Dunleavy's repeated boast of saving billions this year could be a campaign charade

“We’re putting billions of dollars in savings this year on top of the dividend,” Gov. Mike Dunleavy said on Oct. 19, five minutes into one of the few campaign forums he took part in while running for reelection.

“We’ve put billions of dollars into savings this year,” he said a half-hour later.

Seven minutes later, he said, “Today, we’ve put billions of dollars into savings.”

Four minutes after that he said, “We’ve put billions into savings.”

The repetition of the claim did not make it more true. We haven’t put billions into savings.

Dunleavy was stating a wish based on guesswork made last spring and summer when oil was selling for more than $100 a barrel.

There were clear signs in October that the savings wouldn’t materialize.

The boast about the billions depends on an inflated expectation about oil prices for this fiscal year, which continues until the end of June 2023.

The billions in new savings may or may not exist in six months.

It will depend on Putin, OPEC, economic conditions around the world, oil company profits and the demand for oil. Every single factor is beyond the control of Dunleavy or anyone else in Alaska.

The fiscal year may end with extra billions in savings for Alaska. Or it may end with nothing added to savings. This is a foolish way to deal with the state budget.

Alaska oil sold for $75 a barrel Monday, which is more than $25 below what the state predicted last spring as the average price for this fiscal year. On Oct. 19, when Dunleavy mentioned billions saved four times, oil was selling for $92 a barrel.

Dunleavy is required to introduce his budget for the next fiscal year this week. There will be a guess baked into it about oil prices for this fiscal year and the next one.

Oil prices may be higher next summer than they are. Or they may be lower.

The state is using the oil futures market as a revenue guessing tool, a practice that should be abandoned because of its unreliability. It creates either a sense of security or a sense of panic. Both can be false and neither one is reliable.

The monthly revenue guesses produced by the Dunleavy administration swing up and down by hundreds of millions because the market is volatile. The world is volatile.

On March 15, the state guessed that Alaska would take in about $5 billion in oil revenue this fiscal year. On June 14, the state guessed that it would take in about $700 million more than that. On Nov. 15, the state guessed that oil revenue this year will be about $1 billion less than it guessed in June.

The December guess, due this week, may show a decline of greater than $1 billion compared to June.

Relying on this guesswork is absurd. A range of numbers, taking into account the inability to guess oil prices in advance, would make more sense.

Dunleavy has said repeatedly that the savings added to the Constitutional Budget Reserve this year are enough to cover the state budget if oil takes a dive.

“The bottom line: Alaska’s CBR account balance increases from $1.3 billion to approximately $3 billion – enough to cover the state budget if oil prices collapse,” he said June 30.

He was exaggerating. Oil prices have collapsed, compared to the spring and early summer. The CBR deposit, which depends on revenue that doesn’t exist yet, hasn’t happened. The account contained $1 billion on Nov. 30.

Below are two graphs from Sen. Bert Stedman that reflect some of the vital statistics of state finances and our uncertain situation.

It’s not just that the “billions saved” by Dunleavy could be a campaign charade, it’s that the state could draw down its remaining savings outside the Permanent Fund to a dangerous level.

The state has spent more on Permanent Fund dividends this year than anything else, about $700 million more than on K-12 education.

If oil prices do not rise from the current levels, the fiscal year average could end up forcing the state to spend from its savings that is not in the Permanent Fund to balance the budget.

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