State says revenue to get worse
The bad budget news keeps coming.
The Alaska Department of Revenue is predicting unrestricted general fund revenue of $2.6 billion for the current 2015 fiscal year. For the 2016 fiscal year the outlook is worse; the state is expected to take in $2.2 billion in unrestricted cash.
By comparison, the state took in $5.4 billion of unrestricted revenue in fiscal 2014, which ended June 30. The State of Alaska’s total revenue for fiscal 2014, including investment income, was $17.2 billion.
The state released its forecast Dec. 10 in the Revenue Sources Book Fall 2014.
The projections are alarming, but not surprising. Alaska North Slope oil prices have tumbled in recent months from $110 per barrel in July to $63.67 as of Dec. 8.
In fiscal 2014, approximately 88 percent of unrestricted state revenue came from oil, according to the Revenue Department.
A year ago the department forecasted $4.5 billion of unrestricted revenue in fiscal 2015.
Gov. Bill Walker released former Gov. Sean Parnell’s fiscal 2016 budget Dec 5., without endorsement, which laid out $5.5 billion in unrestricted general fund spending. That would put the state in a roughly $2.9 billion deficit for 2016.
Walker plans on releasing an amended budget proposal to the Legislature early next session, which begins Jan. 20.
Reigning in state spending was a cornerstone of Walker’s campaign.
Despite the currently collapsing oil market, acting Revenue Commissioner Marcia Davis is forecasting what could be seen as a dim light at the end of the tunnel.
“After (fiscal year) 2016, we believe that oil prices will recover above $90 per barrel and remain higher throughout our forecasted period to (fiscal year) 2024,” Davis said in a department release.
Long-term revenue projections are for annual unrestricted state income between $3.6 billion and $4.8 billion from fiscal 2017-2024 after bottoming out in 2016 at $2.2 billion.
Also on the bright side, North Slope oil production is expected to increase after this fiscal year, Davis said. Following a decline of 22,000 barrels per day in fiscal 2015, Revenue anticipates production will increase 15,000 barrels per day in 2016 and 10,000 barrels per day in 2017, keeping average production rates above 500,000 barrels per day for the next three fiscal years, she said.
North Slope production was flat between the 2013 and 2014 fiscal years, bucking a historic trend of roughly 6 percent annual decline.
“Although, in the short term, lower oil prices lead to lower revenues, our long-term view is optimistic,” Davis said. “Greater investment by the oil and gas industry on the North Slope and solid performance of state investments makes Alaska’s overall financial health sound.”
Elwood Brehmer can be reached at [email protected].