Senate Finance Committee Chairman Sen. Bert Stedman, R-Sitka, sits at the head of the table at a committee meeting on Thursday, Jan. 23, 2020. (Peter Segall | Juneau Empire)

Senate Finance Committee Chairman Sen. Bert Stedman, R-Sitka, sits at the head of the table at a committee meeting on Thursday, Jan. 23, 2020. (Peter Segall | Juneau Empire)

State revenue forecast doesn’t give much to work with

Declining oil revenues will mean less money for the state and hard decisions for lawmakers

The State of Alaska can expect declining revenue from oil taxes as production on the North Slop is set to decline. That was the message given to the Senate Finance Committee in their meeting with Department of Revenue staff Tuesday morning.

Staff walked senators through this year’s income as well as projections for the next few years based on oil companies past tax returns and future estimates.

The largest portion of the state’s income is from investments which go into the Permanent Fund, Daniel Stickel, DOR’s chief economist said. After that the largest portions of state revenue come from the federal government and petroleum revenues.

The rest of the state’s economy, including things like tourism, fishing and mining, accounted for roughly 10% combined of the state’s income, Stickel said.

With oil taking up so much of the state’s income, the majority of the presentation focused on oil revenues and production forecasts. Oil revenues have been declining over the past few years, and projections show declines continuing due to drops in the price of oil, according to Stickel.

Despite the drop in oil prices, the state’s revenue for the next few years appears stable, according to Stickel.

“The state share of the property tax, new investments, corporate income tax, show relative stability,” Stickel said. “That’s based on the expectation companies are figuring out how to make profits under the current (oil) prices.”

For Fiscal Year 2021 the state is expected to bring in $11.3 billion from the petroleum industry, Stickel said. But over the next few years the industry is looking at declining oil prices as well as a dip in production as the cost of transportation goes up and companies spend more investing in aging infrastructure.

Also looming over the state’s finances is the potential repayment of refundable tax credits owed to producers.

In 2018, the Legislature passed a law issuing refundable tax credits to oil companies trying to invest in Alaska.

A chart on state revenues prepared by the Department of Revenue. (Courtesy photo | Department of Revenue)

A chart on state revenues prepared by the Department of Revenue. (Courtesy photo | Department of Revenue)

“The whole premise was we’re going to give you these massive tax breaks and they’re going to take that money and reinvest in Alaska and we’re going to get all this new production and new jobs,” said Sen. Bill Wielechowski, D-Anchorage. “And that has been proven to be a completely false premise.”

But the law, HB 331, has been challenged as unconstitutional and is currently before the Alaska Supreme Court. If the law is struck down, the state will have to find a way to pay the $700 million currently owed to producers.

The state has been paying some of the credits back, according to Mike Barnhill, acting director of DOR. But since the litigation was filed, that process has been in a “hold pattern,” according to Barnhill.

One of the ways the state could pay those credits is through annual appropriations in the Legislature, but the governor’s proposed budget doesn’t allocate funds for those payments.

What the Legislature decides to do is still undetermined.

“The whole dynamic and context around the state has been how do we deal with these statues that on their face suggest payments of certain amounts,” Barnhill told the committee. “We don’t have the money to pay all of them, we’re trying to figure out a way forward.”

• Contact reporter Peter Segall at 523-2228 or psegall@juneauempire.com.

More in News

The Aurora Borealis glows over the Mendenhall Glacier in 2014. (Michael Penn / Juneau Empire File)
Aurora forecast

Forecasts from the University of Alaska Fairbanks’ Geophysical Institute for the week of Dec. 3

Mountain reflections are seen from the Mendenhall Wetlands. (Courtesy Photo / Denise Carroll)
Wild Shots: Photos of Mother Nature in Alaska

Superb reader-submitted photos of wildlife, scenery and/or plant life.

Clarise Larson / Juneau Empire 
At Wednesday evening’s special Assembly meeting, the Assembly appropriated nearly $4 million toward funding a 5.5% wage increase for all CBJ employees along with a 5% increase to the employer health contribution. According to City Manager Rorie Watt, it doesn’t necessarily fix a nearly two decade-long issue of employee retention concerns for the city.
City funds wage increase amid worker shortage

City Manager says raise doesn’t fix nearly two decade-long issue of employee retainment

People and dogs traverse the frozen surface Mendenhall Lake on Monday afternoon. Officials said going on to any part of Mendenhall Lake can open up serious risks for falling into the freezing waters. (Clarise Larson / Juneau Empire)
Officials warn residents about the dangers of thin ice on Mendenhall Lake

Experts outline what to do in the situation that someone falls through ice

(Michael Penn / Juneau Empire File)
Police calls for Saturday, Dec. 3

This report contains information from law enforcement and public safety agencies.

Molly Yazwinski holds a 3,000-year-old moose skull with antlers still attached, found in a river on Alaska’s North Slope. Her aunt, Pam Groves, steadies an inflatable canoe. (Courtesy Photo /Dan Mann)

 

2. A 14,000-year-old fragment of a moose antler, top left, rests on a sand bar of a northern river next to the bones of ice-age horses, caribou and muskoxen, as well as the horns of a steppe bison. Photo by Pam Groves.

 

3. Moose such as this one, photographed this year near Whitehorse in the Yukon, may have been present in Alaska as long as people have. Photo by Ned Rozell.
Alaska Science Forum: Ancient moose antlers hint of early arrival

When a great deal of Earth’s water was locked up within mountains… Continue reading

FILE - Freight train cars sit in a Norfolk Southern rail yard on Sept. 14, 2022, in Atlanta. The Biden administration is saying the U.S. economy would face a severe economic shock if senators don't pass legislation this week to avert a rail worker strike. The administration is delivering that message personally to Democratic senators in a closed-door session Thursday, Dec. 1.  (AP Photo / Danny Karnik)
Congress votes to avert rail strike amid dire warnings

President vows to quickly sign the bill.

Mark Sabbatini / Juneau Empire
Juneau state Sen. Jesse Kiehl, left, gives a legislative proclamation to former longtime Juneau Assembly member Loren Jones, following Kiehl’s speech at the Juneau Chamber of Commerce’s weekly luncheon Thursday at the Juneau Moose Family Center.
Cloudy economy, but sunnier political outlook lie ahead for lawmakers, Kiehl says

Juneau’s state senator tells Chamber of Commerce bipartisan majority a key to meaningful action

Most Read