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Report: Alaska suffered $526 million budget shortfall in FY 2013

  • Author: Alex DeMarban
  • Updated: September 29, 2016
  • Published December 18, 2013

Alaska's slide into the red seems to have officially begun on Monday, when the state released the audited financial report setting the 2013 fiscal year deficit at more than half a billion dollars.

The amount is higher than the $384 million deficit state analysts predicted in the spring forecast.

Alaska was supposed to end the year with a massive surplus, as Gov. Sean Parnell announced in late 2011 when he introduced his proposed 2013 budget. But the newly released financial report notes that the state instead moved $526 million from its $17 billion savings to balance the budget.

The money came out of the Statutory Budget Reserve -- one of two main savings accounts not including the $48 billion Permanent Fund. The statutory reserve had $4.7 billion on June 30.

State forecasters have already said they expect another $3 billion to be drawn from the statutory reserve to balance budgets through the summer of 2015. The state of Alaska is now losing millions of dollars every day.

The last time the state borrowed from its savings to balance the budget at year's end was in fiscal year 2005, when $35 million was pulled from the Constitutional Budget Reserve -- a constitutionally protected savings account, officials said.

Before 2005, the state had moved money from that reserve to balance the budget almost every year for a decade, including in 2003 when $500 million was used.

After 2005, the state hiked taxes on oil producers. The 2007 tax hike, known as Alaska's Clear and Equitable Share, significantly increased state income as oil prices rose. Oil prices did indeed rise, allowing the state to pad its savings accounts with billions in surplus cash.

That law was in effect in fiscal year 2013. It will be replaced Jan. 1 by a tax cut that is expected to increase the need for deficit spending in the years to come.

Rep. Beth Kerttula, D-Juneau, blamed the 2013 shortfall partly on a spending spree in the spring of 2012, when lawmakers approved and Parnell signed a $2.9 billion capital budget. Legislators made the decision to add extra projects based on the state's aggressive projection for the price of oil at the time, which turned out to be overly optimistic.

Kerttula also noted that the state's large oil producers increased shutdowns for pipeline maintenance, leading to an increase in expenses and a reduced oil production.

The increased expenses hurt tax revenue because Alaska instituted a net profits tax in 2006, meaning expenses by oil producers aren't taxed. The reduced oil production was a double whammy, costing the state production-tax income and revenue from oil royalties.

Legislative Budget Director David Teal said the lawmakers were confident enough that they initially moved $250 million into state savings.

"There was a time it looked like we had a surplus," he said. "In fact, it looked certain enough that they deposited extra money into the Statutory Budget Reserve. But price and production didn't meet expectations, so everyone was a bit surprised by it."

Contact Alex DeMarban at alex(at)

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