JUNEAU — Forecasters with the Alaska Department of Revenue raised the state’s two-year oil revenue forecast by $3.6 billion, Gov. Mike Dunleavy said Tuesday. At current spending levels, the forecast would create a budget surplus of billions of dollars.
“It’s actually really good news,” Dunleavy said, urging lawmakers to approve a large Permanent Fund dividend and save much of the surplus.
State lawmakers, who rely on the annual spring forecast to craft Alaska’s budget for the coming year, have been enthusiastic but cautious. Global oil prices topped the state’s earlier forecast, then surged after Russia invaded Ukraine. That push has waned, but prices remain high.
“I think it’s good to be more conservative when we have these upbeat numbers,” said Rep. Neal Foster, D-Nome and co-chair of the House Finance Committee.
Each spring, Alaska legislators set the state budget for the upcoming fiscal year, which begins July 1. The revenue forecast determines the amount of money available to spend. Any difference between forecasts and what actually happens is reconciled the following year.
For fiscal year 2023, which begins July 1, the new forecast is $8.33 billion, up $2.4 billion from the December forecast. In the current fiscal year, which ends June 30, state revenue is expected to be $6.95 billion, up $1.2 billion from the estimate. state precedent.
Each of these numbers is far greater than what the state has spent in the recent past. Last spring, the Alaska Legislature approved a $5.3 billion budget, and lawmakers expected they would need to spend savings to pay for some of that figure.
Now they are looking at a surplus and the possibility of a special energy rebate or an additional dividend from the Permanent Fund.
The House Finance Committee, which was due to present a draft state budget in early March, suspended work for two weeks pending new estimates.
With the forecast in hand, Foster said the committee will present a new version of the budget on Wednesday.
Foster, Dunleavy and others said there was reason to be cautious early in the budget process.
“We don’t know what tomorrow has in store for us. We don’t know what next week is going to bring,” Dunleavy said.
The Crude Oil Volatility Index, which attempts to quantify past and expected fluctuations in the oil market, stood at above-normal levels on Tuesday last seen at the start of the Omicron COVID-19 wave and the 2020 presidential election.
“Let’s not live in a state of high oil euphoria, when all of our forecasts are for numbers below that,” said Sen. Bert Stedman, R-Sitka, referring to forecasts from the Federal Reserve Bank of Dallas and from US Energy Information. Administration.
The Alaska oil revenue forecast is based on a five-day oil market price window. The period used for the latest forecasts began on Wednesday, when prices rose above $120 a barrel.
“If they had done this two weeks ago, or a month or three ago, or if they had done it six months later, it would have been totally different,” Stedman’s top budget aide said. , Pete Ecklund.
The spring forecast puts oil prices at $101 a barrel, up $30 from December. Stedman said members of the Senate Finance Committee wanted to use a more conservative number.
“At the table here, we’ve had conversations about the FY23 budget and are looking at about $80 going forward, down from $101,” he said.
At $80 a barrel, the state would collect about $6.7 billion in FY23, according to a price sensitivity chart released last year by the Revenue Department.
Stedman suggested that if prices are higher than that, the state could save the profit and spend later, if it chooses.
Foster said leading members of the House had a similar view.
“If we have money at the end of the day, it goes into savings, and there’s nothing wrong with that,” Foster said.