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

2. 2 2007: Decent growth; great for budget  Population Growth: +0.9%  Employment Growth: +1.1% Strength: Oil, mining, tourism, services Strength: Oil, mining, tourism, services Weakness: Construction, fisheries, Govt. 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. 3 Total employment growth: “Slow & Steady” Percentage change in employment from prior year Source: Alaska & US Departments of Labor

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

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

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

7. 7 Unemployment ticks upward…

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

9. 9 Per capita real income growth

10. 10 Housing: Sales down, prices steady

11. 11 Housing: Q4 down from year ago

12. 12 Unrestricted revenue: 91% from oil

13. 13 Oil prices are higher; Production is in decline

14. 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. 15 A budget surplus, for now History & Forecast General Purpose Unrestricted Revenue; Spending Estimates are Unofficial & for Illustration Purposes Only.

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

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

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

19. 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. 20 Outlook: Short term  Good for business $2,000 PFD checks $2,000 PFD checks High commodity prices (Good for Alaska) High commodity prices (Good for Alaska)  Great for state government Oil-induced revenue surplus Oil-induced revenue surplus  Uncertain for individuals Questions about Housing & Inflation Questions about Housing & Inflation Two-edged sword of commodity prices Two-edged sword of commodity prices $2,000 PFD checks, strong business & government $2,000 PFD checks, strong business & government

21. 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 Natural Gas pipeline Pebble / Donlin Creek mines Pebble / Donlin Creek mines  Risk: Significantly lower prices for oil, gas, minerals

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