(SitNews) - Juneau, Alaska - Today Commissioner Sheldon Fisher released the Department of Revenue’s preliminary fall 2018 forecast, but has elected to delay issuance of the Fall 2018 Revenue Sources Book to allow the department to review recent developments in oil markets and their impact on the oil price forecast.  

This preliminary forecast is the department’s first revenue projection following passage of SB 26, which established a protocol for transferring a portion of the earnings of the Permanent Fund to the general fund each year.  The department is presenting the estimated Permanent Fund transfer as unrestricted revenue beginning in FY 2019.  Under this structure, this Permanent Fund transfer will fund both the Permanent Fund Dividend as well as general government operations. 

Under this preliminary forecast, including the Permanent Fund transfers, FY 2019 General Fund unrestricted revenue (GFUR) is estimated to be $6.2 billion, a $3.9 billion increase from the spring 2018 forecast. FY 2020 GFUR is estimated to be $5.9 billion, a $3.7 billion increase from the spring forecast. Excluding the Permanent Fund transfers, the GFUR forecasts have been increased by $1.2 billion for FY 2019 and $0.7 billion for FY 2020.

For FY 2018, North Slope oil production averaged 518,400 barrels per day, a decline of 1.5% compared to FY 2017. The department forecasts that new fields will help increase production to 529,800 barrels per day in FY 2019 and 533,200 barrels per day in FY 2020 before entering a period of declining production through FY 2024. Production is expected to remain around 500,000 barrels per day over the next decade, as new developments help offset most of the declines from existing fields. 

In the preliminary forecast, Alaska North Slope (ANS) crude oil prices are expected to average $76.00 per barrel for FY2019 and $75.00 for FY2020. This price assumption was finalized in in late October when ANS oil prices were around $75.00 per barrel. In the month since, oil prices have trended downward, with ANS oil prices closing below $60.00 per barrel on November 28, the first time that has happened since October 2017. 

“Once again, Alaska is experiencing unexpected oil price volatility,” Commissioner Sheldon Fisher stated, “As has been our practice for the past 15 years, through the month of October the department worked with staff from Revenue, Natural Resources, Labor, the University of Alaska, OMB, and Legislative 

Finance, as well as a private economics firms and financial analysts to develop an oil price forecast.  During November, however, the oil markets have experienced the largest monthly price decline, in percentage terms, in a decade. Markets now appear to be oversupplied due to Iranian oil remaining on the market despite the imposition of Iran oil sanctions in November. Consistent with other analysts, the department’s preliminary oil price forecast assumed that increased Saudi production would replace Iranian oil.  Instead, it added supply which had a profound impact on price over the past month.” In response to the shift in the oil market, the Department is presenting the forecast work done thus far as a preliminary forecast, and delaying the release of the final forecast and Revenue Sources Book to allow for a review and potential update of the oil price forecast.  

“By delaying the release of the Revenue Sources Book, incoming Commissioner Tangeman and the Department of Revenue will have the opportunity to evaluate this situation, with an eye on whether the Saudi government is able to implement production cuts in the short to mid term,” Fisher explained.

“We think this situation unfortunately reflects the inherent volatility in the price of oil.”  Deputy Chief of Staff John Hozey added, “We believe the State of Alaska needs more certainty in its revenue sources. One of the most important accomplishments of the Walker administration was reaching consensus with the legislature on the structured and sustainable use of Permanent Fund earnings to help balance the budget.  A sustainable fiscal plan should remain the goal of all Alaskans.” 

The preliminary fall forecast was released at 10:00 am Monday, December 3, on the department’s website at www.tax.alaska.gov. The final fall forecast and the Fall 2018 Revenue Sources Book will be released in advance of the mandated December 15 deadline for the release of Governor-elect Dunleavy’s proposed budget.

On the Web:

Preliminary Fall 2018 Revenue Forecast (PDF)

Comparison of Preliminary Fall 2018 Forecast to Spring 2018 Forecast (PDF)

Editing by Mary Kauffman, SitNews

Source of News:

Alaska Department of Revenue (DOR)
www.dor.alaska.gov

 

Representations of fact and opinions in comments posted are solely those of the individual posters and do not represent the opinions of Sitnews.

SitNews ©2018
Stories In The News
Ketchikan, Alaska

Articles & photographs that appear in SitNews may be protected by copyright and may not be reprinted without written permission from and payment of any required fees to the proper sources. E-mail your news & photos to editor@sitnews.us Photographers choosing to submit photographs for publication to SitNews are in doing so granting their permission for publication and for archiving. SitNews does not sell photographs. All requests for purchasing a photograph will be emailed to the photographer.