The Alaska Department of Revenue is predicting that the Iran war will cause high oil prices for most of 2026 — substantially boosting state revenues — it said in a revised forecast published March 13.
Oil is no longer the No. 1 source of general-purpose state revenue in Alaska — that role has been filled by Permanent Fund earnings the past several years — but the higher wartime prices are forecast to bring in an additional $1 billion to the state treasury in fiscal years 2026 and 2027.
Last fall, the department’s forecasters predicted $6 billion in state revenue for fiscal year 2026, which ends June 30. Now, they’re predicting $6.5 billion, an increase almost entirely caused by the Iran war.
Much of that money may already have been spoken for.
Since last spring, when state legislators and Gov. Mike Dunleavy enacted the state’s fiscal year 2026 budget, the governor’s office and legislators have proposed more than $530 million in budget amendments to cover additional anticipated and unanticipated spending— for disaster relief, road construction, prison operations and more.
On March 12, the Alaska House postponed a vote on some of those amendments because many lawmakers said they wanted to see the new revenue forecast before deciding whether or not to spend from savings to pay for those items or use oil dollars.
On March 13, some legislators said they still support the certainty of spending from savings because the forecast depends so heavily on the vagaries of war. Others said they felt their caution of waiting for the revenue forecast was vindicated.
“It’s all a gamble on the price of oil actually landing where the Department of Revenue is forecasting it could be in the future,” said Speaker of the House Bryce Edgmon, from Dillingham.
It takes 30 votes in the state House and 15 votes in the state Senate to spend from the Constitutional Budget Reserve, the state’s principal savings account.
The House is led by a 21-person multipartisan coalition that has doubts about the forecast and wants to spend from savings to pay for the budget amendments, a plan already accepted by the Senate.
But because it has only 21 votes, the coalition needs the support of at least nine members of the 19-person, all-Republican House minority.
Members of the minority were unwilling to offer that support. In a series of interviews, they said they felt confident the oil-revenue forecast will hold, and if it doesn’t, they can approve a savings draw later.
Last fall, the department predicted that the average price of a barrel of North Slope crude oil would be $65.48 for the 12 months ending June 30. In February, the average price of a barrel of North Slope crude was $69.48. So far this month, it’s $88.71. On March 12, the daily price topped $105 per barrel.
The new forecast expects prices to average $91.09 per barrel through June 30, the end of fiscal year 2026.
“The price forecast for FY 2027 is $75 per barrel,” revenue department officials wrote.
They went on to explain that the forecast is especially volatile and unpredictable this time around.
“While the price forecast is $75 per barrel, there is approximately a 10% chance that oil prices could average $130 or higher, and a 10% chance they could average $45 or lower,” they wrote.
Even as they debate supplemental spending in the current fiscal year, legislators are also at work on writing the budget for the next fiscal year.
Last fall, the Department of Revenue predicted the state would have $6.2 billion in general-purpose revenue for the fiscal year that starts July 1. Now, the forecast is above $6.7 billion.
The next two months of the legislative session will decide how that money gets spent.
“Because of the revenue projections it’s going to be easier to be operating budget chair than it was going to be 24 hours ago,” said Rep. Andy Josephson. The Anchorage Democrat is co-chair of the budget-writing House Finance Committee. “Because now we have some opportunities to look at maybe a larger capital budget, more education funding, maybe a larger dividend, maybe more operation adds (public service and agency operations).”
House Minority Leader DeLena Johnson, a Palmer Republican, said during a press conference on March 13 that if spending is added to the budget, a larger Permanent Fund dividend should be a foremost priority since residents are telling her they are struggling with food and other costs.
The Alaska Beacon is an independent, donor-funded news organization. Alaskabeacon.com. The Juneau Independent contributed reporting for this story.
