Alaska editorial: High oil prices hide the real issue

Posted: Tuesday, April 20, 2004

This editorial appeared in Saturday's Fairbanks Daily News-Miner:

Oil most often is associated with making things run smoother, but that might not be the case in Alaska right now. Oil's high price may end up behaving like sand in the gears of government instead.

This week's announcement by the Department of Revenue that the price of oil will has averaged $31.13 a barrel by the end of the fiscal year on June 30 is, of course, good news for Alaska in a strict financial sense.

And prices are expected to average $28.30 throughout the following fiscal year, still quite high.

What's a dollar per barrel worth to the state? About $60 million a year. So with the fiscal 2004 average about $3.50 higher than the previous forecast, that's an additional $200 million in revenue for the state.

That leaves the state with a $60 million shortfall for this year, much smaller than first anticipated, and a longer life in the Constitutional Budget Reserve - the $2 billion savings account from which money is taken to close the budget gaps. The account has repeatedly defied predictions of its demise.

Yes, good news. But at the bottom of the barrel lies reality - the price of oil will fall and the state will again be faced with budget gaps in the hundreds of millions of dollars.

The new Revenue Department forecasts have bought Alaska a little more time to arrive at a solution, which a growing number of people now believe is needed.

But it hasn't bought a lot of time.

Alaskans should hope they don't see a repeat of this performance: Sudden sustained surges in the price of oil lift the state out of a fiscal jam yet simultaneously take the steam out of legislative drives that had been under way to assemble a long-term fiscal plan.

And the problem remains unsolved through successive administrations.

This state continues to need a long-lasting budget solution from the Legislature, which adjourns for the year in less than a month.

Keep the pressure on.

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