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Alaska’s Economic and Revenue Outlook

Alaska’s Economic and Revenue Outlook. Dan Stickel, Economist Alaska Dept of Revenue Tacoma WA, May 2008. 2007: Decent growth; great for budget. Population Growth: +0.9% Employment Growth: +1.1% Strength: Oil, mining, tourism, services Weakness: Construction, fisheries, Govt.

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Alaska’s Economic and Revenue Outlook

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  1. Alaska’s Economic and Revenue Outlook Dan Stickel, EconomistAlaska Dept of Revenue Tacoma WA, May 2008

  2. 2007: Decent growth; great for budget • Population Growth: +0.9% • Employment Growth: +1.1% • Strength: Oil, mining, tourism, services • Weakness: Construction, fisheries, Govt. • Unemployment Rate: -0.3% to 6.2% • Per Capita Income Growth: +6% • Housing: Sales -10%, Avg Price +2% • State Budget: Higher oil prices + Higher oil tax rate = Really Big Surplus

  3. Total employment growth: “Slow & Steady” Percentage change in employment from prior year Source: Alaska & US Departments of Labor

  4. Employment growth highlights: 2007 Total Employment Growth: 1.1%

  5. Employment growth forecasts: 2008 Total Forecast Employment Growth: 0.6%

  6. Population growth Alaska population estimate: 676,987 as of July 1, 2007

  7. Unemployment ticks upward…

  8. … With huge regional differences March 2008 Unemployment by region, not seasonally adjusted. State avg 7.4%

  9. Per capita real income growth

  10. Housing: Sales down, prices steady

  11. Housing: Q4 down from year ago

  12. Unrestricted revenue: 91% from oil

  13. Oil prices are higher;Production is in decline

  14. Three severance tax hikes boost state revenue. Revenue From Oil & Gas Severance Tax.Key tax changes: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)3) New ACES Severance tax, (tax rate 25% on net minus credits)

  15. A budget surplus, for now History & Forecast General Purpose Unrestricted Revenue; Spending Estimates are Unofficial & for Illustration Purposes Only.

  16. Alaska’s $40 billion “rainy day” fund Historical and Projected Alaska Permanent Fund Value at end of fiscal year

  17. …And it pays dividends to each Alaskan Historical and Projected Permanent Fund Dividend Payment, Per Eligible Alaskan

  18. On the horizon: A gas pipeline Two Proposals: • TransCanada proposal • Selected Under Gov Palin’s AGIA initiative • Conoco/BP proposal • Code name Denali • Pipe to Alberta/Chicago, Cost $20-40 billion +

  19. On the horizon: A Mining boom • $675mm E&D in 2006, likely higher in 2007. • Pebble: world’s largest copper mine • Donlin Creek: will double Alaska gold production • Dozens of smaller prospects

  20. Outlook: Short term • Good for business • $2,000 PFD checks • High commodity prices (Good for Alaska) • Great for state government • Oil-induced revenue surplus • Uncertain for individuals • Questions about Housing & Inflation • Two-edged sword of commodity prices • $2,000 PFD checks, strong business & government

  21. Outlook: Longer term • Oil prices level around $80/bbl • Continued declines in oil production mean state budget deficits return • Potential economic boom from megaprojects: • Natural Gas pipeline • Pebble / Donlin Creek mines • Risk: Significantly lower prices for oil, gas, minerals

  22. For more information Dan Stickel Alaska Department of Revenue daniel.stickel@alaska.gov www.tax.alaska.gov

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