Alaska lawmakers reworking budget following oil revenues windfall

Alaska lawmakers are rewriting the state's budget after experiencing a windfall from oil and gas revenues as prices soared following Russia’s invasion of Ukraine.

Lawmakers are weighing whether to spend the money on education, infrastructure or save it for a rainy day.

The Alaska Department of Revenue raised the state’s two-year forecast of oil revenues by $3.6 billion on March 15 prompting the changes.

State revenue is expected to be $6.96 billion, an increase of $1.2 billion from the state’s prior estimate, for the current fiscal year ending June 30. The forecast for fiscal 2023, which starts July 1, is for $8.33 billion, up $2.4 billion from December’s forecast.

Alaska Governor's office

The Alaska Legislature approved a $5.3 billion budget last spring. Each spring Alaska lawmakers set the state’s budget for the upcoming fiscal year, which begins July 1. Revisions are then made after the March revenue forecast, which determines how much money is available to spend.

The revenue department estimated oil prices at $101 per barrel, an increase of $30 from December. The Legislature is using an $80 per barrel figure, which would mean state oil revenues of $6.7 billion in fiscal year 2023.

Gov. Mike Dunleavy and some Republicans want to put the money into reserves, or increase the payment from the state's permanent fund, while some Democrats support a plan by Rep. Neal Foster, a Democrat, to pay for education costs a year in advance to avoid future cuts if revenues decline. Under Foster’s plan, the state would spend $1.2 billion for education now to fund costs in the fiscal year starting July 2023.

"I'm asking the Legislature to help alleviate economic hardship for Alaskans now, by paying every eligible resident a [permanent fund dispersal] this year of at least $3,700," Dunleavy said in a statement.

The House Finance Committee, which Foster chairs, updated its budget proposal on March 15 adding the additional $1.2 billion in education spending after the revenue department reported the changed forecast.

Volatility in oil prices has forced lawmakers to draw down reserves to $1 billion in 2021 as the state has grappled with deficits. Reserves totaled $19 billion in 2013, at their recent peak.

Prior to the revised revenue forecast, Dunleavy had proposed a $356 million general obligation bond in his February budget proposal to pay for infrastructure projects throughout the state, he said, to “stabilize the economy and put Alaskans back to work.” The governor said it could draw $1 billion in matching funds from the federal government.

Even if the lawmakers approve the bond package, the concept would need to be approved by voters.