Alaska state revenue projected to see a $200 million boost from higher oil prices

JUNEAU — The Alaska Department of Revenue is projecting that the state treasury will see a roughly $200 million boost from higher oil prices over two fiscal years.

The spring revenue forecast, used by the Legislature to finalize the budget, was published Wednesday. It projects that oil prices will be $2 per barrel higher over the fiscal year that starts in July, compared to a December forecast.

For the current fiscal year, the department projects that the state will get an additional $58 million from higher oil prices, helping to boost a projected surplus. For the upcoming fiscal year, oil revenue was anticipated to be $140 million higher.

”It helps quite a bit. It does help. No doubt about it. Several years ago it would have been hardly noticeable. This year, it’s very noticeable,” said Sitka Republican Sen. Bert Stedman, who manages the operating budget in the Senate.

Legislators had warned that with state finances strained, it would be difficult to balance the budget with big-spending items still to be considered. Those include providing some state matching funds for a $206 million federal grant awarded last year to modernize the Railbelt’s electrical grid.

Stedman said extra oil revenue could help with energy issues the state is facing and could help fund the capital budget, which is used for maintenance and infrastructure projects statewide.

The House Finance Committee unveiled its version of the operating budget on Tuesday. It was largely unchanged from the spending plan proposed by Gov. Mike Dunleavy in December.

Legislative leaders said last week there’s little appetite to spend from the state’s main $2.8 billion savings account, likely killing a proposal from Dunleavy to pay a full statutory $3,500 dividend. The governor’s dividend was expected to leave the budget roughly $1 billion in deficit.

The Senate has favored a 75-25 PFD, where three-quarters of an annual draw from the Permanent Fund goes to state services, and the rest would go to the dividend. The Senate’s dividend would be roughly $1,360.

The House last year supported a dividend double the size of the Senate’s, but that was projected to leave the state with a substantial deficit if that formula was followed this year. It remains unclear what dividend figure the House would support this year.

Last year, legislators approved using unanticipated oil revenue to boost state savings and to pay an extra energy relief check this year. Last month that was expected to be $175 per recipient, but with higher oil prices, the extra check was expected to be $220 on top of the PFD.

The Senate has factored the legislature’s roughly $200 million education package into its budget-making process. Dunleavy has until midnight on March 14 to sign or veto the measure or it will automatically pass into law.

The House Finance Committee was waiting for the new revenue forecast before including additional school funding or the dividend into its budget.

Palmer Republican Rep. DeLena Johnson, who manages the House’s operating budget, said on Tuesday that her goal was to fully fund essential services; to take a tough look at expenditures; to pay the largest dividend possible, and, ”God willing, leave some money for the capital budget.”

There is pending legislation with large fiscal impacts, and substantial unplanned budget items to consider for the current fiscal year. Those include costs for last year’s fire season and almost $40 million extra for the Department of Corrections, partly to cover overtime costs due to understaffing. All are expenses that could make budgeting difficult.

“Certainly, we don’t have lots of extra money,” Johnson said on Wednesday, adding, that it would take some time to calculate the exact impacts of extra oil revenue on the state’s bottom line.

The governor’s Office of Management and Budget is set to present to the House and Senate finance committees Thursday, describing the impacts of the state’s revised revenue forecast and additional budget revisions to consider.