Revenue Commissioner describes 2018 production forecast as ‘stale’

Commissioner of Revenue Randy Hoffbeck explains why the Revenue Source Book was being presented so late to the Legislature, while Tax Division Director Ken Alper takes notes. ( screen shot)

With somewhat stronger oil prices and increased production, the State of Alaska will have $191 million more dollars to patch the difference between its spending and its revenue, which even now comes mainly from oil.

The gap between those two is now $2.6 billion, down from the $2.8 billion hole the Legislature and the governor are attempting to bridge. That is what the Department of Revenue’s Revenue Source Book says.

The extra cash represents a 20 percent increase in oil revenues — from about $967 million to $1.16 billion — that goes into the part of the State’s budget available as undesignated general funds (UGF).

For Fiscal Year 2017, which ends June 30, the price of oil is projected to be seven percent higher than prior projections, and will remain in the same $50-a-barrel price territory for Fiscal Year 2018, the Walker Administration is predicting.

Production for this fiscal year is exceeding the prior forecast by 7 percent, but the Walker Administration surprised lawmakers on Friday by predicting a whopping 12 percent drop in production for 2018. That is a prediction that seemed to mystify any other credible observers of state oil output, including the Commissioner of Revenue.


Commissioner of Revenue Randy Hoffbeck was quick to dismiss the state’s own numbers, saying that the production number for 2018 was a “stale number,” and should not be counted on.

Committee member Sen. Peter Micciche explained that stale (read: inaccurate) numbers were not helpful to a legislative body trying to find the best way to balance a budget for 2018.

“We are looking at a fiscal plan that is outlined in SB 26. Our assumptions are based on a set of factors that demonstrates that our plan is a [complete] fiscal plan, yet when you plug in numbers that are stale…” He looked exasperated.

In the past several years, the State has hired Dudley Platt, an oil analyst who provided the revenue forecast at a cost of between $50,000 and $100,000. But last year, the Walker Administration decided that the Department of Revenue can do its own forecast.

Now, that forecast is something neither Hoffbeck nor the Department of Natural Resource’s leaders seem willing to stand behind, even as they presented it to Senate Finance.

In addition to the unprecedented 12 percent drop it predicted for 2018, the Administration predicts a swift decline in oil, projecting the Trans Alaska Pipeline will carry less than 350,000 barrels a day in less than a decade. Experts say the pipeline will be unlikely to remain functional with that level of production. But few other experts believe that oil will decline that quickly, unless the State wants it to.



The Senate Finance Committee received the Administration’s Revenue Source Book just minutes before the committee met on Friday, giving  committee members inadequate time to review it.

Committee Chairwoman Anna MacKinnon made note of the tardiness of the report: “That’s not a lot of time to go through the information,” she understated to Commissioner Hoffbeck.

Notwithstanding the stale numbers it contained, Hoffbeck tried to explain that they were eager to get it right, rather than get it earlier.   He denied that the report’s delay was a political ploy by the Administration.

“There was some speculation in the other body that we had withheld the information,” he said. “And that’s simply not true.”

The commissioner said the numbers in the forecast had needed refining. “We weren’t trying to hold them back,” he said.

More than “refining,” the forecast numbers need major rework, especially the short-term and longer term production assumptions. In the meantime, suspicions are growing that the days of an objective, rigorous and nonpartisan revenue forecast are a thing of the past, at least under the Walker Administration.

That the Governor has been looking for any sort of political leverage he can muster to pressure lawmakers into a wide array of tax increases and new taxes, only feeds those suspicions.

The Revenue Source Book was released one day before the Democrat-controlled House passed a massive income tax, which it has dubbed an “education tax” on working Alaskans.