Alaska revenue forecast predicts more oil this year, much less next year

JUNEAU — A head-spinning new government revenue forecast from Gov. Bill Walker's administration predicts $200 million extra to help close Alaska's nearly $3 billion deficit along with substantially higher-than-expected oil production this year — even as it still suggests a precipitous production decline next year.

The new forecast was released Friday after a weeklong delay prompted by new tax guidance for oil companies. And it's generating renewed accusations of political interference.

Some Republican lawmakers are saying that the forecast, by Gov. Bill Walker's administration, plays into Walker's calls for a restructured Permanent Fund and other measures to resolve the state's massive budget deficit. The critics say the forecast should show the deficit isn't quite as bad as Walker suggests.

[Tax rules, not politics, delay state revenue forecast, according to Alaska officials]

At a pair of hearings Friday, administration officials fended off questions from GOP lawmakers who suggested the forecast was being tilted to help make the case for taxes.

"It's often said that the victor writes the history books," said Soldotna Republican Sen. Peter Micciche, the majority leader. "In this case, I think they also write the spring forecast."

Walker administration officials say there's a simple explanation.

Oil companies managed to reduce their summer downtime and stave off the long-term decline in their aging North Slope fields this year, they said. And, they added, next year's projected 12 percent drop-off in production, from 524,000 barrels a day to 460,000, isn't really expected — it's just that the spring forecast traditionally does not substantially update the production figures published in a separate, fall prediction.

"Nobody's forecasting a 12 percent decline," Randy Hoffbeck, the state revenue commissioner, told the House Finance Committee on Friday.

State lawmakers typically take a keen interest in the revenue forecast because of its potential to affect the amount of cash they'll have to save or spend. When times were good and oil prices high, a better spring forecast could translate into higher operating and capital budgets.

Now, with low prices and production down since the Prudhoe Bay heyday opening a deficit of nearly $3 billion — more than half the size of the state budget — lawmakers use the revenue forecast to determine how much of the gap their proposed fixes will fill, and which steps will be needed.

Different legislators place different weight on the forecast. House Speaker Bryce Edgmon, a Democrat from the fishing town of Dillingham, said he finds it about as useful as salmon price forecasts.

"It's just really throwing a dart at a wall in some respects," he said in a brief interview. "The numbers come and go, and sometimes they hit the wall and sometimes they don't."

Other members of his predominantly-Democratic House majority said they don't think the adjustments in Friday's forecast should change the underlying debate about Alaska's budget, which, they argue, needs to shift away from its dependence on volatile oil revenue.

Members are proposing to balance the budget by restructuring the Permanent Fund and levying a statewide income tax projected to raise $700 million a year.

"You can't build your budget just on guesses as to what oil prices are going to be," said Rep. Les Gara, D-Anchorage. "We know that we get the numbers wrong every year. So we have to go off what we know about today."

The GOP Senate majority and House minority, however, are opposed to an income tax, even though relying solely on a restructured Permanent Fund could leave a deficit of $500 million or more — with the state's primary savings account falling to less than $5 billion by July.

And Republicans argue that a more pessimistic revenue forecast — and the failure to adjust future production estimates after this year's higher-than-expected figures — puts more pressure on lawmakers to approve the income tax proposal.

Anchorage Republican Rep. Lance Pruitt pointed to the new forecast as evidence, along with the Walker administration's decision to release last year's pessimistic spring forecast early, in the middle of the Legislature's budget negotiations.

"It's become a political tool as opposed to a true, actual, what-should-we-expect-in-the-budget tool," Pruitt said.

If production held steady in the new forecast, instead of falling by 12 percent, it could generate more than $100 million in extra revenue, said one of Pruitt's GOP colleagues, Rep. Tammie Wilson of North Pole.

That could be a significant chunk of the money raised by an income tax, but it's far from the full amount.

There have long been "political rumblings" that revenue forecasts were twisted in one direction or another, but the accusations now seem to be "nastier," said Larry Persily, a former deputy revenue commissioner.

He attributed that less to the forecast itself and more to the state's dire fiscal position — and the huge ideological gaps still remaining between lawmakers after three months in Juneau.

"Come on — it's the 88th day," he said. "They are cranky."