Despite Oil Prices Plummeting, S&P Not Downgrading Alaska, Yet
Photo credit: roger4336
Although the rapid decline in oil prices exacerbates Alaska’s existing fiscal budget deficit, whether it will weaken the state’s credit quality will depend on the state’s budgetary response. For fiscal 2015, the state assumed oil prices would average $105.06 per barrel, giving rise to about 495,900 barrels
per day of production on Alaska’s North Slope. Based on more recent price and production information, the state has revised its estimates to $76 per barrel and 509,500 barrels per day for fiscal 2015.
The state’s assumptions regarding oil prices and production are integral to its budget condition because oil-related revenues made up 88% of its estimated revenue for the 2014 fiscal year and 79% of fiscal 2015. At enactment, the state’s budgeted general fund expenditures for fiscal 2015 exceeded its unrestricted revenues by $1.4 billion. Weaker oil prices and production resulted in an updated budget gap of $3.5 billion, equal to 57% of general fund expenditures. For most states, an operating deficit of this magnitude would likely result in immediate negative rating consequences. In Alaska’s case, however, extraordinarily large budget reserves effectively buy the state time to deal with its structural misalignment.
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JAMES LAPLANTE, also known as JIMMY O’BRIEN, who works as the PD and morning man at iHEARTMEDIA Country KASH-F (COUNTRY 107.5)/ANCHORAGE, was arrested by local police last evening for posessesion and distribution of child pornographY, as well as online enticement of a minor, according to the ALASKA DISPATCH NEWS.
I received a Facebook message the other day from one of my readers in Cordova, Alaska.
