Updated oil tax numbers boost state accounts by $100 million
JUNEAU — A new oil production estimate from Alaska Gov. Bill Walker's administration estimated the state will have an extra $111 million in unrestricted revenue next year — a potential windfall that would still leave the state's fundamental deficit problem unchanged but could provide extra ammunition for tax opponents.
The new projections, sent in a memo to legislative leaders last week, correct for what administration officials describe as outdated production estimates in the annual spring forecast of government revenue that was released last month.
The spring forecast called for a 12 percent decline in oil production in the state's next fiscal year, even though that figure actually is expected to rise slightly between 2016 and the current fiscal year. Some lawmakers said they were frustrated by the discrepancy, since they're debating how much in new revenue and spending cuts they need to cover the state's deficit.
The new projections — which the state revenue department was clear to distinguish from an "official forecast" — assume a 4 percent decline, which the department said is "intended to account more realistically for recent increases in oil production."
"We've been clear — it's not a new forecast. It's just an alternative scenario," said Dan Stickel, the department's chief economist.
The $100 million extra would close a fraction of the state deficit of roughly $2.5 billion. But it could affect the debate over deficit-reduction measures between the Republican-led Senate majority and the largely Democratic House majority coalition.
The two chambers both want to spend investment earnings from the Permanent Fund to cover the majority of the deficit. But they disagree on whether an income tax, which would raise an estimated $700 million a year, is needed to make up the difference.
Without the tax — and even with the extra $100 million from new oil production — the state would have a deficit next year of several hundred million dollars. Senate leaders argue that such a deficit could be sustained by the billions of dollars in the state's reserve accounts.
This story first appeared in Alaska Dispatch News and is reprinted here with permission.