Alaska Governor Warns State’s Fiscal Situation “Critical” As Oil Price Drops | Zero Hedge.
Narrative, we have a problem. What is billed day after day as ‘unequivocally good’ is entirely not good for Alaska (oh and Texas and Pennsylvania and…) as with oil prices dropping, AP reports Alaska Gov. Bill Walker has halted new spending on six high-profile projects, pending further review. With oil taxes and royalties expected to represent nearly 90% of Alaska’s unrestricted general fund revenue this year, officials warned, “the state’s fiscal situation demands a critical look.”
Alaska Gov. Bill Walker issued an order Friday putting the new spending on hold. He cited the state’s $3.5 billion budget deficit, which has increased as oil prices have dropped sharply.
With oil prices now around a five-year low, officials in Alaska and about a half-dozen other states already have begun paring back projections for a continued gusher of revenues. Spending cuts have started in some places, and more could be necessary if oil prices stay at lower levels.
How well the oil-rich states survive the downturn may hinge on how much they saved during the good times, and how much they depend on oil revenues. Some states, such as Texas, have diversified their economies since oil prices crashed in the mid-1980s. Others, such as Alaska, remain heavily dependent on oil and will have to tap into sizeable savings to get by.
