Legislature(2025 - 2026)SENATE FINANCE 532
03/13/2025 09:00 AM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Three Year Budget Outlook Update – Legislative Finance Division | |
| Presentation: Spring Revenue Forecast – Department of Revenue | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
March 13, 2025
9:01 a.m.
9:01:34 AM
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator James Kaufman
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
Senator Donny Olson, Co-Chair
Senator Mike Cronk
ALSO PRESENT
Alexei Painter, Director, Legislative Finance Division;
Adam Crum, Commissioner, Department of Revenue; Dan
Stickel, Chief Economist, Economic Research Group, Tax
Division, Department of Revenue.
SUMMARY
PRESENTATION: THREE YEAR BUDGET OUTLOOK UPDATE
LEGISLATIVE FINANCE DIVISION
PRESENTATION: SPRING REVENUE FORECAST DEPARTMENT OF
REVENUE
Co-Chair Hoffman discussed the agenda.
^PRESENTATION: THREE YEAR BUDGET OUTLOOK UPDATE
LEGISLATIVE FINANCE DIVISION
9:02:52 AM
ALEXEI PAINTER, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
discussed a presentation entitled "Response to Questions
from 3-10 Presentation" (copy on file). He relayed that he
would discuss his response to questions generated during
the March 10, 2025, committee meeting. The committee's
request was to see the scenarios comparing the House
amended version of HB 269 to the original version. He noted
that the amended House version added $22 million to the
original version.
Mr. Painter looked at slide 2, "K-12 Funding Legislation
and Trends:
• The FY25 budget included $174.7 million in funding
above the Foundation Formula (equivalent to $680 in
the Base Student Allocation) and $7.3 million above
the Pupil Transportation formula ($182.0 million
total).
• The Governor proposed two major K-12 bills this
year: SB 66 (Tribal Compacting) and SB 82 (Education
Omnibus). In the House, the Rules Committee CS for HB
69 would increase the BSA by $1,000 and add reading
incentive grants that were proposed in the Governor's
bill.
• In FY26, the projected K-12 formula amount went down
by $28.7 million UGF, primarily due to a lower student
count. Based on the Department of Labor's demographic
projections, this may continue over the next several
years.
9:03:47 AM
Mr. Painter spoke to slide 3, "Medicaid Projection
• According to the Long-Term Medicaid Forecast by
Evergreen Economics, the UGF cost of Medicaid is
expected to grow by 4.5% per year.
• The table below illustrates the effect of 4.5%
growth in Medicaid in FY27 and FY28 compared to growth
with inflation (2.5%).
• At 2.5% annual growth, Medicaid UGF would increase
by $37.8 million from FY26 to FY28. At 4.5% growth, it
would increase by $68.7 million.
Mr. Painter referenced the table at the bottom on the slide
and noted that the projection increased by $31 million in
FY2028.
9:04:43 AM
Mr. Painter referenced slide 4, "Senate Finance FY26 Budget
Scenario
•The Senate Finance co-chairs requested a scenario to
envision what the final FY26 budget could look like.
This does not reflect final decisions and is
illustrative only.
•Since the February 19 presentation, the budget
baseline has been changed to the Governor's amended
budget
The placeholder for new contracts has been
increased from $29.6 million last month to $40.0
million now, primarily based on the ACOA contract
coming in with an 11% increase.
Mr. Painter detailed that LFD had seen three contracts that
were part of the governor's amendments, and expected six
more before the end of session, which would change the
placeholder figure.
9:05:26 AM
Mr. Painter turned to slide 5, "Senate Finance FY26 Budget
Scenario - $680 BSA Increase, 75/25 PFD," which showed a
PFD payout of $1,420 per recipient.
9:05:36 AM
Mr. Painter considered slide 6, "House Finance Co-
Chairman's FY26 Budget Scenarios
•A House Finance Co-Chairman did a similar exercise in
a March 5, 2025 meeting, but included several PFD
scenarios:
1.75/25 PFD
2.$1,000 PFD
3.$2,000 PFD
4.Statutory PFD
5."Balanced Budget" PFD
•The Senate Finance Co-Chairs asked to show Scenario 5
in this presentation. The remaining scenarios are part
of the meeting documents for the March 5 House Finance
Committee meeting.
•The House three-year scenarios grow with inflation
for all items rather than having Medicaid grow at 4.5%
like the Senate scenario does.
Mr. Painter noted that the 5 scenarios could be viewed in
the House Finance March 5, 2025, budget documents.
9:05:55 AM
Mr. Painter displayed slide 7, "HFIN Co-Chair FY26 Budget
Scenario 5 - $1,000 BSA Increase, Balanced Budget PFD,"
which showed $1,000 BSA increase and a PFD amount that
would balance the budget - $736 per recipient.
Co-Chair Hoffman asked Mr. Painter to remind the committee
of the previous year's dividend.
Mr. Painter recounted that the previous year's dividend had
been a combination of an energy relief payment and PFD. The
dividend portion was a 75/25 split, the combined effect
resulted in a PFD totaling $1,702.
Co-Chair Hoffman estimated that the proposed scenario on
slide 7 had a PFD that was $1000 less than the previous
year.
Mr. Painter agreed.
9:07:03 AM
Mr. Painter highlighted slide 8, "House Finance Co-
Chairman's FY25-28 Scenario 5 - Modified by SFIN to Add
Medicaid Growth of 4.5% from MESA Report and full,"
highlighted that there was $1,000 BSA increase as well as
an additional $22 million for reading grants. He explained
that the result of that was a reduced PFD - $700 per
recipient.
Co-Chair Hoffman relayed that the committee would be
hearing from DOR next, and whatever that presentation
reflected would result in an update to LFD's current
slides.
Mr. Painter relayed that he would be happy to bring the
updated information back to the committee.
9:08:50 AM
Mr. Painter looked at slide 9, "FY26-28 Senate Finance
Scenario":
•Assumes existing schedules for statewide items, adds
$7.8m placeholder for new school bond debt starting in
FY27.
•Agency operations and the capital budget grow with
inflation (2.5%) over FY26 levels (from scenario on
previous page), except Medicaid is shown with a 4.5%
growth rate.
•Adds additional $66.5 million for AMHS in FY28 to
replace expired federal funds.
•$50.0 million supplemental budget placeholder in FY26
and beyond.
9:09:22 AM
Mr. Painter addressed slide 10, "Senate Finance FY25-28
Scenario - $680 BSA Increase, 75/25 PFD," which showed a
table reflecting a deficit of approximately $4 million in
FY2026, growing to $6 million in FY2028.
9:09:44 AM
Mr. Painter advanced to slide 11, "House Finance Co-
Chairman's FY25-28 Scenario 5 - $1,000 BSA Increase,
Balanced Budget PFD," which showed a balanced budget before
supplementals, which increased the deficit to $50 million.
He noted that the FY2026 $746 dividend decreased in the out
years.
Co-Chair Hoffman reiterated that the dividend continued to
decline in the out years. He assumed that in a decade or
so, the PFD would be completely eliminated. In talking with
members in the House and Senate from both parties, there
was a strong desire to have a PFD continue into the future.
9:11:27 AM
Mr. Painter looked at slide 12, "House Finance Co-
Chairman's FY25-28 Scenario 5 - Modified by SFIN to Add
Medicaid Growth of 4.5% from MESA Report and full HB 69
Cost ($275.9 million)," which showed a table that reflected
a modification requested by the co-chairs. He pointed out
that the higher cost for the K-12 bill as well as the
faster growth of the cost of Medicaid. The change
collectively reduced the amount of the balanced-budget PFD
to $450 in FY2028.
9:12:08 AM
Senator Merrick asked whether Mr. Painter had an idea of
how much the state paid the federal government out of the
PFD.
Mr. Painter believed that it was approximately 15 percent
to 20 percent.
Co-Chair Hoffman thought it was clear that the direction of
Scenario 5 gave the state, which caused some concern
regarding the PFD. He reiterated that the committee
expected an update on the slides after the release of the
DOR Spring Revenue Forecast.
^PRESENTATION: SPRING REVENUE FORECAST DEPARTMENT OF
REVENUE
9:13:53 AM
ADAM CRUM, COMMISSIONER, DEPARTMENT OF REVENUE, relayed
that he was going to present the Spring 2025 Revenue
Forecast. He relayed that the UGF forecast for 2025 was
essentially unchanged from the fall forecast.
9:15:09 AM
DAN STICKEL, CHIEF ECONOMIST, ECONOMIC RESEARCH GROUP, TAX
DIVISION, DEPARTMENT OF REVENUE, discussed a presentation
entitled "Spring 2025 Forecast Presentation - Senate
Finance Committee(copy on file). He relayed that the
outline of the presentation was like what was presented in
January 2025. He thanked his staff for their work on the
forecast.
9:16:08 AM
Mr. Stickel looked at slide 2, "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
9:16:37 AM
Mr. Stickel showed slide 3, "Forecast Background and Key
Assumptions."
Mr. Stickel referenced slide 4, " 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 noted that the spring forecast was an update to
the Revenue Sources Book (RSB) that was published in the
fall.
9:17:11 AM
Mr. Stickel turned to slide 5, "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
Mr. Stickel pointed out that the information was a scenario
within a range of uncertainty and made a note of volatility
in the market. He noted that the non-petroleum forecast was
predicated on a stable and growing economy.
9:19:37 AM
Mr. Stickel considered slide 6, "Relative Contributions to
Total State Revenue: FY 2024," which showed a graphical
representation of state revenues. Due to the lack of a
statewide income or sales tax, the state's revenue was
concentrated in federal funds, investments, and petroleum
revenue. The three sources accounted for over 93 percent of
state revenue.
9:20:31 AM
Mr. Stickel displayed slide 7, "Relative Contributions to
Total State Revenue: FY 2025," which showed a similar
graphic to the previous slide, but for FY2025. All other
revenue sources were forecast to contribute under 9 percent
of total revenue for FY2025.
9:20:54 AM
Mr. Stickel displayed slide 8, "Spring 2025 Revenue
Forecast."
Mr. Stickel looked at slide 9, "Unrestricted Revenue
Forecast: FY 2024 and Changes to Two-Year Outlook," which
showed a table of oil price, oil production, the Permanent
Fund transfer, and unrestricted revenue for FY 2024 through
FY 2026. He pointed out that the oil price forecast,
compared to the fall forecast, was increased by .62 cents
per barrel for FY 2025, and decreased by $2 per barrel for
FY 2026.
Mr. Stickel noted that the futures market as of that
morning forecasted $68 per barrel oil. He cited that there
was essentially no change to in the permanent fund transfer
to the general fund. He said that the total unrestricted
revenue did not change for FY2025 but saw a $70 million
decrease for FY2026.
Co-Chair Hoffman queried whether the change in FY 2025 of
.4 was due to the timing in the fiscal year.
Mr. Stickel looked at FY 2025 numbers and made note of a
variety of changes in the different components of the
revenue forecast. He said that the zero change was
coincidental.
9:23:46 AM
Mr. Stickel addressed slide 10, "Total Revenue Forecast: FY
2024 to FY 2026 Totals," which showed a table of revenue
types broken out into four categories of restriction, shown
through FY 2024 to FY 2026 with columns showing the percent
of change.
9:25:16 AM
Mr. Stickel advanced to slide 11, "Unrestricted Revenue
Forecast: FY 2024 to FY 2026 Totals," which showed a table
breaking the state's Unrestricted revenue into the three
categories of investment revenue, petroleum revenue, and
non-petroleum revenue. He cited that the investment revenue
was the primary source of unrestricted revenue. That source
contributed $3.7 billion in FY 2024 and was projected to
contribute $3.8 billion in FY 2025 and $3.9 billion in FY
2026. Petroleum Revenue contributed $2.5 billion in FY 2024
and was projected to contribute $1.9 billion in FY 2025 and
$$1.6 billion in FY 2026. Non-Petroleum revenues were
forecasted to contribute $4 million in FY 2025 and
approximately $600 million in FY 2026.
9:26:31 AM
Mr. Stickel looked at slide 12, "Unrestricted Investment
Revenue: FY 2024 to FY 2026 Totals," which showed a table
showing the percent of market value (POMV) transfer and the
PF investment revenue. He said that the transfer
contributed $3.5 billion in FY 2024. The transfer was
expected to be $3.6 billion in FY 2025 and $3.8 billion in
FY 2026. He stated that the remainder of the unrestricted
general fund revenues would be primarily earnings on cash
balances of the general fund.
9:27:11 AM
Mr. Stickel showed slide 13, " 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 noted that the bar graph on slide 13 showed the
POMV transfer forecast from 2025 through 2035. He explained
that the forecast was based on a 7.76 percent long-term
assumption for the fund and a draw of 5 percent.
9:28:02 AM
Mr. Stickel referenced slide 14, "Unrestricted Petroleum
Revenue: FY 2024 to FY 2026 Totals," which showed a table
with the four main sources of unrestricted petroleum
revenue including taxes and royalties. He detailed that the
taxes included the Oil and Gas Production Tax, the
Petroleum Corporate Income Tax, and the Petroleum Property
Tax. In all, there was just under $900 million in petroleum
taxes in FY 25, and approximately $800 million in FY 2026.
The Oil and Gas Royalties were the largest source of
petroleum revenue to the state, bringing in $1.15 billion
in FY 2024, and forecasted $990 million in FY 2025, $857
million for FY 2026. The royalty numbers only reflected the
unrestricted general fund portion of the royalties, and
additional 20 to 25 percent were deposited in the permanent
fund and one-half of one percent was deposited in the
school fund.
Senator Kiehl noticed a bump in petroleum property tax in
the current year, but not in the coming year. He observed
that there were a couple of large projects underway, which
gave him the impression that property tax revenue would
increase.
Mr. Stickel pointed to the increase in property tax from FY
2024 to FY 2025, which was a significant increase in the
state share. He detailed the process of forecasting
property tax. He said that the largest source of revenue to
the state was Trans-Alaska Pipeline because the state
received a significant share of its property tax from the
pipe that ran through unorganized boroughs. He noted that
much of the large spending for new fields such as Pikka and
Willow came from the North Slope Borough. The state
received a small share of the property tax, but much of the
tax in organized boroughs went to those boroughs.
9:31:32 AM
Senator Kiehl calculated that the net increase from FY 2025
to FY 2026 was $5 million.
Mr. Stickel relayed that DOR had detailed backup to support
the numbers on the slide that could be provided to the
committee.
9:32:18 AM
Mr. Stickel turned to slide 15, "Unrestricted Non-Petroleum
Revenue: FY 2024 to FY 2026 Totals," which showed a table
some additional detail for the unrestricted non-petroleum
revenue. The largest source forecast was taxes. Corporate
income tax in FY 2024 brought in a little over $177 million
with $210 million forecasted in FY 2025, and $235
forecasted in FY 2026. The forecast was predicated on
continued economic growth and the projections were broad
based across different industries and incorporated some
recovery from certain industries that suffered Covid-19
losses. The fall version of the presentation showed a
negative number for the Mining License Tax for FY 24, which
was due to a variety of factors including one-time
adjustments and weak base metal prices in calendar year
2023. He noted that DOR was forecasting a recovery in
mining prices. Other than the taxes, there was a variety of
different revenue sources such as licensing and permits,
fines, and dividends from state corporations.
Senator Kiehl asked Mr. Stickel to provide positive
indicators about the state's economy.
Mr. Stickel relayed that when discussing economy in terms
of the forecast, DOR mostly referenced the national economy
and how it drove corporate income tax and tourist
information. Putting the forecast together, the general
assumption was continued economic growth. He thought there
had been discussion in the public sphere related to a
"recalibration" of sorts.
Co-Chair Hoffman spoke to a potential recession under the
current federal administration. He asked for Mr. Stickel's
opinion and how a recession might impact the forecast.
Mr. Stickel relayed that the forecast did not include
consideration of a recession but was predicated on stable
economic growth. He thought there was increased probability
of a 35 percent chance of recession in the coming year.
9:36:39 AM
Senator Kiehl was interested in the revenue projections and
how the projections reflected the growth of Alaska's
economy.
Mr. Stickel noted that the Department of Labor and
Workforce Development had projected a very slight growth in
the population base. He said that the department assumed
stability in the tourism sector a high levels, operation
and development at the major mines, and expanding business
profits. He made note of an assumption related to the
fishing industry, which had suffered greatly in the last
few years; the department could not predict how that would
play out but had touched based with stakeholders outside of
state government to develop the five-year time horizon for
revenue recovery. He related that the consensus had been
that the industry was likely to continue suffering.
Senator Kiehl thought it was intriguing that predictions of
a growing economy in the state was good for four-tenths of
a percent.
9:39:28 AM
Mr. Stickel showed slide 16, "Petroleum Forecast
Assumptions Detail." He noted that the final portion of the
presentation focused on key assumptions around the
petroleum revenue forecast and how those assumptions had
changed.
Mr. Stickel displayed slide 17, "Petroleum Detail: Changes
to Long-Term Price Forecast," which showed a line graph
reflecting the spring 2025 oil price forecast compared to
the fall 2024 forecast. He noted that DOR used the median
futures data for the first five trading days in March 2025.
He mentioned that he glanced at the futures market earlier
in the morning, and there had not been significant change
to the outlook beyond what was shown on the slide. He said
that the FY 2024 prices came in a $.62 per barrel above
predictions and the FY 2025 prices were $62 per barrel
above the fall forecast at $73.86 per barrel. FY 2025 price
was reduced to $68 per barrel. Prices stayed just under the
$70 range over the time horizon of the forecast.
9:41:07 AM
Mr. Stickel highlighted slide 18, "Petroleum Detail:
Nominal Brent Forecasts Comparison as of March 11, 2025,"
which showed a line graph that compared the previous
forecast on slide 17 with other sources of forecasts and
had been updated on March 11, 2025, using data from that
day.
9:41:58 AM
Mr. Stickel looked at slide 19, "Petroleum Detail: UGF
Relative to Price per Barrel (without POMV): FY 2026,"
which showed a graph with an updated sensitivity analysis
showing how revenues could change if prices did not come in
as forecasted. He pointed out that the forecasted price for
FY 2026 would contribute $2.3 billion in unrestricted
general fund revenue (outside of the POMV). He noted the
assumption assumes official forecasted North Slope
production of 466,600 barrels per day. Near the forecasted
ANS price, per Spring 2025 forecast, a $1 increase or
decrease in price leads to an approximately $35 million
change in UGF revenue.
Co-Chair Hoffman asked by how many million how the
forecasted numbers reduced the revenue from the current
year.
Mr. Stickel explained that the oil price forecast for FY
2026 compared to the fall forecast was a reduction of $2
per barrel. It reduced the UGF revenue forecast by $70
million.
9:43:27 AM
Mr. Stickel addressed slide 20, "Petroleum Detail: North
Slope Petroleum Production Forecast," which showed a graph
depicting DOR's forecast for the next decade as well as a
high case and a low case. He noted that the forecast was
prepared by DNR. Generally, there was a picture of
stability for the next several years as natural declines in
mature fields were offset by additional drilling and
development. Once in 2029, and beyond, assumptions for
increased in production were incorporated.
9:44:25 AM
Mr. Stickel advanced to slide 21, "Petroleum Detail:
Changes to North Slope Petroleum Production Forecast,"
which showed a comparison of the updated 2025 spring
forecast with the fall 2024 forecast. He noted that DNR had
incorporated the most recent production information by
field. Updated information for drilling and development at
the different fields had also been updated. He summarized
that generally the production forecast between fall and
spring had not varied.
9:45:22 AM
Mr. Stickel looked at slide 22, "Petroleum Detail: North
Slope Allowable Lease Expenditures," which showed the
history and forecast for allowable lease expenditures,
which were the capital and operating costs for oil
companies doing business. Capital expenditures were $4.2
billion in FY 2024, which represented a high-water mark.
There was an expected increase for FY 2025, with continued
high levels of capital expenditures stabilizing at $3.4
billion per year. The big increase in FY 2024 and following
years represented large amounts of spending and activity in
fields like Pikka and Willow. He said that there was a lot
of money currently being spent on the North Slope. He said
a general modest and stable trend in operating expenditures
was expected.
9:46:59 AM
Mr. Stickel spoke to slide 23, " Petroleum Detail: North
Slope Transportation Costs," which showed a bar graph with
a similar history and forecast but for transportation
costs. The average transportation cost was $10.53 per
barrel in FY 2024. The cost represented the total cost of
getting oil onto a tanker and to market. The three largest
sources of cost are marine costs, TAPS tariff, and other.
He was expecting transportation costs to remain very stable
over the next decade. Any costs of operating pipelines were
expected to be offset by increased throughput in the
pipeline.
9:48:38 AM
Mr. Stickel referenced slide 24, "State Petroleum Revenue
by Land Type," which showed a table depicting land lease
status by revenue component. He reminded that the state
revenue received from different fields varied by location.
All taxes applied to any production within the state and up
to the state's three-mile limit, while royalty tax
contributions varied depending on landowner.
Co-Chair Hoffman thanked Commissioner Crum and Mr. Stickel
for the presentation. He thought the takeaway was the
deficit had increased by $70 million.
Commissioner Crum commented that the most incorporated data
had been incorporated into the presentation.
9:50:45 AM
Senator Merrick asked whether the administration had any
revenue sources to consider due to the current deficit.
Commissioner Crum referenced conversations. He stated that
he could not speak on behalf of the governor's office.
Co-Chair Hoffman discussed the agenda for the following
day.
ADJOURNMENT
9:52:02 AM
The meeting was adjourned at 9:52 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 031325 LFD SFIN Response to Committee Questions 3-13-25.pdf |
SFIN 3/13/2025 9:00:00 AM |
|
| 031325 S.FIN Spring 2025 Forecast Presentation 3.13.2025.pdf |
SFIN 3/13/2025 9:00:00 AM |
|
| 031325 DOR Response to SFIN Spring Forecast Questions 03.21.25.pdf |
SFIN 3/13/2025 9:00:00 AM |