Appropriations committee adopts updated revenue forecast; members flag oil-tax shortfall and agency "turnbacks"

At a meeting of the Appropriations Committee, members voted to adopt a revised revenue forecast and committee resolution after staff described new assumptions that lower future oil prices and shift allocations across statutory revenue "buckets." The motion passed on a roll-call vote, 16-0.

The revised forecast, presented by Allen of the Office of Management and Budget, assumes near-term oil prices that hold around $62 per barrel for the remainder of the current biennium and decline to an average of about $59–$57 per barrel in the 2025–27 biennium, with production assumptions falling slightly from about 1,150,000 barrels per day to about 1,100,000 barrels per day. Allen said, “the resource trust fund will end up having about a hundred million less under the new forecast compared to the January forecast.”

Those price and production assumptions produce estimated total collections of roughly $5.7 billion for the 2023–25 period, with a state share of about $1.8 billion, according to the presentation. The forecast also shows the bottom bucket for SIF at about $361 million, a $5 million increase from the January forecast. The presentation compared these allocations under current law with the effect of three bills that, as of crossover, would alter how oil-tax revenues fill statutory buckets: House Bill 1015 and Senate Bills 2143 and 2323 (as identified in the presentation).

The forecast incorporates an assumed change in the effective oil-extraction tax rate from about 4.8 percent to 4.3 percent for the remainder of the biennium and to 4.0 percent in 2025–27. Allen told the committee that reduction primarily affects the Resource Trust Fund because that fund receives oil-extraction tax revenues.

Committee discussion also focused on agency "turnbacks"—unspent appropriations that revert to the general fund. OMB reported that agencies updated their turnback estimates after a survey, producing roughly $100 million in additional identified turnback. The largest items the presenter cited were a $45 million transfer associated with the Department of Corrections and roughly $30 million of additional turnback reported by Human Services (raising that agency’s turnback estimate from $80 million to $110 million). The presenter said about $37 million of requested exemptions to turnback were backed out in the calculation. After accounting for those adjustments, OMB reported a net pickup of about $71 million in turnback plus roughly $27 million in additional revenues, producing about $100 million of additional beginning balance for the next biennium.

Allen noted the 2025–27 biennium would lose an estimated $75 million of revenue under the revised forecast, leaving a net of approximately $25 million in additional resources available for 2025–27 compared with the January forecast.

Senator Mathern asked what rationale underlies the downward revisions in price and production. Allen and other leaders said global market signals from futures markets and outside analysts (S&P Global and Moody’s were cited) suggested price declines over the next one to two years; Allen said the forecasts factored in a regional discount (the Bakken discount) that lowers the effective price received locally.

Several senators raised questions about the treatment of stripper wells and long-standing exemptions or carryover requests. Senator Sorlag asked why recent changes in revenues tied to stripper wells were not detected earlier; committee discussion noted the tax commissioner’s office historically analyzes those receipts and that agencies and leadership will ask for more timely reporting going forward. Senator Sarban said pilots for secondary recovery are underway and cautioned that it is too early to judge whether those efforts will raise production enough to change tax-treatment thresholds. Sarban said a legislative study is being drafted with input from Legislative Council, the tax commissioner and stakeholders to examine the effective tax-rate issue over the interim.

A motion to adopt the new revenue forecast and Appropriations Committee resolution was made in the meeting and then put to a roll-call vote. Senator Wozniak moved adoption; the clerk recorded the motion as having been made by "Senator Wansink" and the second was recorded as Senator Deavor. The clerk conducted a roll-call vote; the record in the meeting shows the following members voting aye: Chairman Beckettol; Senators Burkhart, Cleary, Connolly, Davison, Devers, Dwyer, Erbil, Grama, Mather, Meyer, Scribe, Sigler, Thorvog, Thomas and Wojcick. The clerk announced the motion passed, 16-0.

The committee recessed until the afternoon floor session.