Continuing Deficit for State Budget Should be a Call to Act
April 16, 2004
"Alaska has been blessed by high crude oil prices, which have provided us with more than $520 million in revenue over what we would have received under OPEC's baseline of $22 per barrel," Corbus said. "However, even with the high prices, Alaska faces a budget deficit that needs to be solved now."
"This forecast document presents no reason to postpone closing the fiscal gap. If it shows anything, this forecast shows the high volatility of oil prices. Therefore it, is in reality a call to action to adopt a plan this legislative session that matches recurring revenues with expenditures going forward."
The Constitutional Budget Reserve Fund, the cash reserve the state uses each year to balance the budget, is now forecast to hit $1 billion in September 2007, and be depleted in May 2008, based upon a $2.3 billion annual budget. Several aspects of the annual revenue shortfall are to be found in the forecast document.
The purpose of the forecast is to provide the Governor, Legislature and citizens of the State of Alaska with a summary of state revenues and a forecast of future revenues. The revenue forecast is categorized into four major components: oil taxes, non-oil taxes and fees, federal dollars, and investment revenues. The forecast contains projections through FY2015.
Oil revenues continue to dominate the revenue picture - forecasted to provide more than 80% of unrestricted revenue through FY2007 before steadily declining to 72% by FY2015. Oil production also continues to decline.
The forecast also updates production details. For instance, Point Thomson startup is delayed compared to the fall forecast but West Sak production is both increased and accelerated. NPR-A development is moved one year closer and Alpine output is increased.
Current worldwide market strength for petroleum is evident in this forecast. FY2004 is forecasted to have an all-time record high for Alaska North Slope crude oil. Through March, the price has averaged $30.64 per barrel. Despite the high prices, the state must continue to use one-time reserves to balance the budget, even in a year of record oil prices.
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