Income estimate from oil windfall dips $187 million

Revision also predicts the price of oil will be higher in fiscal year 2006

Posted: Sunday, January 16, 2005

The state's forecast of its oil revenue surplus has been revised downward $187 million because of lower oil prices in recent months, Revenue Commissioner William Corbus said Friday.

In October, the Department of Revenue estimated the state would have a $653 million surplus for fiscal year 2005, which ends in June. That surplus - dubbed a windfall in Gov. Frank Murkowski's budget proposal - assumed North Slope crude oil prices would average $43.61 per barrel for the year.

To date, the average for the year actually has been $41.06 per barrel, $2.55 less than the October estimates.

Corbus announced the revised windfall forecast of $466 million to the House Ways and Means Committee on Friday.

"At this juncture, it looks like we may be a little bit overly optimistic for fiscal year 2005 oil revenues," Corbus said.

However, Corbus added, the revision also predicts the price of oil will be higher in fiscal year 2006, which begins July 1, than the October estimate of $34.50 per barrel.

The revenue department releases its spring forecast in April, at which time the actual size of the surplus can be better determined. Until then, it is a moving target, said Tom Boutin, deputy revenue commissioner.

"There are several months left in the fiscal year, and I guarantee the price won't be the same," Boutin said.

In his budget proposal, Murkowski called for saving $301 million of the surplus and spending the rest over three years on education, the state's retirement systems, locking in construction of a gas pipeline and several other programs.

Cheryl Frasca, budget director at the Office of Management and Budget, said Friday the revised numbers changed nothing in the proposed budget.

"We still have a surplus, barring some incredible increase in supply or some deep drop in demand," Frasca said. "We think it's prudent how we are using the windfall. We continue to watch what the revenue picture is and, if necessary, will make changes."

Senate Minority Leader Johnny Ellis, D-Anchorage, said he wondered whether some of Murkowski's windfall spending proposals are realistic. He said that under Murkowski's plan too much goes to special interests and too little goes to boost education funding.

"I had a sense back in December when the governor went from being the Grinch to being Santa Claus," Ellis said. "I really doubted whether the oil surplus would sustain the commitments he was making."

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