Legislature(2025 - 2026)ADAMS 519
03/13/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Spring Revenue Forecast by the Department of Revenue | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 13, 2025
1:35 p.m.
1:35:09 PM
CALL TO ORDER
called the House Finance Committee meeting to order at
1:35 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard (via teleconference)
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative DeLena Johnson
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Adam Crum, Commissioner, Department of Revenue; Dan
Stickel, Chief Economist, Economic Research Group, Tax
Division, Department of Revenue.
SUMMARY
PRESENTATION: SPRING REVENUE FORECAST BY THE DEPARTMENT OF
REVENUE
Co-Chair Josephson reviewed the meeting agenda.
^PRESENTATION: SPRING REVENUE FORECAST BY THE DEPARTMENT OF
REVENUE
1:36:15 PM
1:36:45 PM
ADAM CRUM, COMMISSIONER, DEPARTMENT OF REVENUE, introduced
a PowerPoint presentation titled "Spring 2025 Forecast
Presentation: House Finance Committee," dated March 13,
2025 (copy on file). He made brief remarks. He summarized
that the FY 2025, projected Unrestricted General Fund (UGF)
revenue was essentially unchanged compared to the Fall 2024
forecast due to a slight increase in expected petroleum
revenue offset by decreases to expected non-petroleum and
investment revenues. He expounded that for FY 2026,
projected UGF revenue had decreased by $70 million, driven
by lower revenue and production projections. He thanked the
Tax Division, the Economic Research Group, and the
Department of Natural Resources for their efforts on the
forecast.
Co-Chair Josephson recognized Representative Elam in the
room.
DAN STICKEL, CHIEF ECONOMIST, ECONOMIC RESEARCH GROUP, TAX
DIVISION, DEPARTMENT OF REVENUE, began with slide 2 titled
"Agenda:"
1.Forecast Background and Key Assumptions
2.Spring 2025 Revenue Forecast
•Total State Revenue
•Unrestricted Revenue
3.Petroleum Forecast Assumptions Detail
•Oil Price
•Oil Production
•Oil and Gas Lease Expenditures
•Oil and Gas Transportation Costs
•Petroleum Revenue by Land Type
Mr. Stickel turned to slide 4 titled "Background: Spring
Revenue Forecast
•Released March 12, 2025
•Historical, current, and estimated future state
revenue
•Updates key data from Fall Revenue Sources Book
•Official revenue forecast used for final budget
process
•Located at tax.alaska.gov
Mr. Stickel addressed slide 5 titled "Spring Forecast
Assumptions
•The economic impacts of financial and geopolitical
events are uncertain; DOR has developed a plausible
scenario to forecast these impacts
•Key Assumptions:
O Investments: Stable growth in investment
markets, 7.90% for remainder of FY 2025 and 7.65%
for FY 2026+
O Federal: The forecast incorporates known
funding as of March 1, 2025. FY 2027+ assumed to
grow with inflation.
O Petroleum: Alaska North Slope oil price of
$74.48 per barrel for FY 2025 and $68.00 per
barrel for FY 2026.
O Non-Petroleum: Continued economic growth. 1.6
million cruise passengers, five-year recovery for
fisheries taxes, minerals prices based on futures
markets.
1:40:23 PM
Representative Stapp noted that all of the financial
markets were currently down. He wondered about the impact
that might have on the forecast. Mr. Stickel agreed there
had been a downturn in financial markets. He elaborated
that the economists had incorporated actual investment
returns through January, and the 7.9 percent was the
assumption that applied beginning in February. He explained
how the Permanent Fund returns were calculated. The
unrestricted general fund transfer was based on the average
ending market value (trailing market average) of the first
five years of the last six years. The method smoothed out
the volatility and provided more predictability in the
revenue forecast.
Mr. Stickel reported that the department worked with the
Office of Management and Budget (OMB) to incorporate all
known federal funding since the beginning of March for the
FY 26 forecast.
Co-Chair Josephson interjected that Representative Allard
was present online and Representative Jimmie had joined the
meeting.
Mr. Stickel reminded the committee that the forecast
presented a scenario within a range of potential outcomes
and stressed the uncertainty of any revenue forecast. He
pointed out that the 5 year recovery for fisheries taxes
only included revenue and not the impacts on jobs or
economic impacts.
1:44:35 PM
Mr. Stickel moved to an illustration on slide 6 titled
"Relative Contributions To Total State Revenue: FY 2024:"
He noted that the state did not have a personal income tax
or state sales tax, therefore, the primary revenue sources
were Federal Revenue at 37.2 percent, Investment Earnings
at 6.7 percent (including POMV), Petroleum at 18.7 percent,
and Other sources of revenue were 7 percent. [Total State
Revenue: $16.3 Billion.]
Representative Stapp asked the department to include the
tax other industries pay to municipal governments in the
future. Mr. Stickel asked if it was a comment or a request.
He shared that the Department of Commerce, Community and
Economic Development (DCCED) published a document that
included information regarding local taxes. Representative
Stapp clarified that the public did not think the state
received any revenue at all from the other sources via the
depiction on the slide. He clarified that municipalities
did actually tax a lot of the companies listed.
Co-Chair Foster cited federal revenue. He thought he
recently saw Alaska had been named the number one state for
its dependency on federal dollars. He noticed that in FY 24
federal revenue was 37 percent and jumped to 41 percent in
FY 25. He asked if it was per capita or total and asked for
comment. Mr. Stickel acknowledged that he saw the same data
and noted that the state received more federal money than
it paid to the federal government. He expounded that
federal revenue was a key source of funding for Alaska and
was thought to be stable but there was some concern over
coming uncertainty.
1:48:38 PM
Representative Hannan requested the actual dollar amounts
along with the percentages on slide 6. She wanted to
determine if growth in the percentage was due to growth in
the industry or due to a decrease in other industries like
petroleum. She asked if mining earnings increased from FY
24 to FY 25 or if the percentages shifted. Mr. Stickel
answered that DOR was projecting an increase in mining
revenue from FY 24 to FY 25. He projected an increase in
mining license tax. He would provide the dollar figures.
Representative Johnson followed up on Co-Chair Foster's
question. She noted that every year there was some type of
uncertainty. She asked if there was a factor included in
the forecast showing uncertainty. She wondered about more
uncertainty related to federal revenue due to the recent
federal level changes compared to past years.
1:51:35 PM
Mr. Stickel responded that federal funding was experiencing
a period of uncertainty for better or worse; there were
potential risks and also exciting opportunities being
discussed. He indicated that the division did include a
sensitivity analysis in their investment revenue and
petroleum revenue projections.
1:52:44 PM
Mr. Stickel turned to slide 7 titled "Relative
Contributions To Total State Revenue: FY 2025. [Total
State Revenue: $17.4 Billion] He reiterated that federal
revenue, investment earnings, and petroleum were the
highest sources of revenue and other sources of revenue
were roughly 9 percent. He highlighted Slide 9 titled
Unrestricted Revenue Forecast: FY 2024 and Changes to Two-
Year Outlook. The chart showed FY 24, FY 25 and projected
FY 26 numbers. The forecasted decrease for oil was $2.00
bbl. in FY 26. The production forecast increased modestly
for FY 26 to 469.5 bbl. from 466.6 in FY 25. The Permanent
Fund Transfer (PF) transfer showed no change to the FY 26
forecast due to the trailing market average. The UGF change
in FY 26 was a $70 million decrease in the forecast due to
the $2 decrease in the price of oil.
Representative Galvin asked how certain the department was
in the projected oil price. Mr. Stickel answered that there
was always uncertainty around oil prices. He informed the
committee that every $1.00 change in the price of oil
equated to $35 million UGF revenue.
Co-Chair Foster considered the fall forecast from 2024 for
FY 25. He relayed that the hope was at the time that the
oil price may be up a bit to around $71 in the spring. He
voiced that the oil price drop to $60 currently was
substantial. He emphasized that an oil price decrease by
$2.00 was significant.
1:56:25 PM
Mr. Stickel advanced to slide 10 titled "Total Revenue
Forecast: FY 2024 To FY 2026 Totals. He noted the charts
showed revenues from all sources. He reported that in FY 24
the total was roughly $16.3 billion and was forecasted at
$17.4 billion and $15.9 billion in FY 26. The income was
broken down by UGF, Designated General Fund (DGF), Other
Restricted Revenues, and Federal Revenues. He noted that
the remainder of the presentation was focused on UGF. He
discussed slide 11 titled "Unrestricted Revenue Forecast:
FY 2024 To FY 2026 Totals." The chart showed the three main
sources of income: federal revenue, investment earnings,
and petroleum revenue.
1:58:17 PM
Mr. Stickel reviewed slide 12 titled "Unrestricted
Investment Revenue: FY 2024 to FY 2026 Totals He
delineated that total UGF revenue was 3.67 billion in FY 24
and projected to be $3.77 billion in FY 25 and $3,88
billion in FY 26, with the largest share from the POMV
transfer from the PF to General Fund (GF).
1:58:49 PM
Representative Stapp pointed to the five year average for
the Permanent Fund performance percent of market value and
noted that the 5 percent POMV exceeded the average earnings
of the fund when adjusted for inflation. Mr. Stickel
answered that he had not looked at it specifically.
Mr. Stickel underlined slide 13 titled "Unrestricted
Investment Revenue: Percent Of Market Value (POMV) Transfer
Forecast
• Permanent Fund total return for FY 2024 of 7.90%
•$80.8 billion fund value as of 1/31/25
•7.90% return assumption for remainder of FY 2025
•Long-term total return expectation of 7.65% for FY
2026+
•5.0% annual POMV transfer
Mr. Stickel pointed to the graph that spanned 10 years to
2035. He noted that he worked with the Alaska Permanent
Fund Corporation (APFC) to obtain the data. He indicated
that the data showed "a fairly stable transfer forecast
He did not have the effective inflation adjusted draw rates
and offered to provide it to the committee.
2:01:21 PM
Mr. Stickel summarized slide 14 titled "Unrestricted
Petroleum Revenue: FY 2024 To FY 2026 Totals:" The chart
depicted the Oil and Gas Production Tax, the Petroleum
Corporate Income Tax, and the Petroleum Property Tax that
applied to all oil and gas properties in the state. He
reported that the local share of petroleum property tax
totaled $500 million per year, which equated to 2 percent,
or a 20 mills tax rate and the state received the
remainder. The petroleum taxes generated $1.3 billion in FY
24 and was projected at a little under $900 million in FY
25 and under $800 million in FY 26. The Royalty revenue was
expected to be roughly $1 billion in FY 25 and $800 million
in FY 26. The total Unrestricted Petroleum revenue was
predicted at $1.9 billion in FY 25 and $1.6 billion in FY
26.
2:03:16 PM
Representative Stapp stated he was having difficulty
putting the forecast assumptions together. He reviewed the
results from the Spring 2025 Revenue Forecast (copy on
file) showing stagnant petroleum revenue and price from FY
2026 through FY 3032, with increased production and
capital, operating, and lease expenditures decreasing. He
wondered why revenue would decrease under the assumptions.
Mr. Stickel pointed to page 16, Appendix A-3 of the
forecast showing a breakdown of the different sources of
revenue. He explained that much of the new oil production
was from federal lands with less royalty revenue unlike
existing production. The production tax included some
incentives for new production offering tax credits and
gross value reduction, which allowed a tax reduction for
the first three to seven years of production from a new
field. In addition, there were impacts from carried forward
annual losses that were earned by investments in new fields
used to decrease future production taxes. He noted these
details were the reason for the stagnant revenues for
production tax and much of the benefit of the new
production would occur at the end or beyond the time
encompassing the revenue forecast.
2:06:03 PM
Co-Chair Josephson asked whether Conoco could use its Net
Operating Losses (NOL) in productive fields and if it was
the reason for the decreased revenue. Mr. Stickel could not
speak to specific companies. He relayed that if a company
were to incur an NOL it would earn a carry forward loss
eligible to reduce taxes in future years.
Representative Galvin alluded to two bills in the other
body. She asked about the per barrel difference in revenue
if one bill was to pass. She reported that another bill
changed the corporate structure for the LLC oil and gas
companies. She asked if either bill would affect future
revenue if adopted. Mr. Stickel believed she was referring
to SB 112 [Oil & Gas Production Tax] and SB 113 [Apportion
Taxable Income; Digital Business, 09/27/2025, Vetoed By
Governor]. The department had prepared fiscal analyses and
fiscal notes but had not released an analysis based on the
Spring Revenue Forecast only on the Fall 2024 forecast. The
division was in the process of updating them. He expected
that revenue would be a bit lower than the fall forecast.
2:09:11 PM
Representative Galvin asked for details regarding the SB
112 and SB 113 numbers. Mr. Stickel answered that he was
prepared to speak to the baseline revenue forecast and not
the bill analysis. He offered to follow up.
Co-Chair Josephson recollected some revenue data from the
bill hearings and relayed it to Representative Galvin.
2:10:32 PM
Representative Hannan reported that the state recouped the
difference between the amount a municipal government was
taxing up to the 20 mills limit. She asked if any local
governments taxed at the 20 mills rate for Petroleum
Property Tax and if so, whether the state received
anything. She wondered what limited municipalities from
charging the full 20 mills. Mr. Stickel was unable to
answer the question related to what prohibited
municipalities from charging 20 mills. He cited Appendix 6-
9 of the 2024 Fall Revenue Sources Book that broke out the
difference between the gross tax and the local share in FY
24; only the City of Valdez taxed at 20 mills. He deduced
that if all municipalities taxed at 20 mills the state
would lose a significant share of revenue. However, half of
the property tax state revenue was from unorganized
boroughs and there were no local municipal taxes. The state
would retain around $62 million based on that scenario.
Co-Chair Josephson asked if the tax was measured from July
1 to July 1 of each year. Mr. Stickel answered that the
corporate income tax was an annual tax typically based on a
calendar year. He surmised the question was related to
extending the petroleum tax not only to C corporations but
also to non-C corporations and what would be the impact on
revenue. He noted that the forecast predicted production
from non-C corporations would decline over the time horizon
of the forecast but expected C corporation production to
increase. The anticipated non-C corporate revenue would
decline over the ten year forecast.
2:14:31 PM
AT EASE
2:15:01 PM
RECONVENED
Mr. Stickel examined slide 15 titled "Unrestricted Non-
Petroleum Revenue: FY 2024 to FY 2026 Totals." He indicated
that many of the unrestricted sources had designated
components that were not shown on the slide. The largest
source of revenue was from Non-Petroleum Corporate Income
Tax at $177 million in FY 24, predicted to be $210 million
in FY 25, and $235 million in FY 26 for non-petroleum
corporate income tax. He highlighted the Mining License Tax
where the state paid a net refund of $1 million. He
expected it to rebound to over $33 million in FY 25. The
subtotal was $357.6 million in FY 24 and $457.2 predicted
in FY 2026. He noted that the Other category contained
miscellaneous revenues.
2:17:17 PM
Representative Hannan cited the Excise Taxes (alcohol,
marijuana, tobacco, etc.) decreasing in FY 26. She asked if
it was a result in a decline in marijuana tax. Mr. Stickel
replied that the division predicted a slight decline in
several of the excise taxes. He noted that marijuana use
had increased but there was a shift away from bud and
flower yielding the highest marijuana tax rate. Therefore,
he anticipated modest declines in marijuana tax revenue in
FY 25 and FY 26. In addition, the division identified
declines in alcohol consumption; assuming the trends of
moderation continued, the tax revenue would decline.
Finally, there was a continued shift away from taxable
tobacco products like cigarettes and towards nicotine
delivery methods that were not taxable such as vaping.
Representative Hannan referenced the Large Passenger Vessel
Gambling Tax. She wondered why there was a predicted
decline.
2:20:04 PM
Mr. Stickel replied that the forecast in FY 25 was based on
the passenger counts in 2024 where many ships were over
full capacity at over 1.7 million passengers. The forecast
assumed the ships would sail at capacity therefore,
predicting a slight reduction in the tax revenue.
Co-Chair Foster referred to the revenue breakout in excise
taxes in the revenue sources book. He noted that alcohol
tax revenue was $19.3 million, and tobacco was $14.9
million. He commented that he had initially thought that
the marijuana tax would be a huge windfall for the state
but was predicted at $6.6 million in FY 26.
Representative Johnson asked if marijuana was the state's
biggest agricultural product. Mr. Stickel did not know the
answer but acknowledged that it was a significant industry
in the state. Representative Johnson guessed that it was.
She considered other agricultural products and deduced that
they did not bring in as much tax revenue. Mr. Stickel
stated that as far as a specialized tax on an agricultural
product it created significant revenue. He noted that there
was no farming tax. The $6.6 million for FY 26 reflected
the general fund (GF) share, which was only 25 percent of
the tax collected. The remainder went to designated general
funds.
2:23:32 PM
Representative Galvin noted there was a bill related to e-
cigarettes. She wondered how it may impact the forecast if
adopted. Mr. Stickel answered that if the tobacco tax was
expanded there was a band of uncertainty around the
estimate because the division lacked data regarding the tax
base. He did not expect a large change based on prior
fiscal analyses. Representative Galvin asked if Mr. Stickel
knew the number. Mr. Stickel replied in the negative.
Co-Chair Foster pointed out that he was unaware of the
marijuana tax revenue breakdown between GF and DGF. He
calculated an additional 75 percent to the state's share of
$6.6 million and noted the total was $26.4 million. He
maintained his belief that the tax was smaller than
originally anticipated.
2:25:31 PM
Representative Stapp considered the vape tax. He asked if
people purchasing vape products on military installations
would be subject to the tax. Mr. Stickel was not certain,
but he believed there were exemptions.
Representative Hannan interjected that she was carrying the
bill, and the military bases were exempt from alcohol and
cigarette taxes.
Co-Chair Josephson asked if the mining license tax was
historically closer to $100 million. Mr. Stickel answered
in the positive and recalled that in the mid-2000's mineral
prices were high. He expounded that the mining license tax
was a net profit based tax and currently costs in mining
had increased substantially impacting profitability.
2:28:10 PM
Mr. Stickel noted that the remainder of the slides
pertained to oil and gas. He turned to slide 17 titled
"Petroleum Detail: Changes To The Long Term Forecast." The
graph depicted the 10-year forecast from the Fall 2024
versus the Spring 2025 forecasts. Mr. Stickel discussed
that FY 2025 had trended modestly higher than the prior
forecast and beginning in FY 2026, the forecast was
slightly decreased.
Co-Chair Schrage asked about any trends that may impact
petroleum prices or production. Mr. Stickel answered that
some of the past recessions had been preceded by oil price
increases. However, there was not always a correlation
between recession and oil prices.
2:30:11 PM
Mr. Stickel turned to slide 18 titled "Petroleum Detail:
Nominal Brent Forecasts Comparison as of March 11, 2025."
He detailed that the slide showed a price comparison
between the Spring 2025 Revenue Forecast and other
forecasters' predictions for the price of oil. The
division's forecasted oil prices were the same as other
forecasters; in the $65 to $71 range.
Mr. Stickel illuminated slide 19 titled "Petroleum Detail:
UGF Relative to Price per Barrel (without POMV): FY 2026
He pointed out that the slide contained a sensitivity
analysis regarding revenue changes if the forecasted price
was different than actual prices. He reminded the committee
that each $1 change in ANS oil price equated to about $35
million in revenue. The graph portrayed the potential range
of uncertainty and included a high and low range of prices.
2:31:52 PM
Mr. Stickel looked at the 10-year outlook of oil production
on slide 20 titled "Petroleum Detail: North Slope Petroleum
Production Forecast. He offered that the slide included
high and low case scenarios. Oil production was expected to
be stable over the next several years due to natural
declines in the legacy fields offset by additional
development in other fields. An increase was expected to
begin in 2029 due to new filed production. He addressed
slide 21 titled "Petroleum Detail: Changes To The North
Slope Petroleum Production Forecast." The graph represented
expected changes to production from the Fall 2024 forecast.
The slide showed the most recent data of actual production
and trends by field, which discovered only modest changes.
2:33:22 PM
Mr. Stickel reviewed Slide 22 titled "Petroleum Detail:
North Slope Allowable Lease Expenditures." The graph showed
how allowable lease expenditures had changed over the past
10 years representing the cost of production that was
deducted in the net profits tax calculation and represented
the oil companies' investment. He reported that capital
expenditures were over $4 billion in 2024 for North Slope
oil, which would increase to $5 billion in FY 2025 and
would stabilize to around $3.4 million around 2031. He
noted that large investments were currently in progress in
new fields and in existing units. He indicated that
operating expenditures were $2.9 billion in FY 24 and
slight increases were anticipated as new fields came
online.
2:34:57 PM
Representative Johnson asked if the state allowed the same
kind of tax credits on Natural Petroleum Reserve-Alaska
(NPRA) land as anywhere else. Mr. Stickel answered in the
affirmative and relayed that in terms of the oil and gas
production tax, for the North Slope, north of 68 degrees,
the same tax applied regardless of the landowner.
2:36:11 PM
Mr. Stickel addressed slide 23 titled "Petroleum Detail:
North Slope Transportation Costs. He delineated that the
graph represented total transportation costs from the field
through any feeder pipelines to the TransAlaska pipeline to
Valdez and on to the west coast via tanker. The cost of
getting oil to market was about $10.53 bbl. in FY 24 and
was predicted to decrease to under $10.00 bbl. through FY
34 due to the anticipated increase in production dividing
the cost among a greater number of barrels.
2:37:24 PM
Mr. Stickel addressed slide 24 State Petroleum Revenue by
Land Type The chart addressed how different components of
the tax system related to state petroleum revenue by land
type.
Co-Chair Josephson stated that it was not the news he was
hoping for. He thanked the presenters. He reviewed the
schedule for the following meeting.
ADJOURNMENT
2:38:53 PM
The meeting was adjourned at 2:38 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| H.FIN DOR - Spring 2025 Forecast Presentation 3.13.2025.pdf |
HFIN 3/13/2025 1:30:00 PM |
|
| revenue-spring-2025-forecast.pdf |
HFIN 3/13/2025 1:30:00 PM |
|
| HB049-DOR-TAX-1-25-25.pdf |
HFIN 3/13/2025 1:30:00 PM |
|
| SB092-DOR-TAX-2-14-25.pdf |
HFIN 3/13/2025 1:30:00 PM |
|
| SB112-DOR-TAX-3-7-25.pdf |
HFIN 3/13/2025 1:30:00 PM |
|
| DOR Response to HFIN Spring Forecast Questions 03.21.25.pdf |
HFIN 3/13/2025 1:30:00 PM |