The revenue department released a forecast yesterday that says the price is expected to remain low for at least another year.
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In Oklahoma, the state’s monthly gross receipts have declined for seven straight months, in large part because oil and natural gas production taxes have slumped.
“Basically what I’m hearing from people is, “Show me the cuts first”, said Mike Porcaro, an advertising executive and radio talk-show host in Anchorage. And it would abolish the state’s expensive system of tax credits for oil and gas producers, replacing it with a loan fund.
The governor’s plan would shift the state away from a direct reliance on oil revenue and the boom-and-bust cycle of oil prices. For decades, Alaska has been dependent on income from oil.
Oil flow through the trans-Alaska pipeline peaked at about 2 million barrels a day in the late 1980s but is averaging close to 505,000 barrels per day this year.
Republican lawmakers, who control the state’s Legislature, said were willing to work with the governor, although taxes wouldn’t be high on their agenda.
The income tax, as proposed, would generate about $200 million a year, according to the Walker administration. The payments vary from year to year based on investment returns and other factors; this year’s dividend, which is being paid this month, is $2,072.
Senate Minority Leader Berta Gardner says she agrees with Walker’s sense of urgency to make a sustainable budget plan. The Republican-turned-independent governor also recommended some oil tax and credit changes.
The moves come as Alaska faces a budget shortfall of about $3.5 billion in the next fiscal year, because of the collapse in oil prices and a slide in crude production.
The centerpiece of Walker’s plan is using the fund that provides annual checks to most Alaskans to generate a stream of cash for state government rather than relying on the year-to-year volatility of oil.
Earnings generated from the fund are used for inflation-proofing and paying the annual dividends.
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While permanent fund earnings can be used for the state budget, legislators have been loath to go there for fear of being accused of “raiding” the fund.
