JUNEAU -- Alaska is rolling in money from the high oil prices, with the revenue department on Wednesday projecting a state surplus of $3.4 billion.
The news comes as the Legislature prepares to decide how much it wants to spend on construction and maintenance projects in the coming year. Lawmakers had already planned a big budget, but this could inspire even more projects.
Legislators also are talking about putting more than $1 billion into savings in the coming year. The question will be how they divide the new projected $3.4 billion surplus between spending and savings.
Other states are reeling from the recession and cutting programs. But Alaska, which gets almost 90 percent of its state general fund revenue from oil, is raking in the cash from the same high oil prices that hurt consumers at the gasoline pump.
Alaska already has more than $11 billion in savings accounts.
Gov. Sean Parnell said he wants lawmakers to spend no more on construction projects than they did last year and to add most of the projected surplus to savings. The governor, who has the power to veto projects, said he's going to want even less spending than that if the Legislature doesn't pass his bill to slash state oil taxes.
"Really, how much (money) is enough?" Parnell said.
Sen. Bert Stedman bristled at the threat. He said the Senate won't cut the oil tax this year and the governor can abuse his power by vetoing projects in revenge if he wants. "We're not buying votes with the capital budget," Stedman said.
Parnell said there has to be less spending if the tax cut doesn't pass, because lawmakers will be relegating the state to a future of less oil production. Senators said that makes no sense and passing Parnell's bill would cost the state an estimated $8 billion in lost tax revenue over the next five years, with no guarantee of more drilling.
Stedman, a Sitka Republican, is in charge of putting together the state budget for construction projects. He said it's being finished and will be public soon.
It now stands at $2 billion, including federal money, he said, "and we're going to add from there."
The projected surplus is a result of higher-than-expected oil prices. The revenue department last fall projected the price of North Slope crude would average $77.96 per barrel through the fiscal year that ends June 30 and $82.67 the coming year.
The department has upped that to say prices should average $91.13 per barrel this fiscal year and $94.70 for the next. Revenue Commissioner Bryan Butcher called it a conservative forecast.
Alaska North Slope crude is now at almost $120 per barrel.
"Our forecast assumes that demand for petroleum products continues to rise as the global economic recovery continues," Butcher said. "We also expect as turmoil in the Middle East and North Africa persists, there will be concerns about supply disruption and therefore higher and more volatile oil prices in the short term."
Butcher said the state projects North Slope oil production of about 605,000 barrels a day through June and rising to 610,000 barrels a day the coming year. He said the slight rise in production is because of the Nikaitchuq field, operated by the Italian company Eni Petroleum, the restarted Badami field and the Oooguruk field, which was developed by Pioneer Natural Resources.