High oil prices could provide an additional $500 for Alaskans a year from now.
As part of the end-of-session budget deal put together by legislative leaders, particularly in the Senate, lawmakers in May adopted a provision in the fiscal year 2024 state spending plan that will provide a one-time “energy relief payment” next fall if state revenues exceed estimates.
Global supply shortages, caused largely by production cuts in Saudi Arabia and Russia, have driven up oil prices and boosted state revenues for the first three months of the fiscal year.
Alaskans in 2022 received a similar bonus along with the annual Permanent Fund dividend that went to almost 626,000 eligible residents. That year’s payment totaled $3,284, of which $662 was called energy relief.
State revenues far exceeded expectations in 2022 as Russia’s war on Ukraine pushed up global oil prices to their highest level in years. Alaska North Slope crude peaked on June 8, 2022, at $127.77 a barrel, almost double of a year earlier.
Excluding Permanent Fund investment earnings, oil production taxes and royalties are by far the single-largest source of revenues for the state general fund.
Legislators this spring decided it would be more prudent to wait until the fiscal year ends on June 30, 2024, to determine how much state revenues might exceed estimates and then, if the money is there, send out an energy relief payment in fall 2024 as part of the annual PFD distribution.
The state needs oil to average about $73 a barrel this fiscal year to balance the budget. If oil averages around $83 per barrel over the entire fiscal year, the extra revenues would result in the additional $500 payment. The energy relief payment would be less if revenues come in between what is needed to balance the budget and cover the full $500.
Of the additional revenues, half would go toward the relief payment and half would go into the state’s savings account, the Constitutional Budget Reserve Fund.
Alaska North Slope crude closed last week at $95.41 a barrel and has been above $85 since mid-July. Most oil market analysts expect tight supplies to keep prices in the $90s, or maybe down into the $80s, through next year.
The Legislature and governor have the legal ability to change the energy relief payment when they go back to work in January.
The 2022 relief payment was exempt from federal income taxes, unlike the PFD which is taxable. The Internal Revenue Service determined that Alaska’s payment, and similar aid checks distributed by 20 other states, were “related to general welfare and disaster relief,” and therefore not subject to federal taxation.
The other states sent out relief payments to help their residents hit by job losses and the economic slowdown caused by COVID-19 pandemic restrictions.
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