Revenue forecast down on lower oil prices, production
Alaska’s fiscal situation looks yet a little bleaker based on the latest annual state revenue forecast.
The Department of Revenue projects the State of Alaska’s traditional unrestricted general fund income will be $2.1 billion in the current 2020 fiscal year, according to the Fall 2019 Revenue Sources Book published Friday afternoon by the department. That estimate is down about $200 million from the department’s March update to last fall’s revenue forecast.
Unrestricted general fund revenue for fiscal year 2021, which starts July 1, is now pegged at roughly $2 billion and is also a decrease of about $200 million from the March projections.
Oil taxes and royalties will account for nearly three-quarters of traditional unrestricted general fund revenue to the state for the next couple years, Revenue officials project.
Those figures do not include more stable investment revenue from the $65 billion Permanent Fund, which the state started appropriating to support government services last year. Permanent Fund revenue for dividends and government should be $2.9 billion this year and $3.1 billion in 2021 — in line with previous estimates.
It all amounts to a little less financial wiggle room for Gov. Michael J. Dunleavy’s administration, which is set to release its fiscal 2021 budget proposal next week.
Prior revenue estimates had the state facing roughly a $1 billion deficit in 2021 based on current spending levels if Permanent Fund dividends were to be paid based on the historic statutory formula, which has been one of the administration’s top priorities.
The drop in likely revenue to the state is attributed to declines in both North Slope oil production and the price of Alaska North Slope crude over the next year-plus, according to the report.
Acting Revenue Commissioner Michael Barnhill wrote in a letter to Dunleavy accompanying the Revenue Sources Book that Alaska crude is expected to average $63.54 per barrel in 2020 and $59 per barrel in 2021. That is a downward revision of about $2.50 per barrel for 2020 from the previous price forecast and $7 per barrel less for 2021.
North Slope oil production is expected to average 492,063 barrels per day this year, down from 496,900 barrels per day in 2019. Next fiscal year, about 490,500 barrels per day are expected to flow through the Trans-Alaska Pipeline System, or TAPS. Those estimates are down 7 percent and 4 percent for fiscal 2020 and 2021, respectively.
North Slope production is now forecast to bottom out at 434,000 barrels per day in 2024 before several large prospects currently in the works start to reverse the decline trend.
“New fields offer tremendous potential to increase production later in the 2020’s but these developments are still contingent on final investment decisions and commitment of billions of dollars of new investments on the part of oil and gas producers,” Barnhill wrote to Dunleavy.
Through Thursday, fiscal year-to-date North Slope oil production averaged 466,524 barrels per day and the average price for the period was $63.73 per barrel. However, North Slope production generally increases during the winter and early spring.
Alaska North Slope crude sold for $65.96 per barrel as of Thursday, according to the Revenue Department.
Look for updates to this story in an upcoming issue of the Journal. Elwood Brehmer can be reached at [email protected].