AKLEG Day 63: Updated revenue forecast predicts oil production to decline, but prices to rise

North Slope pipeline. (Photo by Joshua Stearns/Flickr Creative Commons)

The 63rd day of the Alaska legislative session kicked off with a walkout from the subcommittee tasked with reviewing the state’s education budget, setting the stage for an interesting week as the House begins to assemble its version of the operating budget.

Here’s a selection of what happened.

Less money now, a little more later

The Legislature got an update on the Department of Revenue’s spring revenue forecast that predicts oil production to decline lower than previously expected but for oil prices to be slightly higher than previously forecasted.

The topline takeaway is that the revised forecast expects Alaska will receive $89 million less in oil revenue for the current budget year, Fiscal Year 19, that ends in June than previously forecasted. The forecast for Fiscal Year 20 is a little better as the state expects it’ll get $39 million more than previously forecasted for the year.

Oil production for the current year is expected to miss the daily forecasted average of 526,787 barrels per day by about 15,000 barrels. The new forecast for the average daily throughput is 511,460 barrels. The forecasted decline for the upcoming year is smaller compared to the fall forecast: The new forecast is an average of 529,459 as compared to the previous forecast of 533,197.

The Senate Finance Committee spent a chunk of its meeting exploring whether or not future prospects, such as Willow, Pikka, NPR-A or the 1002 area of ANWR would be in the forecast. Everything but ANWR is in the long-term forecast, but Department of Revenue Commissioner Bruce Tangeman and economist Ed King said much of that is on the probabilistic end of things.

“We don’t assume that a field will come on in five years as predicted at full production at the time they are estimating,” Tangeman told the committee, according to the Juneau Empire’s report of the meeting. “The prudent way for the department to account for (production) is to put a risking mechanism in there.”

The committee also got some updates on its auditing system of oil and gas taxes, which appears to have improved thanks to recent investments funded by the Legislature. Audits have long been an issue for legislators, who’ve worried the slow pace of audits and backlogs would run up against statute of limitations for reviewing taxes.

The state’s auditor said the new system should allow the state to get ahead of the audits in future years.

Not so fast

The closeout process is starting to get underway in the House for the operating budget. This year, the House is taking the old process and giving it a new wrinkle that could force some politically unpopular votes.

The old process is to take the adjusted base budget prepared by the Legislative Finance Division and then taking the governor’s proposed changes and picking and choosing which pieces will be included in the draft. That decision of what to roll in has typically rested with the chairs of the various budget subcommittees

The new wrinkle is to put those decisions up to the committee via action item votes.

It might not be much of an issue in a year where the Legislature and the governor are aligned—or at the very least when the governor’s budget isn’t so incredibly unpopular—but we’re talking about a budget that proposes axing schools, seniors, ferries and the university to just name a few of the more politically sensitive areas of cuts.

In effect the changes require legislators to put their names on the record via a motion and a vote if they want to see any of Dunleavy’s proposed cuts even considered. The process requires them to do it piece-by-unpopular-piece, too, so each legislators’ record will be crystal clear to the public.

Instead of play ball with the process, the minority Republicans—who’ve demanded that the Dunleavy budget be used as the starting point, instead—decided to walk out of the House education budget subcommittee on Monday.

The education committee was the only closeout scheduled on Monday. There will be more throughout the week.

University students protest cuts

The Juneau Empire reports that about 50 people attended a rally in support of the University of Alaska outside the capitol on Monday.

API ombudsman report out

The state ombudsman released her report on the Alaska Psychiatric Institute, confirming various failures at the state psychiatric hospital and recommending nearly a dozen significant changes for how it’s run.

KTVA has a thorough breakdown of the 85-page report, but here’s a few critical takeaways:

Two statements from the ombudsman report’s introduction, in bold text, highlight the role of assaults against API workers in their alleged conduct.

“The Ombudsman specifically notes that violence directed toward API staff by patients is an equally serious problem that must be addressed,” the report read, noting that Burkhart separately contracted with (attorney Bill) Evans regarding his findings on that issue.

“The Ombudsman notes that the fear and trauma experienced by API staff contributes to the environment in which decisions about when and how to use restraint or seclusion are made.”

Burkhart’s office began requesting information from API and DHSS in June, receiving most documents by October with additional information arriving through January.

DHSS fully accepted six of Burkhart’s recommendations and partially accepted several more, although it “made no commitment to requiring Wellpath or any other private hospital management entity to implement or maintain the changes recommended.”

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