The bad news just got worse, officially speaking anyway.
In response to crashing oil prices, Alaska's state government said Friday it will earn $400 million less in unrestricted revenue this fiscal year, compared to its last earnings forecast four months ago. Instead of $2.6 billion as previously expected, the unrestricted general-fund revenue will be $2.2 billion.
That's down from $5.4 billion in 2014, when oil prices were above $100 a barrel. They've plunged to around $50 in recent months, gutting the important unrestricted income that can be appropriated by the Legislature.
The downward revision can be found in the state's newly released revenue forecast, part of a twice-annual exercise that estimates expected income based largely on oil prices and the oil production that fuels most of the state government's unrestricted income. The state also expects to bring in an additional $7.4 billion in restricted income in 2015, largely from federal monies and investments tied to the politically off-limits $54 billion Permanent Fund.
The forecast is not necessarily surprising, said Revenue Commissioner Randall Hoffbeck. "There's not a lot of good news in there, but I don't think there's anything people didn't expect to occur," he said.
The state expects production to remain above 500,000 barrels a day through 2018, with an increase in yearly production in 2016 and 2017 before falling again as it has for many years as the Alaska's large fields age and produce less oil.
Hope is on the horizon, but it may be fleeting. Oil prices are forecast to remain in the $60 range through 2016, but the state expects them to rise above $80 in fiscal year 2017.
That's a "significant" number, when revenue gains from the production tax begin to rise substantially, said Hoffbeck.
"We see a fairly substantial upturn in the slope of revenues" starting at that point, Hoffbeck said. "Of course, we'd love to get to $100."
But the predictions might be wrong. A year ago, the state forecast the price of oil would average $105.06 in 2015. Now, thanks to a supply glut that has rocked the industry with lower prices, it's expecting crude prices in fiscal year 2015 to average out to $67.49.
And where the state had once predicted a decade's worth of prices above $100 a barrel, from 2014 onward, it now doesn't expect prices to rise back above $100 a barrel until 2020.
Unrestricted revenue that year is expected to be $4.5 billion, reaching a high point in the forecast before it begins to dwindle again.
By then, it's possible the state's substantial savings that are balancing the budget could be long gone.
Of course, all kinds of things can change before then. New sources of unrestricted revenue can come into play, or perhaps the price of oil will rocket up earlier than the state now estimates.
The spring forecast doesn't take the decade-long view of restricted state revenue in the forecast. But it shows the $54 billion Alaska Permanent Fund with gains of $3 billion a year in 2015 and 2016 -- down from $7 billion in 2014 -- one area that lawmakers may one day look to for revenue.
Alaska Dispatch Publishing