Alaska's Legislative Finance Division released a report on Monday that lays out the harsh reality for the state's budget situation for Fiscal Year 2014.
If spending for FY14 – beginning July 1, 2013 – were to be the same as the current year, the state would face a budget deficit of $920 million, The Associated Press reports.
The report explains how at the close of the 2012 session, lawmakers projected a $490 million surplus for FY13. However, due to declining oil production and lower-than-projected oil prices, Alaska now faces a $410 million deficit for FY13.
According to the report, "The Department of Revenue predicts that FY14 oil production will decline by 2.7 percent from FY13, and that oil prices will be about $1 per barrel more than in FY13 ($108.67 in FY13 and $109.61 in FY14). The result is that projected FY14 unrestricted general fund revenue is $510 million below projected FY13 revenue."
"There will be no debating 'spend versus save' during deliberation of the FY13 supplemental budget; there is likely to be a withdrawal from savings to fill the FY13 budget gap," the report's overview states.
The report also states that the deficit situation is new for legislators whose terms began after FY05; for the past eight years, higher-than-projected oil prices "more than made up" lower-than-projected oil production, so revenue exceeded expectations, and expenditures.
Gov. Parnell's budget director Karen Rehfeld told the Associated Press that the governor is proposing a "very, very lean budget" to lawmakers. He will also propose an overhaul to the state's oil tax system.
"With declining [oil] production and revenue we have to be smarter with the people's money," Parnell told guests at a Chamber of Commerce luncheon in downtown Anchorage in December, where he first revealed his proposed budget for 2014. Because of lower production and lower oil prices, Parnell told the crowd the state is projected to lose $1.6 billion in revenue over this fiscal year and next.
Read the entire report.