JUNEAU, Alaska (AP) — A new forecast from the Department of Revenue anticipates about $320 million less in unrestricted general fund revenue than earlier forecast between this year and next.
The spring forecast, released Friday, has been hotly anticipated as lawmakers seek to finalize budgets for state government and infrastructure projects before the Legislature's scheduled adjournment next week. The fiscal analysis for the governor's proposed oil tax overhaul also is based on the revenue forecast for oil prices and production.
The state had already been facing the prospect of having to dip into savings to cover costs for the current year, which ends June 30. Gov. Sean Parnell's budget director, Karen Rehfeld, said it's too early to say how big any budget hole will be until the final level of spending is known. The Senate is expected to pass its version of the capital budget Saturday, and House and Senate negotiators are working to hammer out differences on the state operating budget.
"Clearly, the drop in revenue will put more pressure on the overall spending," Rehfeld said in an email, adding that is why Parnell and lawmakers are working on a spending target for next year and toward a five-year fiscal plan. Parnell has proposed an overall spending cap of about $6.8 billion in unrestricted general funds for fiscal year 2014. That designation refers to money that isn't restricted in its use by the law, constitution or something else.
Parnell and legislative leaders say they want to limit spending amid declining oil production, but they realize, too, that if an oil tax-cut meant to boost investment and oil production passes, it will mean an immediate hit to state revenues.
Rehfeld has said that authorized spending for the current year includes about $7.9 billion in unrestricted general funds.
Revenue forecasts are issued each spring and fall.
The forecast released Friday revises the level of oil production for the current budget year, from about 552,800 barrels a day expected in the fall forecast to 538,300 barrels a day. The revised forecast for production next year is also lower — 526,600 barrels a day, compared to the earlier forecast 538,400.
Revenue said the 2.7-percent drop in forecast production for this year was largely offset by 54-cent increase in oil prices. The forecast anticipates about $35 million less in unrestricted general fund revenue this year and about $289 million next year.
Revenue Commissioner Bryan Butcher attributed the production decline for the current year to maintenance work that resulted in less oil than forecast last fall. For 2014, he said a contract was signed to use 10,000 barrels a day of natural gas liquids for enhanced oil recovery efforts and that accounts for the vast majority of the 11,800 barrel-per-day difference between fall and spring.
Senate Finance Committee co-chair Kevin Meyer said legislators knew the forecast would be worse than earlier expected, adding that the numbers were in the range of what legislators had heard they might be. Meyer, R-Anchorage, who helped craft the Senate version of the capital budget, said the fiscal concerns are going to get worse in the future if the trend of declining oil production continues.
Sen. Bill Wielechowski, D-Anchorage, said he is "very skeptical" of the numbers produced by Revenue. He said lowering the forecast will lower the fiscal note on the oil tax bill, SB21.
Butcher said the new numbers have "absolutely nothing" to do with SB21. Forecast numbers "are put together based on information gathered by the Department of Revenue and seeing that oil production has been declining at a rate greater than projected for decades, it can't come as a surprise that there has been a drop, although it is relatively small compared to the fall forecast."
The report also shows Alaska's current oil production tax is expected to generate about $4.4 billion this year. That compares to $6.1 billion in 2012. While oil is the main focus — it provides about 90 percent of the state's unrestricted revenues — the department reported that total revenue for this year is expected to total $17.7 billion, which it says would be the second-highest total state revenue in Alaska history. That includes about $10 billion in restricted revenues, including investment revenue from the Alaska Permanent Fund and constitutional budget reserve fund.
Follow Becky Bohrer on Twitter at http://twitter.com/beckybohrerap .
Spring revenue forecast: http://1.usa.gov/10lWVKq