Alaska revenue forecast shows lower unrestricted receipts for FY26–27; NPRA reclassification raises legal questions

Juneau — The Alaska Department of Revenue presented its fall 2025 revenue forecast to the House Finance Committee on Jan. 22, telling lawmakers the state expects lower unrestricted revenues in fiscal 2026 and 2027 driven largely by a weaker oil‑price outlook and methodological changes to how some federal receipts are classified.

Dan Stickle, chief economist for the Department of Revenue, said the state’s oil price assumption for fiscal 2026 is $65.48 per barrel and declines to $62 per barrel for fiscal 2027. “Near the forecast price, each $1 increase or decrease in Alaska price leads to about a $30,000,000 change in unrestricted general fund revenue,” Stickle said, quantifying how sensitive the general fund is to small moves in price.

The forecast shows total state revenue from all sources of $19.2 billion in fiscal 2025, with projected totals of $17.8 billion for FY26 and $15.3 billion for FY27. On the unrestricted side—funds available for general appropriation—Revenue staff reported $6.3 billion in FY25, a projected decline to $5.9 billion in FY26 and a modest recovery to $6.2 billion in FY27. Stickle emphasized that investment earnings (largely the Permanent Fund transfer) and petroleum together account for the large majority of unrestricted revenue.

Stickel described assumptions behind that outlook: a 7.6% assumed return for the remainder of FY26 on invested assets and a 7.3% long‑term return for the Permanent Fund; a 5% percent‑of‑market‑value (POMV) calculation drives the Permanent Fund transfer; and non‑petroleum sectors (tourism, fisheries, mining) are assumed relatively stable, with tourism anchored by about 1.7 million cruise passengers annually.

The Department also documented a methodological change: surplus program receipts—fees collected by agencies above operating needs and not carried forward—are now being reported as unrestricted general fund revenue, adding roughly $60 million to the unrestricted total in this forecast, Stickle said.

Committee members pressed presenters on details. Representative Galvin asked for clarification on a notable decline in federal receipts; Stickle deferred detailed line‑by‑line federal accounting to the Office of Management and Budget and said some decline reflects prior one‑time broadband and multi‑year capital funding. Representative Hannon asked how Permanent Fund and other investment earnings are being treated; Stickle explained that the 5% POMV draw is shown as unrestricted while excess earnings above that draw are shown as other restricted investment revenue.

A point of contention centered on revenues from the National Petroleum Reserve‑Alaska (NPRA). Stickle told the committee the fall forecast reclassifies certain NPRA receipts, showing an expected unrestricted share for FY27 that reflects changes in federal law and the “1 Big Beautiful Bill Act.” He said the forecast assumes 25% of those receipts will go to the Permanent Fund and 0.5% to the public school trust fund starting in FY27. Representative Stout and others pressed on whether the state’s approach aligns with federal sharing rules and local expectations.

Chair Josephson warned of legal pushback, saying “there will be litigation on this issue if it hasn't commenced,” and Stickle deferred legal questions to the Department of Law, which he said is evaluating the statutory and federal‑law questions raised by the reclassification.

On production and costs, Stickle said North Slope capital expenditures were about $8.7 billion in FY25—record levels driven by major developments—and that production is forecast to rise from about 457,000 barrels per day in FY26 to roughly 517,000 b/d in FY27 as new projects come online. He noted that, in aggregate, the forecast expects production tax revenue to be at or below the gross minimum tax floor (4%) across the 10‑year forecast even while individual companies may pay above the floor.

Stickle closed by identifying the variables most likely to change the outlook: oil price, oil production, company spending (capital and operating), and transportation costs. The committee thanked presenters; no formal action was taken. The meeting adjourned at 2:38 p.m., and the committee scheduled an Office of Management and Budget presentation on the governor’s FY27 operating budget for its next meeting on Jan. 23.