Budget questions: With Alaska oil now over $100, what will Legislature do with all that money? Grow government or pay back the dividends to the people?

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Oil prices soared by over 8 percent on Thursday, with Brent crude hitting over $105 a barrel for the first time since 2014, and Alaska crude oil prices expected in the same range. The price of Alaska North Slope crude is published a couple of days behind the other major oil markets.

The price surge came after Russia launched a widespread attack on Ukraine, where ports in the Donetsk region ship out commodities, including grain, steel, and gas from Russia to the European Union. The pressure on energy, with oil prices now at levels not seen since early 2014, adds to already extraordinary inflation in the United States, Europe, and around the world.

Russia on Wednesday launched the multi-prolonged attack on Ukraine by air, land, and sea, and captured the mothballed-but-toxic Chernobyl nuclear power plant.

What does the Russia-Ukraine war mean for the State of Alaska’s budget, now that the state is two-thirds of the way through the current 2022 fiscal year?

The Russian invasion means oil and gas commodities will remain high for months to come and that the State of Alaska budget this year will end up with a significant surplus. For 2022, the revenue forecast was based on $75.72 oil and $71 per barrel for Fiscal Year 2023. The prices were said to stay in the $60 range through 2030.

Will this mean the Legislature will act on the governor’s supplemental budget, which proposes to pay Alaskans the rest of last year’s Permanent Fund dividend — about $1,200 more than the half-dividend that was paid in October?

This is not a certainty, since many in the Legislature don’t want to set a precedent of giving Alaskans their full share of the oil wealth. But those who have argued that the money is not there for full dividends now have no argument to stand on. This is also an election year for all but one member of the Legislature, and they will be hearing about high fuel prices from their constituents.

What will high oil prices — say, extended periods of over $100 a barrel — mean for the 2023 fiscal year budget that is now being shaped by House and Senate Finance committees? If the past is any indicator, the pressure will be on to spend more, expand programs, and increase government worker wages and benefits.

In play now, for example, is a bill that would create a defined benefit package for Alaska State Troopers, police officers, firefighters and correctional officers — a plan that may lead to decades of increased state spending. House Bill 55 passed the House last year, 25-5, and is now in onto the Senate last year on a 25-5 vote. It would cost the state about $6 million more a year. There could be many more nickel-and-dime increases put into the state budget under the cover of having surpluses.

If prices remain in this ballpark, just from value of royalties alone, there will be an additional $1 billion deposited into the Permanent Fund this year.

The Department of Revenue published an update on prices on Feb. 15, before the conflict broke out in Eastern Europe.

That document is here.

Will the Legislature repay the borrowing from the Constitutional Budget Reserve? The Legislature owes at least $12 billion to the Constitutional Budget Reserve. That is supposed to be paid back, but nothing forces the Legislature to actually do that. It’s not likely that this Legislature, in an election year, will see that as a high priority.

Can the governor just give out an energy rebate like Gov. Palin did? The increase in oil prices, just like 2005-2014, is great for treasury of the State of Alaska, but now, as then, it is a punishing economic hardship for Alaskans who fuel up and who heat with heating oil. During the administration of Gov. Sarah Palin, Alaskans got a historically high dividend, and an energy rebate check as well. But this Legislature is not the same as the one that approved the energy rebate in 2008, when Palin approved the expenditure and then was given credit for it.

Gov. Mike Dunleavy cannot give the people anything without the authorization of the Legislature. The current Legislature will not want to give a rebate that would make Dunleavy look good during his re-election season.

37 COMMENTS

  1. Just as the average spender, they will spend it on a bunch dumb stuff they think is needed. A piece of equipment, an commissioned art piece, new office furniture, new state building for an expanded division, a public health building, a new public housing complex, free job training, extra road and public trail mainteniance, increased snap and medicaid, and anything they think is needed. I think a russian war with ukraine and china having its planes over taiwan is what democrats want. They don’t appear be showing any intention stopping russia nor china. Pray for ukraines children that they may seek and find A peace in the chaos surrounding them and that putin remembers the children and he tries to make the invasion a little easier on the children.

  2. I’d like my share per Alaskan statute asap. I needed it. I have had little opportunity and was deftly sidelined economically as all Alaskan native men and women are. I want my damned share. Call it greed, call it parity, call it lost opportunity costs for stolen mineral rights. How many times can Alaskans be ripped by the legeelators.

    • Are you joking? There is so much anti-WHITE racism in Alaska and favoritism towards Alaska Natives. I am a graduate student at a University here in Alaska. Every single scholarship opportunity is only for Alaska Natives. Every Grant, every free money – FREE HEALTHCARE – is only for Alaskan Natives. If you can’t make it as an Alaskan Native in Alaska you might actually be cognitively impaired? Walk outside and apply for a job. It’s that easy. You’re making excuses for yourself and it’s embarrassing.

  3. What a silly question Suzanne. Of course they won’t even come close to making us whole. But never fear, their per diem is safe.

  4. I will assume this is just a rhetorical question. We did not cut the bloated bureaucracy when we didn’t have much revenue. All the money will go into government or those favored by government. Medicaid will suck up every available dime if given a chance.

    • I’m afraid you can only be correct. We couldn’t reduce the size and scope of government when we had a large deficit so now, in an election year, we will just continue to grow government with this Putin petroleum price windfall. To be fair, we have an executive branch that has grown government too, despite what we were led to believe back in 2018. Forget that we have one-third of our population on Medicaid, the largest SNAP program in the nation (for our population), an education system that eats money and spits out uneducated kids, a corrections system that costs a multiple of what the private prisons charge for the very same inmates, and a flagging university system. Call your legislator and tell him/her we need the back payments owed and we need a 50/50 split between Alaskans and the bureaucrats – forever. The PFD is an entirely wasteful program, but it is not nearly as wasteful as state government. And the PFD is honest, uniquely so in this state government. Exactly where and how did this governor lose all his courage? Where did he misplace his convictions? What happened to the part of his brain that does arithmetic?

      • No, I did not say Medicare. I said Medicaid, and yes, money that would otherwise go to the PFD pays into the state portion of Medicaid just as it also pays for the school foundation, corrections, etc. Alaskans would like to have their PFD and decide whether to pay for health care, education, their own safety, etc. but the Legislature has instead chosen to expand government. State government grows each year but the administration and the Legislature disguise that and the mainstream media go along with the dishonesty. If we don’t elect a conservative majority in both the Alaska House and the Senate, and a conservative Governor, we will get more of the same. The current Governor proposes higher dividends but he also proposes budget increases that are unsustainable; the Legislature goes along with the spending increases but not with the many versions of the PFD the Governor proposes. And Governor Dunleavy makes it too easy for the Legislature to say no.

  5. Seriously? I don’t expect a dime from those greedy and immoral pigs in the legislature, they have a trend going and thats to keep special interests in their back pocket while conducting business. We cant even move up a rung to increase gambling in the state such as the powerball and casino’s, even a tribe couldn’t do it because of the falsely perpetuated vision of a onslaught of crime and other societal ills, this by itself is the pie -in-your-face, special interests.

  6. Good thing we’ve got the trustworthy fox watching the chicken farm. We all know that we should trust government.

  7. Maybe Dunleavy should stash it away for a year so there will be something to pay out for the programs he is using federal covid money to support.

  8. Plus the future oil production from the new fields coming online over the next few years will give us at least another 200k bpd which will also dramatically increase revenue.
    They want to ignore that when they tell us that we will have a deficit if we give out a 50/50 dividend..

    No they will not do it under the pretense of needing to pay back our debt and future deficits. They will lie and so will ADN and other “news” soup.

  9. Mike proved he is a swamp creature when he backed down from his vetoes. He proved he is a coward when he abandoned his suggestion to give full PFD credit towards DNR land purchases, just because someone with the stupid name of “Click” mildly suggested it might not be the best time for it. He proved he is a hypocrite when he closed businesses and jobs, now tells us he won’t protect us from vaccine mandates because he can’t tell businesses what to do. Vote anybody but Mike this election.

    • Cluck is mistaken. If the legeelators create(by issuing business licenses) an entity they certainly can investigate the entity’s businesses practices for compliance with the US Constitution. It is the main justification for his stipend he receives from the people of Alaska to defend with manly firmness the US Constitution; order investigations, report on bad unconstitutional business practices and order payments of usurpations and shut them down. That’s what his oath, on paper, says he WILL do to receive his spigot stipend. If he can’t do it; well you heard him folks. Can’t means can’t. Quit immediately and let someone else do it who is willing and capable.

  10. They will do the same thing they did when the had excess before. They will not remember the hard times and spend, spend, spend. Trans Canada is probably calling to see if anyone wants to spend half a billion. Tons of studies and film subsidies.

    • The Alaska Legislature has advanced a plan to convert a state-owned building into 33 apartments for legislators and staff at an estimated cost of $5.5 million.

      • Yes Jack without public comment, the Legislature becomes land owner/ land lord to 33 legislators for 120 day’s, is that what that branch of government empowered to do? Self-serving CON ARTISTS !

  11. I’d prefer we put it into savings honestly. At some point we’ll run out of oil, and we won’t be able to pay PFDs or bloat the government anymore.

  12. One might pray that our legislature considers the pain the average Alaskan is enduring as prices rise by the hour.

    But don’t work too hard it – it risks destroying your faith when all is said and squandered.
    Perhaps better to seek an early spring and daffodils sprouting in March.
    The odds are much better.

  13. The legislators in Juneau will vote to spend as much as they can/as fast as they can just like they did the Constitutional Budget Reserve, the Statutory Budget Reserve and OUR share of the earnings from the Permanent Fund/Permanent Fund Earnings Reserve. The price of oil should not determine the amount of the PFD or whether we get a PFD over an arbitrary amount the legislators deem we should be given. The PFD is to be determined by half of 21% of the fund’s realized earnings and interest over the past five years (nothing mentioned about the price of oil at $XXX/bbl), minus expenses and previously owed dividends. It’s finally divided by the number of eligible Alaskans. Easy peasy. Put it in the AK Constitution and be done with it. That ain’t going to happen with the current legislators in Juneau.

  14. What should happen and what will happen are never the same thing when dealing with government and the term surplus funds.
    .
    They will blow it just like they always do, they didn’t learn from the downturn in prices that enabled them to burn through almost the entirety of the entire CBR and other savings accounts. Until a majority of Alaskans concern themselves with how wasteful our government is this will continue to play out over and over again, just like it has for decades. Historically there are far more days when oil sells below $100 per barrel, than above $100 per barrel. We shouldn’t be basing our budget on the price of oil, we should be basing it on constitutionally required government needs and saving the rest. Basing a budget on anything close to the highwater mark of oil prices is nothing short of asinine.

  15. You have to know the price of oil today is not necessarily locked in to bump the state budget.

    What is the most important? Price of fuel at the gas station effecting the citizen or price of barrel effecting state budget?

  16. Cluck is mistaken. If the legeelators create(by issuing business licenses) an entity they certainly can investigate the entity’s businesses practices for compliance with the US Constitution. It is the main justification for his stipend he receives from the people of Alaska to defend with manly firmness the US Constitution; order investigations, report on bad unconstitutional business practices and order payments of usurpations and shut them down. That’s what his oath, on paper, says he WILL do to receive his spigot stipend. If he can’t do it; well you heard him folks. Can’t means can’t. Quit immediately and let someone else do it who is willing and capable.

  17. rebuild the earnings reserve form first.
    Billions BORROWED to balance prior budgets.
    Pay that DEBT.

    Fund at least 30% of the unfunded state pension benefit program with the next fiscal year surplus. Another slice next fiscal year if prices stay above $80/barrel.

    Avoid all increases in state budget for next 3 years. Live like this did not happen. We are in debt – consider this extra cash a solution to PAST over sending.

    That will make the current crude revenue have a lasting impact.

  18. :Don’t want to set a precedent” really, well I hate to inform them they’ve already set a precedent by stealing the people’s money. Thieves all!

  19. Drag queen art grants and transvestite library story tellers.
    .
    We definitely need to fund many more drag queen art grants and transvestite library story tellers. Just think of the children!

  20. Nonsense. Free health care is a treaty. (we took your land, not giving it back ever here is some crappola “free” healthcare. We promise to use you cellularly forever in our infested science inquiries. How much plastic is inside you, buster. We are gonna find out one way or another and I signed a contact with the cdc to find out). Yes. You’ve been to college. You are never getting a job here. Got it? Now go catch a fish or something. I’m 70 years old and now it’s time to start my career in this recreation place. You are pretty woke yourself.

  21. I have heard China (of awl peeps) owns Alaska’s mineral rights now. So yeah, why exactly, would the mere residents own their own mineral rights. The quaintities of communism and confederates…

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