Rising oil price could affect debate over Alaska’s long-term budget

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Representative Dan Ortiz, I-Ketchikan, speaks at a House sitting in Juneau in March 2019. Ortiz said on Tuesday that improving the state’s revenue forecast will likely reduce support for the new taxes. (Photo by Skip Gray / 360 North)

Ketchikan’s independent representative, Dan Ortiz, considered a proposal that would rewrite the formula for setting the funds’ permanent dividends, while adding taxes. But with the recent price of oil increasing state revenue, he said the arguments for taxes were harder to make.

“It will always be a lift for lawmakers to reach consensus on additional revenue – or a tax, passing a tax – and with this new revenue forecast, I think that makes it a lot harder.” , did he declare.

The new revenue forecast is a preliminary report released Friday by the state Revenue Department. He predicts that rising oil prices will add $ 1.2 billion to the budget this year. And if those prices hold, $ 1 billion in additional revenue on average would be generated each year, compared to the spring forecast.

This could be enough money to pay for Governor Mike Dunleavy’s PFD proposal, with no new tax, Where substantial state budget cuts, based on a computer model used by non-partisan budget analysts. But lawmakers have noted that the price of oil is unpredictable.

Ortiz that even with a higher forecast he is no more likely to support Dunleavy’s PFD proposal. He said it must be weighed against other state needs and the importance of protecting the permanent fund.

“To put a ‘long-term budget plan’ quote based on recent oil price increases holding?” Tome? No, “he said.” No, I don’t think that’s a good policy. “

While the House majority caucus of which Ortiz is a part has largely opposed Dunleavy’s PFD proposals, most Republicans in the minority caucus support them.

Nikiski’s Republican Representative Ben Carpenter said that while oil prices are unpredictable, the Legislature must start somewhere in analyzing policy choices.

“You know, it’s been several years since we had really high oil prices,” he said. “And maybe people have forgotten what it’s like to have these important sources of revenue from the oil companies.”

Carpenter said he hoped more income, even in the short term, could allow lawmakers to look to the long term.

“When we don’t have enough money to go around the budget and hard decisions have to be made, it raises the blood pressure of all decision makers,” he said. “It makes conversations more difficult and the emotions run high.”

Brian Fechter, deputy state revenue commissioner, worked on the forecast. Fechter said the state was more confident in the near-term forecast.

He said more detailed information will be included in the final forecast, which is scheduled for December.

Fechter said the department knew oil prices could skyrocket. But he said even short-term price increases can bring long-term benefits.

“A higher oil price means higher royalties, which means more money is deposited into the permanent fund, which benefits us in the years to come,” he said.

Dunleavy also said he understands oil prices are volatile.

“I’ve been here long enough to experience it, since the 1980s,” he said.

But he said a day before the forecast was released that some lawmakers skeptical of relying on high oil prices were already opposed to his proposals.

“Nobody knows what tomorrow will bring,” he said. “We didn’t predict a pandemic. We cannot predict earthquakes. We understand this. We make our best guesses and estimates.

With the fourth special session ending Tuesday, lawmakers look to the next regular session.

Republican Representative for Fairbanks Bart LeBon said income estimates can help. But at the end of the day, he said, the legislature will have to weigh the needs of the state every year, regardless of the price of oil.

“Today we are north of $ 80. In a year, we could be less than $ 50, ”he said. “I just don’t know how to predict future trends in the price of oil.”

The first day of the next ordinary session is January 18.


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