Dunleavy says state can pay a $3,700 PFD with a $3.6 billion surplus, but some legislators are skeptical

Gov. Mike Dunleavy has unveiled an updated revenue forecast that shows the state with billions more in revenue from higher oil prices.
Published: Mar. 15, 2022 at 7:32 PM AKDT
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JUNEAU, Alaska (KTUU) - Gov. Mike Dunleavy has unveiled an updated revenue forecast that shows the state can afford an expanded operating budget, pay a $3,700 Permanent Fund dividend this year and still have a $3.6 billion surplus left over, but some key legislators say those projections are “very optimistic.”

The Alaska Department of Revenue forecasts that the North Slope crude oil price will be $101 per barrel over the fiscal year that starts in July. For the current fiscal year, the oil price is projected to be $91.68.

If those projections hold, the state would have $1.2 billion extra in revenue this fiscal year compared to forecasts made in December and $2.4 billion in additional revenue for the next fiscal year. That extra money is almost entirely from higher oil prices.

Dunleavy says the state can afford to pay his 50-50 dividend at roughly $2,500 this year, while also paying the remainder of a 50-50 dividend for last year at around $1,200 per eligible Alaskan. There would also be billions of dollars left over to save for a rainy day.

“We know that inflation is going through the roof; it’s not just fuel, it’s transportation, it’s lumber, it’s almost everything across the board,” he said on Tuesday. “We’re seeing inflation like we’ve never seen before.”

The Dunleavy administration’s updated revenue figures are based on soaring crude oil prices due in part to a spike caused by Russia’s invasion of Ukraine. But the administration’s projections come with a key caveat: “It is important to point out that this forecast represents one plausible scenario within a range of potential outcomes.”

Some legislators across the aisle say these forecasts are “very optimistic” and they point to a recent oil price drop below $100 a barrel.

Rep. Neal Foster, a Democrat of Nome, manages the operating budget in the House of Representatives. Sen. Bert Stedman, R-Sitka, manages that budget in the Senate. Both men say the Legislature will use more conservative oil prices to finalize the operating budget and pay a dividend this year.

Brian Fechter, a deputy revenue commissioner, said the oil price is currently extremely “volatile,” echoing the governor that it could easily rise or fall. Fechter explained the formula the department uses for oil price projections.

“We take a five-day median of the futures market, so, we’re not picking a particularly high or a particularly low day over that time period,” he said.

There is growing bipartisan interest in socking away some of the state’s recent oil windfall to replenish savings accounts that have been depleted over a decade of deficit spending. There are other ideas about spending some of this anticipated revenue.

The House majority coalition is set to unveil an updated operating budget on Wednesday. The plan is to spend $1.2 billion now on K-12 education to fund schools one year ahead of time. There are also set to be discussions about adding more to the per student funding formula.

Senate President Peter Micciche, R-Soldotna, a supporter of the 50-50 dividend, said the state should go on a “saving spree” while also providing relief to Alaskans who are struggling financially. He said legislators should avoid unsustainably growing the operating budget.

“We’re ecstatic about the current level of revenue that the state is seeing because of higher oil prices, but it doesn’t lessen the imperative nature that we must pass a fiscal plan this year,” Micciche said.

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