Read Online Alaska Spring 2020 Revenue Forecast PDF

I am presenting to you the Department of Revenue’s Spring 2020 revenue forecast. The Spring 2020 forecast is based on additional information and data received since publishing last fall’s forecast of state revenues. This update is a collaborative effort among the Department of Revenue and several other state agencies. This spring revenue forecast comes during a period of extreme uncertainty. Alaska, along with the rest of the world, is responding to the COVID-19 pandemic. While the human impacts of this pandemic are of highest importance, the purpose of this forecast is to attempt to estimate the state revenue impacts. The forecast is made difficult by the ongoing and unknown nature of the pandemic, compounded by highly volatile investment markets and oversupplied oil markets. Unrestricted General Fund (UGF) revenue, before accounting for the transfer from the Permanent Fund Earnings Reserve, is now forecast to be $1.6 billion in fiscal year (FY) 2020 and $1.2 billion in FY 2021. For FY 2020, UGF revenue is expected to consist of approximately $1.1 billion from petroleum and $0.5 billion from non-petroleum sources. For FY 2021, UGF revenue is expected to consist of approximately $0.7 billion from petroleum and $0.4 billion from non-petroleum sources. The Permanent Fund is expected to transfer $2.9 billion to the general fund in FY 2020 and $3.1 billion in FY 2021. These amounts include funds for both payment of dividends and general government spending. This spring forecast reflects a significant reduction in expected UGF revenue compared to the fall 2019 forecast. For FY 2020, projected UGF revenue has been reduced by $527 million, with a $461 million reduction to expected petroleum revenue and a $67 million reduction to expected nonpetroleum revenue. For FY 2021, projected UGF revenue has been reduced by $815 million, with a $693 million reduction to expected petroleum revenue and a $121 million reduction to expected non-petroleum revenue. Petroleum revenue reductions are largely a function of a lower oil price forecast, while non-petroleum revenue reductions are due in part to impacts of COVID-19 and economic impacts primarily from the pandemic. Revenue projections for the remainder of the forecast years have also been lowered, with reductions ranging between $647 million and $845 million per fiscal year. The revenue forecast is based on Alaska North Slope (ANS) oil prices remaining below $30.00 per barrel for the remainder of FY 2020, resulting in an annual average price of $51.65 per barrel. The ANS price forecast is $37.00 for FY 2021, climbing to $53.00 by FY 2029. The oil price forecast is based on futures market prices and reflects the current extreme supply and demand imbalance gradually relaxing over the next several years. The revenue forecast is also driven by an expectation for North Slope oil production to average 486,400 barrels per day in FY 2020, remaining stable at 486,500 barrels per day in FY 2021, and slightly climbing to 491,000 by FY 2029. The spring forecast for oil production was developed prior to the March 2020 oil price crash. Given the long lead time for Alaska oil projects and high level of uncertainty, the production forecast has not been further revised at this time. With the tremendous uncertainty and unprecedented nature of the COVID-19 crisis, it is impossible to make predictions on the stock market, oil prices, future tourist activity, or revenue with certainty. In order to honor this uncertainty, the department has developed a plausible scenario upon which to base the spring revenue forecast. This scenario provides a reasonable baseline for planning purposes and highlights some of the important variables that can be monitored as events unfold over coming months. I hope you find the information provided in the Spring 2020 forecast to be useful.