With new data showing the state on track to burn through its $16 billion savings account in eight years, a Democratic senator is calling on the governor to specify when -- or if -- new oil production might help reverse the massive deficit spending that began this year and is expected to continue for at least a decade.
Sen. Bill Wielechowski, D-Anchorage, said the new data, compiled by the nonpartisan Legislative Research Division at his request, as well as the state's spring Revenue Source Book, showing declining revenue and production for years to come, point to a rapid depletion of the state's savings accounts.
"No family would be comfortable watching its savings evaporate like water, and no Alaska should be comfortable watching Alaska's savings dry up almost overnight," Wielechowski said in a press release.
Gov. Sean Parnell, shortly after filing for re-election on Monday, responded by saying he's reduced spending and that 15,000 additional barrels a day are already being produced this year. The state's revenue sources book revised its expectation for new oil upward by 13,600 barrels a day this fiscal year, between the forecast released last fall and this spring's more recent forecast. The fiscal year ends in June.
Parnell said more oil will be coming each year after this one -- though he wouldn't specify how much -- thanks to the newly implemented tax cut he pushed through the Legislature last year.
"The revenue sources book doesn't include new production unless it's online," Parnell said. "There are new rigs coming up right now that have been committed to Prudhoe Bay and beyond on the North Slope to go after known oil. But that is not accounted for in the revenue sources book until it actually comes online."
But Wielechowski, despite the promises of new oil he hears from the governor, oil companies and TV commercials supporting the tax cut, said all the state documents available point to less state revenue and production well into the future. "It's frustrating to hear people say we're getting more revenue and production, but every piece of government documentation I have says just the opposite," Wielechowski said. "Alaskans deserve to know the truth."
The state's spring revenue forecast shows oil production falling 40 percent over the next decade, and state revenues falling by 26 percent, Wielechowski said.
The data from the Legislative Finance Division, based on current spending trends, shows the state losing $1 billion to $2 billion a year until 2020. Things get worse after that, with the low point coming in 2024 -- the last year examined -- when the state loses almost $4 billion.
"If the revenue forecast is incorrect, tell us," Wielechowski said, directing his question at the governor. "Give us something that's certified that Alaskans can look at with some sort of accuracy to know the financial status of the state."
The state budget is expected to come up $2 billion short this year -- a sharp reversal from recent years of massive budget surpluses, Wielechowski said. Parnell has talked little about the shortfall, never mentioning the budget gap in his state-of-the-state speech early this year, for example.
The new data from the legislative division shows that state savings accounts that exceeded more than $16 billion last year will fall below $12 billion next year. The savings accounts are separate from the state's Permanent Fund that late last week contained $51 billion. The deficit spending will threaten the Permanent Fund, Wielechowski said, noting that Republican lawmakers earlier this year said they're looking at the fund as one source of potential future revenue.
Some of the hit to the state's savings this year comes for a cause supported by both Republicans and Democrats. Parnell -- taking a page from the Democrats' playbook -- won legislative approval to move more than $3 billion of the state's savings account into retirement trust funds this year. The money will be used to pay down costs associated with the state's $12 billion liability for retired public employees and teachers.
That bill passed the House and Senate unanimously, and awaits Parnell's signature. Wielechowski supports that move, he said, noting that he once sponsored just such legislation. But with or without those steps, the state's savings are gone in a matter of years if current spending trends continue, he said.
Parnell said he's taken spending from $8 billion to $6 billion in the last two years. And the shortfall is estimated to get smaller in the future, falling from $1.7 billion to $1.2 billion next year.
"The deficit is actually decreasing, as you call it," he said, explaining that deficit spending technically refers to borrowing money to cover shortfalls, as the U.S. does with China. In Alaska's case, it's using its own savings to pay the shortfall, something it's done in the past, he said.
And when's that new oil coming to reverse Alaska's gloomy outlook? Parnell said oil companies have said that "significant quantities" of oil will come with the tax cut in place.
"I think you're going to be able to look back in three to five years and say, 'Man, this was substantial,'" he said.
By ALEX DEMARBAN
alex@alaskadispatch.com