We’ve always been a fan of the charts Steve Rattner uses on MSNBC’s Morning Joe to explain national issues. For the past few months we have been using a similar approach at Alaskans for Sustainable Budgets to help explain our views on state issues. At Editor-in-Chief Jeff Landfield’s suggestion, this kicks off an effort to broaden the reach of that project with a “chart of the week” to be published Fridays in the Alaska Landmine.
This week we focus on what the Department of Revenue’s (DOR) Spring ‘21 Revenue Forecast looks like after substituting oil prices reflected in the current futures market strip for those used in the original forecast. There has been a huge change in oil prices since the DOR published the Spring Forecast back in March. For example, in March DOR projected the average FY22 oil price at $61/barrel. In her August presentation to the legislature’s Comprehensive Fiscal Plan Working Group, DOR Commissioner Lucinda Mahoney updated that to $72/barrel. After a continued surge, the futures market is now suggesting an average FY22 price in the range of $81/barrel.
But the analysis shows other things as well. While the current futures strip projects higher prices than included in DOR’s March forecast in the near term (the next 3 years), it projects significantly lower prices — with resulting lower traditional revenues — over the intermediate (years 4-6) and longer (years 7-9) term. Under the rule of “good for the goose, good for the gander,” if some want to use the futures strip to argue the state’s fiscal situation is less dire in the near term, they also should be prepared to admit the intermediate and longer term is more bleak than projected in the spring.
Brad Keithley is the Managing Director of Alaskans for Sustainable Budgets, a project focused on developing and advocating for economically robust and durable state fiscal policies. You can follow the work of the project on its website, at @AK4SB on Twitter, on its Facebook page or by subscribing to its weekly podcast on Substack.
I am all for a sub stainable budget but it will never happen. The state is to money hungry. They need to cut the state workforce and handouts by 50% then we will see who wants to live here and who is in it for the money. The politicians have squandered billions and now are getting a toe hold on the last piggy bank the PFD. They will steel it all and the little guy gets nothing.
Got a mouse in your pocket?
What about addressing volumes of oil production ? If you double the price yet production falls by half isn’t that a “zero sum” gambit? And then of course working Alaskans pay more for oil based energy as prices increase which might nicely consume that increase in the PFD. Then, how about aging pipeline infrastructure and the impact of climate change on the structural integrity of the pipe over permafrost that melts? How long now until the State gets “invited” to pay for pipeline enhancements?
Jeff
Try AA. It works