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Woo! A busy #akleg day!

Up first is the H. Finance, which will hear an updated fiscal outlook and an update on federal CARES $. It sounds like they're still in a digesting stage on Dunleavy's proposal from last night.

Leg. Fin. Director Pat Pitney going over the state's spring revenue forecast that estimated oil would drop by $20 per barrel and production would be down ~4K barrels.

"We believe that both the price estimate and the production estimate could be very optimistic."

And if oil revenue wasn't bad enough, Pitney says if the COVID-19 market crash lasts ONLY one year that the long-term impact on the state's POMV draw would be a $300M hit. And that's IF it returns to 7% returns.

That's because the draw is a rolling five-year average.

And here's a look at the state's long-term revenue collapse since Fiscal Year 2012.

Pitney: "We've had massive decline in oil revenue." She says oil now only meets about 1/4 of revenue needs after usually covering more than 100 percent of revenue needs.

Pitney says to expect oil revenue to continue to fall and continue to meet a smaller and smaller portion of the state's revenue needs.

She says it's "probably something we need to get used to."

Fin. Analyst Painter says oil cos are cutting back on investment, which will mean less production in the long term. It's not factored into the forecast.

"If companies choose to further throttle back production that could result in even less revenue if prices do recover."

Really grim.

Painter says after trading below $0, ANS is at about $9: "$9 does not even cover the cost of getting the oil to the market. At $10 a barrel that's where ONLY transportation costs are covered. At $25 per barrel some of the large fields will break even."

Pitney notes that without any additional supplemental spending, next year's deficit is nearing $1 billion based on estimated hits to oil revenue and investment hits.

The saving account the state has used to cover these gaps would be down to a paltry $72.5 million.

Pitney notes that a CBR down to $72.5 would start to create cashflow problems for the state.

Pitney says next year will be real difficult: "The CBR is functionally empty. ... Regardless you have to figure out cashflow."

Says it will be VERY difficult to pass a status quo budget next year.

Pitney says without a PFD, the FY22 budget would have a $300M deficit. A $1B deficit with a $1K PFD.

The "easy button" is gone.

She says there MUST be cuts and MUST be diversified revenue. It's not sustainable to just make ad hoc draws out of the Alaska Permanent Fund.

Pitney says: "Changing the dividend formula is not enough to close the structural deficit. ... It has to be addressed in the very near term because we no longer have the luxury of the CBR."

Pitney is specifically drawing attention to the fact that there are far more places in state law that drive spending than there are that drive new revenue. She says it's created a statutory structural deficit that MUST be addressed one way or another.

Pitney gets to the gov's plan for the CARES Act funding, says many of his proposals DON'T have existing federal receipt authority (which is needed) and that the LB&A process is only for the interim (the #akleg is still in session).

She says a new bill is "more appropriate path."
Into questions, Rep. Johnston asks about issuing revenue anticipation notes and what, if any, revenue the state could issue those on.

Pitney says the state would have to pay a premium on borrowing because the state has such a severe structural deficit.

Josephson notes Alaska hasn't been ALL that hard hit, yet, and wonders if the ~$150M to the city of Anchorage is a "sort of windfall."

Pitney notes that the economic hit could be bigger and says there's "an opportunity to mitigate some of those larger economic impacts." #akleg

Carpenter on oil production: "I have it on very good authority that we're on a slowdown in production. ... We're looking at somewhere of a complete shutdown within the next 90 days. In the June-July timeframe."

He asked what would happen if production fell apart completely. Painter says it'd be bad.

He says that the only thing that would be relatively unaffected in the near-term would be property taxes.

Because of course, Carpenter says this scenario makes the case for reopening the economy nationwide sooner than later: "Production will come to a halt if we can't get the economy going again."

Moving onto Dunleavy's plan to replace vetoes with CARES Act funding, Rep. Ortiz asks if there's any news on the ability to replace $30M+ in education funds.

Johnston notes that it's tied to Title I schools but state's working on getting exemptions, incl for broadband.

Rep. Sullivan-Leonard says "I can't looking at moving forward at a flat budget" and asks for more modelling so they can KNOW what the budget will look like for next year.


Pitney notes that the forecast for the next year's budget is about $40+ for oil with a deficit of $300M with a ZERO PFD.

Dropping it to the $25 range forecast would grow it to $600M to $700M.

Carpenter now wants to know why Dunleavy can't spend the money the way he'd like. And why Pitney believes there'd be a new budget bill required.

Pitney says based on Leg. Legal: "This isn't merely adding receipt authority, it's adding an appropriation."

She says the RPL process that Dunleavy is pursuing can ONLY be used to increase existing appropriations, not create new ones. The process can also ONLY be used during the interim. The Legislature is still in session.

Wool asks about the oil tax initiative, wondering how it might affect the revenue outlook.

Painter: "There would be an increase but it would not be on the order of a billion dollars."

Carpenter continues to be baffled by the RPL process. He asks what's the diff between this and Medicaid expansion, which was also done through the RPL process.

She notes that Medicaid DOES have federal receipt authority attached to it. Also it was during the interim.

He admits that he's very confused, asks that someone please put together a list of appropriations with federal receipt authority attached to them (which, you know, would be the budget).

Pitney says it's on the to-do list.

They're wrapping up now.

Johnston notes the #akleg is interested in getting all of this done and resolved quickly to get CARES $ out ASAP.

"Our ultimate goal will be getting the funds to the people as soon as possible. ... All of us have good intentions to make this work."
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