The Alaska Department of Revenue predicts that during the coming fiscal year, the price of Alaska oil will be in the $70 a barrel range, down from the $73.86 per barrel predicted for the current fiscal year (ends June 30, 2025). The Unrestricted General Fund revenue forecast has decreased by $220 million for FY 2025 and $232 million for FY 2026.
In response to softer prices and modestly stable production, Gov. Mike Dunleavy proposes a stick-to-the-basics budget that has no frills and keeps to his pattern of tamping down the urge among legislators and lobbyists to grow government. For the seventh budget since taking office, his proposed spending is kept at about a 1% increase, far below the rate of inflation.
Dunleavy’s focus is on public safety, education, constitutional requirements, bringing new investment to Alaska, and affordability.
Through the supplemental process, he is proposing a $50 million transfer to the Alaska Industrial Development and Export Authority to help with the “Front End Engineering Design” or FEED to get the Alaska LNG gas pipeline off the ground. He is also proposing to put funds into the state’s disaster fund, which has been drained due to numerous natural disasters around the state in the past year. This would require a transfer from the Constitutional Budget Reserve.
The governor’s budget website is at this link.
Dunleavy proposes the full statutorily set educational funding with the Base Student Allocation (BSA) formula, but has not added any additional funds for education. The Legislature has added to that in the past, and the governor has, in the past, met lawmakers halfway by allowing one-time increase for education.
As he has in past years, Dunleavy will be proposing a bill that ties education funding to performance accountability. Currently, there is no accountability in Alaska’s school districts. The Democrats in the Legislature are not likely to be friendly to that legislation.
The governor is proposing to reopen the Alaska State Trooper post in Talkeetna and to purchase a plane for the Department of Public Safety.
When the Legislature gets the budget, both the Democrat-controlled bodies will be working to insert a new expense — the return of defined benefits for some state workers. The state converted to a more standard retirement program for workers in 2006 but still owes the former workers in the now-defunct defined benefits program over $6 billion.
Revenue deeper dive
Unrestricted General Fund revenue, before accounting for the operating transfer from the Permanent Fund Earnings Reserve, is forecast to be $2.6 billion for fiscal year 2025 and $2.4 billion for FY 2026, respectively. That is a reduction of about $200 million for next year’s fiscal year.
The Permanent Fund is set to transfer $3.7 billion to the General Fund for FY 2025 and $3.8 billion for FY 2026, respectively. These amounts include funds available for general government spending and annual payment of dividends to Alaskan residents.
The Permanent Fund transfer once again is a large source of funding to the General Fund, contributing 59% of Unrestricted General Fund for FY 2025. Based on the Fall 2024 Revenue Forecast, the operating transfer is projected to range from 61% to 64%, for each of the next 10 years.
In FY 2024, the Alaska North Slope oil prices averaged $85.24 per barrel. The Fall Revenue Forecast incorporates the most current indicators from the financial markets and is based on an annual average ANS oil price. The oil price for FY 2025 is projected at $73.86 per barrel and $70 for FY 2026, respectively.
The Department of Revenue forecast assumes that annual average prices will be within a range of $68.00 to $73.00 per barrel (nominal) for the remainder of the forecast period.
In FY 2024, ANS oil production averaged 461,000 barrels per day. ANS oil production is expected to edge up to 466,600 barrels per day for Fiscal Year 2025 and 469,500 for Fiscal Year 2026, respectively, before peaking to 656,900 barrels per day in 2034.
In comparison to the DOR’s Spring 2024 Revenue Forecast, which was released in March 2024, the ANS oil price forecast decreased by $4.14 per barrel for FY 2025 and $4.00 per barrel for FY 2026.
The oil production forecast decreased by 10,200 barrels per day for FY 2025 and 12,600 barrels per day for FY 2026. Driven by the revised outlook of oil price and production, the Unrestricted General Fund revenue forecast decreased by $220 million for FY 2025 and $232 million for FY 2026.
The Fall Revenue Sources Book is published every year to give predictive information about state revenues, as well as a forecast of state revenues over the next 10 years. The revenue forecast is available on DOR’s website at www.tax.alaska.gov.
