Department of Revenue lowers FY25–26 revenue outlook; permanent fund transfer steadies general fund

The Alaska Department of Revenue told the House Finance Committee on Jan. 23 that the state’s fall 2024 revenue forecast reduces near‑term oil assumptions and trims the unrestricted general fund outlook for both fiscal 2025 and 2026.

Department of Revenue Commissioner Adam Crum and chief economist Dan Stickel presented the forecast, which uses futures markets and agency data to produce a 10‑year outlook. The department lowered its Alaska North Slope oil price assumption to $73.86 per barrel for fiscal year 2025 and to $70 per barrel for fiscal year 2026. Netting all changes, the department reported an approximate $220 million downward revision for FY2025 and a $232 million downward revision for FY2026 in unrestricted general fund revenue, with lower oil prices identified as the primary driver.

Why it matters: unrestricted general fund receipts are the portion of state revenue the Legislature may appropriate broadly. The revenue forecast affects budget decisions for FY2026 and beyond, and committee members repeatedly raised questions about how investment returns, oil production and tax credits will shape available funds.

Stickel emphasized uncertainty around the forecast. "Our forecast represents 1 plausible scenario within a range of uncertainty and potential outcomes," he said, noting the forecast incorporates actual returns through October and relies on futures markets for price expectations. He also described methods used for oil, fisheries and mining assumptions and said the department will issue a spring update around mid‑March.

Investment earnings and the Permanent Fund: the forecast assumes a 7.9% annual return for the Permanent Fund for the remainder of FY2025 and a 7.65% long‑term annual return thereafter. Those assumptions yield a projected Permanent Fund percent‑of‑market‑value (POMV) transfer of about $3.8 billion to the general fund in FY2026, a figure the department said is now known with certainty under the statutory transfer formula.

"That 7.9% investment return actually does help us a little bit," Commissioner Adam Crum said, explaining that the assumed returns support the POMV draw relative to a long‑term inflation assumption of 2.5 percent.

Oil and gas: the department reported modest near‑term reductions in North Slope production and higher projected lease expenditures (company capital and operating spending). The forecast reduced average North Slope daily production by about 10,000 barrels per day for FY2025 and increased the FY2026 forecast by about 12,000 barrels per day to roughly 469,500 barrels per day.

Detailed oil‑sector numbers in the department’s unrestricted revenue forecast include an expected production tax of about $563 million in FY2025 and $441 million in FY2026; corporate income tax receipts from petroleum of roughly $210 million in FY2025 and $250 million in FY2026; petroleum property tax receipts of about $130 million per year; and state royalties of $942 million in FY2025 and $898 million in FY2026. Stickel noted that around the forecast price, each $1 change in Alaska North Slope oil equates to roughly $35 million of unrestricted revenue.

Committee members asked how recent corrections to Department of Natural Resources production calculations affected the revenue outlook. Stickel replied that the fall forecast incorporated the corrected methodology and compared spring and fall forecasts for the committee to review.

Taxes and other revenue: nonpetroleum revenues — including corporate income tax outside oil and gas, fisheries and mining taxes, excise taxes and fees — are forecast to contribute several hundred million dollars annually. The department cited volatility in mining and corporate income taxes, one‑time refunds that affected recent results, and structural shifts in consumption patterns that influence excise tax receipts.

Willow and land ownership: presenters said revenues from projects sited on federal land such as Willow would be shared with state and local governments under existing federal formulas and that some federal royalties are treated as pass‑throughs for affected communities. The department said it will update prior analyses of Willow if federal decisions (for example, changing pad counts) alter projected production profiles.

Next steps: the Department of Revenue will publish a spring forecast update (mid‑March) and maintain its revenue sources book online. Committee members and department staff noted further briefings on production‑tax calculation details and permanent fund investment strategy could follow.

Sources: presentation and Q&A with Department of Revenue staff and House Finance Committee members at the Jan. 23, 2025 committee meeting.