Alaska NEEDS Pebble fast: "$500 MILLION DROP IN ALASKA REVENUES"..................
Oil Revs. in the TANK...........
Fisheries Revenue REDUCED to reflect high level of uncertainty regarding demand for FISH, Fish Prices, and uncertainty worker supply............
GOLD PRICES offer Alaska increased Revenues....................... Pebble is going to be a cog in Revenues and JOBS.......... The current Revenue Loss makes Pebble extremely IMPORTANT in building a secure Revenue base for Alaska......................
$500 million estimated drop in Alaska revenues
By Tim Bradner Apr 6, 2020 Updated 48 min ago
Alaska's Department of Revenue issued an updated revenue forecast Monday, April 6 and as expected state income will be sharply down.
The estimate is for a $500 million drop in estimated revenues compared with earlier estimates for the current state Fiscal Year, FY 2020, which ends June 30, and a $700 million reduction for what had been estimated for FY 2021, the financial year beginning July 1.
The bulk of the decline is from oil and gas revenues, a result of lower crude oil prices, but the department also forecasts a drop in non-oil revenue in FY 2021.
One positive aspect of the situation is that the state is much less dependent on petroleum revenue that it was a few years ago. Under a state law enacted two years ago the state can tap earnings from the $60 billion Alaska Permanent Fund to help support the budget. Investment earnings now provide more than twice as much income as petroleum.
Under a formula in the law the Permanent Fund will provide $2.9 billion in support of the budget this year and $3.1 billion next year.
Nevertheless, the drop in oil and gas income will drive up a projected state deficit this year and next by several hundred million dollars, according to estimates.
State petroleum economists attributed all of the current year $500 million drop in state revenues to petroleum income as well as $600 million of the $700 decline for next year. A decline of $100 million in non-petroleum revenues, from taxes on fisheries, minerals, insurance and fuel is also estimated, mostly due to a slowdown in Alaska's economy stemming from the COVID-19 virus.
A sharp revenue decline had been expected. Similar estimates were made recently by the Legislative Finance Division, but the Department of Revenue's projections, done twice yearly, is the official state forecast used for budget planning by the state Office of Management and Budget and by the Legislature.
The revenue forecast is based on Alaska North Slope (ANS) oil prices remaining below $30.00 per barrel for the remainder of FY 2020, resulting in an annual average price of $51.65 per barrel. An average price of $59 per barrel for FY 202 was assumed in the fall forecast issued in December.
For FY 2021 the price forecast for ANS crude oil is to average $37.00 per barrel, climbing to $53.00 by FY 2029. The oil price forecast is based on current futures market prices and reflects the current extreme supply and demand imbalance that is expected to gradually relax over the next few years.
Oil production, meanwhile, is expected to be at volumes estimated in the fall forecast, or an average of 486,400 barrels per day in FY 2020 and to remain stable at 486,500 barrels per day over the following FY 2021.
The spring forecast for oil production was developed prior to the March 2020 oil price crash, and given the long lead time for Alaska oil projects and high level of uncertainty, the production forecast has not been further revised at this time, the revenue department said.
“With the tremendous uncertainty and unprecedented nature of the COVID-19 crisis, it is impossible to make predictions on the stock market, oil prices, future tourist activity, or revenue with certainty. In order to honor this uncertainty, the department has developed a plausible scenario upon which to base the spring revenue forecast,” the revenue department said in a statement.
“This scenario provides a reasonable baseline for planning purposes and highlights some of the important variables that can be monitored as events unfold over the coming months,” the department said.
The department used these assumptions in the forecast released April 6.
Overall Economy: The spring forecast assumes that widespread virus-related shutdowns continue for the second half of FY 2020. The forecast assumes that shutdowns are reversed during the first half of FY 2021 (July – December 2020), and that overall economic activity is back to baseline levels by FY 2022 (after July 2021). Some revenue forecasts have been adjusted to reflect these assumptions, others have not and will continue to be monitored and evaluated ahead of the fall forecast.
Oil Prices: The spring forecast is based on an average Alaska North Slope (ANS) oil price of under $30.00 for the remainder of FY 2020, bringing the FY 2020 average price to $51.65. The ANS price forecast is $37.00 for FY 2021, climbing to $53.00 by FY 2029. The oil price forecast is based on futures market prices and reflects the current extreme supply and demand imbalance gradually relaxing over the next several years.
Investment Returns: The spring forecast is based on the “low projection” from the Alaska Permanent Fund Corporation for FY 2020 and then the median projection for FY 2021 on. For FY 2020 this represents an overall return to the fund of about -0.5% for the year. Reaching this result requires some recovery in investment markets over
the remainder of the fiscal year. For FY 2021 on, the forecast assumes 7 percent annual overall returns to the fund.
Corporate Taxes: The spring forecast for petroleum corporate tax revenue assumes minimal net revenue for the rest of FY 2020 and FY 2021, based on low noil prices. Beyond FY 2021, payments resume as prices recover. Non-petroleum corporate tax revenue is expected to fall significantly for certain sectors, based on reduced economic activity.
Tourism: The spring forecast assumes that the 2020 summer tourism season (FY 2020-2021) is largely lost with no cruise ship visits and minimal independent tourists. The 2021 summer season (FY 2021-2022) is expected to proceed, including resumption of cruise ship visits, but only at 75 percent of previously expected levels.
For summer 2022 on, tourism is assumed to be back to previously expected levels. These assumptions reflect no inside knowledge, the revenue department said, and are intended simply to provide one possible baseline for budget planning purposes.
Mining: The spring forecast for mining revenues was reduced to reflect lower expected prices for industrial metals such as zinc and lead. Sustained high gold prices somewhat offset this negative impact. No adjustments to production expectations were made for the spring forecast.
Fisheries: The spring forecast for fisheries revenues was reduced to reflect the high level of uncertainty regarding demand for fish, and thus fish prices, as well as uncertainty surrounding worker supply.
Motor Fuel Taxes: The spring forecast for motor fuel taxes assumes a 25 percent reduction in fuel use for the remainder of FY 2020, and a 5 percent reduction compared to baseline for FY2021. For FY 2022 on, motor fuel use is forecast to return to previously expected levels.
