barrels a day is equal to about $100 million in new revenue, at oil prices of about $54 a barrel, Hoffbeck said. That’s the average price the department is forecasting for the coming fiscal year.
Current prices are hovering in that range. There is general agreement among legislators that the state will need to use earnings from Alaska’s oil-wealth fund, the Alaska Permanent Fund, to help fill the deficit, which has been fueled by low oil prices.
But there’s disagreement about what other steps may need to be taken.
Members of the House majority, composed largely of Democrats, have opposed cuts proposed by the Senate to areas like K-12 education and the university system. Leaders of the Republican-led Senate majority have said they aren’t interested in House plans to reinstitute a personal income tax or raise taxes on the oil industry.
Senate Finance Committee Co-Chair Anna MacKinnon said oil production will play a huge role as lawmakers weigh the best path forward.
The Eagle River Republican said it can make a difference in the economic picture being painted as some legislators pursue “taxing individual Alaskans and calling that a mandate that must be done because of the economic crisis we’re in.”
She requested modeling looking at production that would be flat compared to this year’s estimate and potential production variations.
Gov. Bill Walker’s administration has estimated next year’s deficit at about $2.8 billion. Hoffbeck said a plan to make structured draws from permanent fund earnings could address nearly $2 billion of the deficit. Even with the projected new revenue for next year, there would be a hole, he said. Walker favors a “revenue-solution” over further budget cuts, Hoffbeck said. By the end of the coming fiscal year, the department said the state could owe $1 billion to companies in oil and gas tax credits. Walker used his veto authority to limit how much could be spent on credits the last two years, helping to create a backlog.