Gov. Bill Walker speaks about his government's Spring Revenue Forecast during a press conference at the Capitol on Monday.

Gov. Bill Walker speaks about his government's Spring Revenue Forecast during a press conference at the Capitol on Monday.

Deficit explodes as oil stays in cellar

Alaska’s annual budget gap will explode to almost $4 billion next fiscal year, according to new estimates from the Alaska Department of Revenue.

On Monday, the department released a preliminary version of its spring forecast that included sharp downward estimates on the price of oil in the coming year.

In December, the department predicted oil would average $56.24 per barrel between July 1, 2016 and June 30, 2017. It now expects oil to average $38.89 per barrel during that period.

“We have reached a point in our state’s history that we need to be looking beyond oil,” said Gov. Bill Walker in a press conference Monday morning.

The new forecast means Alaska will earn less next year in unrestricted oil revenue than it will pay in tax credits to oil companies.

“2017 will be the first year that Alaska doesn’t earn positive income out of oil and gas development; that’s a significant step,” Walker said.

The estimate also contains bad news for the current fiscal year, which ends June 30.

In December, the department estimated oil would average $49.58. Now, it’s predicting a figure almost $10 lower.

As a result, the state will have almost $300 million less than its current budget calls for. That gap will have to be filled with money from the state’s $8.2 billion Constitutional Budget Reserve.

The biggest impact of the revised forecast, however, won’t come until the next fiscal year. The Alaska Legislature is considering next year’s budget — and how to pay for it — in the Capitol right now.

When Gov. Bill Walker announced his draft budget in December, he proposed $5.26 billion in “unrestricted general fund” spending for the fiscal year that starts July 1. That figure dropped to $5.21 billion in a revised budget released in February. Normally, that unrestricted spending is covered by oil and gas revenue and the state’s few non-petroleum taxes.

At the time, the state forecast $1.8 billion in unrestricted general fund revenue, meaning a deficit of $3.4 billion. Now, only $1.23 billion is expected.

Without accounting for further budget cuts from the Legislature, that would result in a deficit of nearly $4 billion.

Barring tax increases or spending some of the earnings of the Alaska Permanent Fund, filling the deficit would require a significant draw from the Constitutional Budget Reserve.

The new forecast also contains bad news in the long term for Alaska. Under the state’s existing tax system, it would need oil prices above $105 per barrel to balance its budget. The forecast doesn’t predict oil above $60 per barrel until 2021, and its 10-year prediction doesn’t include oil prices above $66 per barrel.

“It makes sense that the $60 would be sort of a ceiling we’d bump into,” said revenue commissioner Randall Hoffbeck.

Above that price, it becomes economical to produce oil from shale rock, as is done on a large scale in the Lower 48.

“We’ve been saved by oil several times,” Sen. John Coghill, R-North Pole, said Monday morning. “What we know from the spring forecast is that’s extremely unlikely right now.”

Monday’s estimate was a preliminary document released to help guide budget discussions, Walker and Hoffbeck said, and a final forecast is expected in the first week of April.

Gov. Bill Walker and Department of Revenue Commissioner Randall Hoffbeck, right, give their Spring Revenue Forecast during a press conference at the Capitol on Monday.

Gov. Bill Walker and Department of Revenue Commissioner Randall Hoffbeck, right, give their Spring Revenue Forecast during a press conference at the Capitol on Monday.

More in News

(Juneau E
Aurora forecast for the week of Nov. 27

These forecasts are courtesy of the University of Alaska Fairbanks’ Geophysical Institute… Continue reading

A bit of a sun break as seen from the John Muir Cabin, submitted on Dec. 6. (Photo by Deborah Rudis)
Wild Shots

To showcase our readers’ work to the widest possible audience, Wild Shots… Continue reading

The Southeast Alaska village of Metlakatla. (Photo courtesy of the Alaska Department of Transportation and Public Facilities)
Biden administration could wade into lawsuit over Southeast Alaska tribal fishing rights

The Biden administration could jump into a high-profile lawsuit involving a Southeast… Continue reading

The gates are locked at the Pipeline Skate Park at midday Thursday, after Juneau’s Parks and Recreation Department announced the facility will be open limited hours until further notice due to an increase in vandalism and drug paraphernalia. (Mark Sabbatini / Juneau Empire)
City: Pipeline Skate Park open reduced hours due to ‘sharp increase’ of vandalism, drug activity

Extra patrols by police and parks staff also planned for facility at Jackie Renninger Park.

A car drives by Mendenhall River Community School on Back Loop Road on Thursday morning. (Mark Sabbatini / Juneau Empire)
Woman, two children struck by vehicle while crossing road near Mendenhall River Community School

Victims in stable condition, initial investigation shows driver not at-fault, according to police.

“The Phantom of the Opera” is screened with a live musical soundtrack at the Gold Town Theater in April. Three of the musicians are scheduled to perform Sunday during two screenings of the 1928 silent film “The Wind.” (Courtesy of Gold Town Theater)
This weekend’s lineup at the Gold Town Theater really blows

Xmas Bazaar Xtravaganza nearly sold out already, but seeing “The Wind” to live music a breeze.

Scant patches of snow remain at the base of Eaglecrest Ski area on Wednesday despite snowmaking efforts that occurred during the weekend, due to warmer temperatures and rain this week. The opening date for the ski area, originally set for Dec. 2 and then delayed until Dec. 9, is now undetermined. (Photo courtesy of Eaglecrest Ski Area)
Eaglecrest opening delayed again, target date now TBD

Warm temperatures and rain thwart efforts to open ski area on Saturday.

Work crews continue removing hundreds of truckloads of debris from Zimovia Highway since the Nov. 20 landslide in Wrangell. (Photo courtesy of the Alaska Department of Transportation and Public Facilities)
Clearing work continues at Wrangell slide; fundraising grows to help families

Juneau, with several thousand pounds of food collected in drive, among many communities assisting.

The front page of the Juneau Empire on Dec. 4, 2005. (Mark Sabbatini / Juneau Empire)
Empire Archives: Juneau’s history for the week of Dec. 10

Three decades of capital city coverage.

Most Read