Department of Revenue publishes latest revenue forecast

The state of Alaska is earning more from its Permanent Fund than from royalties and taxes on oil production, according to the latest revenue forecast published Friday, March 15 by the Department of Revenue.

Not including money from the Permanent Fund, revenues are expected to be $89 million lower in the current fiscal year than was forecast in December, in the department’s fall revenue forecast, mainly due to lower oil production and crude oil prices.

The Permanent Fund is meanwhile expected to return $2.7 billion to the state treasury in Fiscal Year 2019, the current budget year that ends June 30, and $2.9 billion in FY 2020, which begins July 1. Oil revenues, in contrast, are projected at $2.26 billion in the current year and $1.97 billion in FY 2020.

The Permanent Fund, created in 1976, is the accumulated savings of oil royalties paid to the Fund through a constitutional amendment along with surplus state oil earnings paid into the Fund over the years through special appropriations by the Legislature and the Fund’s earnings held in the earnings reserve, a special account.

The transfers from the Permanent Fund are from the earnings reserve and not the corpus of the fund. Money in the earnings reserve is available for appropriation, unlike funds in the corpus, which is not available for use in the state budget.

However, the transfers from the earnings reserve include money for both payment of Permanent Fund Dividends and general government spending.

The state’s total Unrestricted General Fund revenue is now forecasted to be $2.7 billion in fiscal year FY 2019 and $2.3 billion in FY 2020, not including the Permanent Fund earnings transfers.

Meanwhile, oil production is now forecast at 511,500 barrels day, down from 526,800 barrels per day predicted in December. Revenues, production and prices will also be down in Fiscal Year 2020, but by smaller margins.

Beyond FY 2020, the unrestricted revenue forecast has been decreased by between $50 million and $100 million per year for FY 2021-2028. These estimates assume oil production remaining in the range of 500,000 barrels a day with newly-developed oil production offsetting the natural decline in older fields.

The revenue forecast is based on an annual Alaska North Slope (ANS) oil price of $68.90 per barrel for FY 2019 and $66.00 for FY 2020, according to the revenue department’s forecast. “Based on a review of oil market fundamentals, the department chose not to revise its view on long term oil price since the fall forecast. Long term, we continue to expect oil prices to stabilize in the low $60's in real terms,” the department said.