Snapshot: Revenue forecast shows gov’s tax plan (still) not needed

Revenues to the State of Alaska are on the upswing, due to higher oil prices and more robust oil production.

The Alaska Fall 2017 Revenues Sources Book was released by the Alaska Department of Revenue on Wednesday, two days in advance of the governor’s proposed budget for the fiscal year that will begin in June.

Walker’s budget will be debated and passed in some form in the coming legislative session, starting Jan. 16.

The Governor and the Democrats may make another run for an income tax, although that is unlikely during an election year.

The Revenues Sources Book shows that an income tax would indeed be a tough sell, considering these points:

• For 2018, (the fiscal year that ends June 30, 2018), general fund unrestricted revenues are expected to be $750 million higher than they were for 2017: $2.1 billion is anticipated for this year.
• That is a jump of $247 million more than the state’s draft report six weeks ago.
• For 2019, the department projects revenue of $2.0 billion.
• Last year, the Revenue Department predicted $9.9 billion in revenue, but instead received $12 billion.
• Last year’s forecast also said Trans Alaska Pipeline System would move 490,300 barrels for FY 17, and 455,600 barrels for FY 18. Instead, TAPS averaged 526,500 barrels in 2017.
• Revenue now projects 533,400 barrels per day in FY18 and 525,700 barrels in FY19.
• The difference between what it projected last year for 2018 and what it’s projecting now is 77,800 barrels per day. That’s a 17 percent swing.
• The Permanent Fund returned over 12 percent, and Revenue says it expects total revenue of $10.3 billion in FY18, and $11 billion in FY19.
• Revenue forecasts an annual average price for North Slope crude at $56-57 per barrel for the next two fiscal years. Of all the predictions, this is perhaps the most difficult one to make. Today’s price is over $63, but it has been as low as $48 during the past year.
• Revenue projects prices will stabilize around $60 per barrel and increase to $75 per barrel during the next 10 years.

DATA POINTS FOR ARMCHAIR BUDGETERS

• The Permanent Fund has $63.2 billion, as of last week.
• The Earnings Reserve Account holds $14 billion of the Permanent Fund balance.
• The Constitutional Budget Reserve has $3 billion, which is not part of the Permanent Fund balance.

WHAT GOV. WALKER SAID IN 2016

Gov. Walker has made a hard push for taxes since taking office in 2014.

In 2016, he said that without taxes and restructuring how the Permanent Fund helps pay for government operations, the state budget would need to be cut to $1.5 billion.

“The CBR will be completely depleted by 2018,” his office said in a dire statement in 2016. “After that, Alaska’s current revenue structure will produce approximately $1.5 billion in unrestricted general funds (UGF), assuming oil price returns to $55/bbl. Petroleum based tax and royalty at $55/bbl produce about $950 million and all other taxes; corporate, excise, fees, and investment income, are $550 million.”

Read the 2016 Office of Management and Budget prediction here.

Legislators are up against the wall with the budget this year, and will likely need to use the Percent of Market Value method in using the Earnings Reserve Account to help pay for services. Cuts to the operating budget, according to many Republicans, are also overdue. Some Republicans believe that trimming state operations by $250-500 million is an essential first step.

Gov. Walker has been unable to reduce operating costs in government. In December, 2016, he offered a $4.2 billion operating budget, but by June, 2017 he signed off on $4.9 billion in spending, with no vetoes.

In June of 2015, he signed a $4.95 billion operating budget for the year that ended June 30, 2016.

The vetoes he has made were to Alaskans’ Permanent Fund dividends and to the small oil producers who are owed tax credits for coming north to help Alaska goose more production out of the North Slope.