Juneau, Alaska (KINY) Something has to change structurally for the state budget to balance.
Everyone wants to know how the state budget will impact the state. How many jobs will be lost in Juneau? The Democrats have claimed $1.6 billion in cuts are coming.
The Governor will roll out the budget on Wednesday, Feb. 13 at 10:30 a.m.
Edward King, Chief Economist of the Office of Management and Budget, talked about the revenue forecast for the state at the Alaska Business Roundtable luncheon before the Greater Juneau Chamber of Commerce.
The state remains in a recession. The amount of GDP or gross domestic product has increased in the past two years as oil prices have gradually risen. Unrestricted revenues were over $10 billion in 2008. As late as 2014, revenues were nearly $6 billion. In 2019 unrestricted revenues were barely over $2 billion.
Today oil prices are at $63 per barrel.
"The recession happened in the oil industry and was pretty much only in the oil industry. Other industries like health care increased,” King said.
The Oil industry lost 5,000 jobs from 2013. There are about 9,500 today. Government jobs have also steadily declined.
‘Oil prices are very stable. We shouldn’t look for oil prices to increase anytime soon.”
King said anything can happen if there is a war or pipeline disaster. He added we shouldn’t count on any increase in oil prices.
There are some really large oil fields on the north slope that are on the verge of coming online. These new projects will offset reductions in production in other older fields. The forecast for this year is 526,600 barrels per day, up from 521,800 barrels per day in the spring of 2018.
The fiscal year tax estimate from oil is S1.136.5 billion. Total oil Revenue is expected at $2.21 billion. The revenue taken from the permanent fund is $2.8 billion and the state revenue is forecast to be $5.5 billion. The forecast for fiscal year 2020 is just under $5.2 billion.
Total state revenue for fiscal year 2019 is $11.42 billion. The 2020 fiscal year estimate is $11.47 billion.
The gross domestic product of the state has increased since 2015 to close to $55 billion.
There is a $1.6 billion gap between this year’s revenues and last year’s spending plan.
“The problem is not going away. We can’t just drop savings and get through a year or two and the problem will be solved. To solve it something have to change structurally. Its not a temporary tax or a cut to a budget, it has to be structural.”
In order to make last year’s budget of $4.6 billion, oil prices would have to average over $90 per barrel.
“There are not enough revenues and there are no savings. Something has got to change.”
“Every lever that you pull will impact people and regions differently. Juneau would be more impacted by reduction in state government than Bethel.”
“It doesn’t matter how we solve the problem because somebody will be affected. The question is how do we minimize those impacts.”
King pointed out job forecasts predict that government spending will remain the same.
In other business at the luncheon, Travel Juneau announced they will hold the annual Travel Fair on April 20.
The Southeast Conference Mid-Year Conference will be held next week.
It will be hosted by Elizabeth Peratrovich Hall. A keynote speech on Tuesday will focus on a freight survey and the impacts on southeast Alaska.