Higher oil prices projected to see Alaska with millions of dollars more in state revenue

JUNEAU, Alaska (KTUU) - Due largely to increases in oil prices and production, the state of Alaska is projected to receive hundreds of millions of dollars more in revenue compared to a forecast made last fall.

The Department of Revenue presented its spring revenue forecast to the Senate Finance Committee on Tuesday, showing that the state of Alaska is expected to receive an extra $332 million in revenue for the current fiscal year.

For the fiscal year that starts on July 1, Alaska is projected to receive $460 million in additional revenue compared to earlier projections.

The state of Alaska is also set to receive over $1.1 billion from the latest round of federal coronavirus funding, but those dollars are not included in the latest revenue forecast. Dunleavy administration officials are waiting for guidance from the U.S. Treasury Department about how that money can be spent.

“It’s premature of us to lay out any spending plans at this point,” said Commissioner Lucinda Mahoney of the Department of Revenue.

Neil Steininger, the director of the Office of Management and Budget, said that the Dunleavy administration will be working with national organizations to clarify how those funds can be spent.

“As we better understand these requirements we are also working on a plan for the most advantageous deployment of these funds for the State,” Steininger said by email. “Given the formal budget amendment deadline has passed, the administration will be working with the legislature in the next few weeks on budget amendments that reflect that plan.”

Mahoney said the rising price for North Slope oil has been the primary driver in the rosier revenue forecast.

For the current fiscal year, oil is projected to be $7.73 per barrel higher compared to projections made last fall. For the next fiscal year, there’s projected to be an increased price of $13 per barrel.

Production is expected to be up, too, said Dan Stickel, the chief economist with the Department of Revenue. The Alaska North Slope oil production forecast is up 4,700 barrels per day for fiscal year 2021 and Alaska is expected to see an additional 20,100 barrels per day for fiscal year 2022.

“The reason for the increase is continued recovery and stabilization in the oil markets as the economy recovers from COVID-related issues,” Stickel said.

Non-petroleum revenue is also set to recover as the COVID-19 pandemic ends, but tourism is not expected to fully bounce back until 2023.

There were 23,000 fewer Alaskans working in January 2021 compared to the same time last year.

“Employment losses have improved from last summer but we still have not recovered fully from the COVID situation,” Stickel said.

The Permanent Fund is expected to provide roughly two-thirds of state revenue for the foreseeable future. A full statutory Permanent Fund dividend would cost the state an estimated $2 billion for the current fiscal year.

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