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1
Alaska’s Economic and Alaska’s Economic and Revenue OutlookRevenue Outlook
Dan Stickel, EconomistDan Stickel, EconomistAlaska Dept of RevenueAlaska Dept of Revenue
Tacoma WA, May 2008Tacoma WA, May 2008
2
2007: Decent growth; great for budget2007: Decent growth; great for budget
Population Growth: +0.9% Population Growth: +0.9% Employment Growth: +1.1%Employment Growth: +1.1%
Strength: Oil, mining, tourism, servicesStrength: Oil, mining, tourism, services Weakness: Construction, fisheries, Govt.Weakness: Construction, fisheries, Govt.
Unemployment Rate: -0.3% to 6.2%Unemployment Rate: -0.3% to 6.2% Per Capita Income Growth: +6%Per Capita Income Growth: +6% Housing: Sales -10%, Avg Price +2%Housing: Sales -10%, Avg Price +2% State Budget: Higher oil prices + Higher State Budget: Higher oil prices + Higher
oil tax rate = Really Big Surplusoil tax rate = Really Big Surplus
3
Total employment growth: Total employment growth: “Slow & Steady”“Slow & Steady”
Percentage change in employment from prior year Source: Alaska & US Departments of LaborPercentage change in employment from prior year Source: Alaska & US Departments of Labor
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008(F)
2009(F)
2010(F)
Alaska
U.S.
4
Construction
Seafood Process
Local Govt
Federal Govt
Other Manufact
Information
Financial
State Govt
Retail
Other Services
Transport&Utilities
Healthcare
Wholesale
Educ Services
Leisure/Hospitality
Prof&Bus Services
Other mining
Oil&Gas Extract
-5% 0% 5% 10% 15%
Employment growth highlights: 2007Employment growth highlights: 2007
Total Employment Growth: 1.1%Total Employment Growth: 1.1%
5
Construction
Financial
Other Manufact
Information
Educ Services
Federal Govt
Local Govt
State Govt
Transport&Utilities
Prof&Bus Services
Other Services
Seafood Process
Retail
Healthcare
Wholesale
Oil&Gas Extract
Leisure/Hospitality
Other mining
-5% 0% 5% 10% 15%
Employment growth forecasts: 2008Employment growth forecasts: 2008
Total Forecast Employment Growth: 0.6%Total Forecast Employment Growth: 0.6%
6
Population growth Population growth
Alaska population estimate: 676,987 as of July 1, 2007Alaska population estimate: 676,987 as of July 1, 2007
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
1.80%
Alaska
US
7
Unemployment ticks upward… Unemployment ticks upward…
8
… … With huge regional differencesWith huge regional differences
March 2008 Unemployment by region, not seasonally adjusted. State avg 7.4%March 2008 Unemployment by region, not seasonally adjusted. State avg 7.4%
9
Per capita real income growth Per capita real income growth
0%
1%
2%
3%
4%
5%
6%
7%
8%
2000 2001 2002 2003 2004 2005 2006 2007
Alaska
US
10
Housing: Sales down, prices steadyHousing: Sales down, prices steady
5,000
7,500
10,000
12,500
15,000
$100,000
$150,000
$200,000
$250,000
$300,000
# of Loans [L]
Avg Price [R]
11
Housing: Q4 down from year agoHousing: Q4 down from year ago
0
1000
2000
3000
4000
5000
$200,000
$220,000
$240,000
$260,000
$280,000
# of Loans [L]
Avg Price [R]
12
Unrestricted revenue: 91% from oilUnrestricted revenue: 91% from oil
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
Un
restr
icte
d R
even
ue (
$ M
illio
ns)
.
Oil revenues
Non-oil revenue
History Forecast
13
Oil prices are higher;Oil prices are higher;Production is in declineProduction is in decline
$-
$20
$40
$60
$80
$100
AN
S O
il P
rice
($
/ Bar
rel)
.
500
700
900
1,100
1,300
1,500
. AN
S O
il Pro
ductio
n -
(barrels p
er day x 1000)
Alaska Oil Price
Alaska Oil Production
History Forecast
14
Three severance tax hikes boost Three severance tax hikes boost state revenue.state revenue.
Revenue From Oil & Gas Severance Tax.Revenue From Oil & Gas Severance Tax. Key tax changes:Key tax changes:
1) Administrative change to ELF tax (tax rate 15% of gross * ELF) 1) Administrative change to ELF tax (tax rate 15% of gross * ELF) 2) New PPT Severance tax, (tax rate 22.5% on net minus credits)2) New PPT Severance tax, (tax rate 22.5% on net minus credits)3) New ACES Severance tax, (tax rate 25% on net minus credits)3) New ACES Severance tax, (tax rate 25% on net minus credits)
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$ B
illi
on
s
. History Forecast
1
3
2
15
A budget surplus, for nowA budget surplus, for now
History & Forecast General Purpose Unrestricted Revenue; Spending Estimates are Unofficial & for History & Forecast General Purpose Unrestricted Revenue; Spending Estimates are Unofficial & for Illustration Purposes Only.Illustration Purposes Only.
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$ B
illio
ns
.
General Fund Spending(Unofficial)
General Fund Revenue
History Forecast
16
Alaska’s $40 billion “rainy day” fundAlaska’s $40 billion “rainy day” fund
Historical and Projected Alaska Permanent Fund Value at end of fiscal yearHistorical and Projected Alaska Permanent Fund Value at end of fiscal year
$23.9
$25.1
$26.5
$24.8
$23.5
$24.2
$27.4
$30.0
$32.9
$37.8
$40.2
$42.6
$45.1
$47.7
$50.5
$53.5
$-
$10
$20
$30
$40
$50
$60
1998 2000 2002 2004 2006 2008 2010 2012
$ B
illi
on
s .
17
……And it pays dividends to each AlaskanAnd it pays dividends to each Alaskan
Historical and Projected Permanent Fund Dividend Payment, Per Eligible AlaskanHistorical and Projected Permanent Fund Dividend Payment, Per Eligible Alaskan
$1,5
41
$1,7
70
$1,9
64
$1,8
50
$1,5
41 $1,1
08
$920
$846
$1,1
07
$1,6
54
$2,0
48
$2,2
87
$2,4
57
$2,4
29
$2,5
60
$2,7
49
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1998 2000 2002 2004 2006 2008 2010 2012
Per-
pers
on
div
iden
d .
18
On the horizon: On the horizon: A gas pipelineA gas pipeline
Two Proposals:Two Proposals:
TransCanada proposalTransCanada proposal Selected Under Gov Selected Under Gov
Palin’s AGIA initiativePalin’s AGIA initiative
Conoco/BP proposal Conoco/BP proposal Code name DenaliCode name Denali
Pipe to Alberta/Chicago, Pipe to Alberta/Chicago, Cost $20-40 billion +Cost $20-40 billion +
19
On the horizon: A Mining boomOn the horizon: A Mining boom
$675mm E&D in $675mm E&D in 2006, likely higher 2006, likely higher in 2007.in 2007.
Pebble: world’s Pebble: world’s largest copper minelargest copper mine
Donlin Creek: will Donlin Creek: will double Alaska gold double Alaska gold productionproduction
Dozens of smaller Dozens of smaller prospectsprospects
20
Outlook: Short termOutlook: Short term
Good for businessGood for business $2,000 PFD checks $2,000 PFD checks High commodity prices (Good for Alaska)High commodity prices (Good for Alaska)
Great for state governmentGreat for state government Oil-induced revenue surplusOil-induced revenue surplus
Uncertain for individualsUncertain for individuals Questions about Housing & InflationQuestions about Housing & Inflation Two-edged sword of commodity pricesTwo-edged sword of commodity prices $2,000 PFD checks, strong business & $2,000 PFD checks, strong business &
governmentgovernment
21
Outlook: Longer termOutlook: Longer term
Oil prices level around $80/bblOil prices level around $80/bbl Continued declines in oil production Continued declines in oil production
mean state budget deficits returnmean state budget deficits return Potential economic boom from Potential economic boom from
megaprojects:megaprojects: Natural Gas pipelineNatural Gas pipeline Pebble / Donlin Creek minesPebble / Donlin Creek mines
Risk: Significantly lower prices for Risk: Significantly lower prices for oil, gas, mineralsoil, gas, minerals
22
For more information For more information
Dan StickelDan Stickel
Alaska Department of RevenueAlaska Department of Revenue
[email protected]@alaska.gov
www.tax.alaska.govwww.tax.alaska.gov