The Alaska Department of Revenue is predicting that the Iran war will cause high oil prices for most of 2026, it said in a revised forecast published Friday.
Oil is no longer the No. 1 source of general-purpose state revenue in Alaska, but the higher wartime prices are expected to bring hundreds of millions of extra dollars to the state treasury.
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 has already been earmarked for spending.
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 — for disaster relief, road construction, prisons and more.
On Thursday, the Alaska House postponed a vote on some of those amendments because many lawmakers said they wanted to see the new forecast before deciding whether or not to spend from savings to pay for those items.
On Friday, some legislators said they still support spending from savings because the forecast depends so heavily on the vagaries of war. Others said they felt their caution 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, I-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 more than $373 million in 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.
On Thursday, and again Friday, members of the minority were unwilling to offer that support.
In a series of interviews, they said they felt confident the forecast will hold, and if it doesn’t, they can approve a savings draw later.
“Having a need to see this revenue forecast was very important to us before we made any decisions,” said Rep. Justin Ruffridge, R-Soldotna. “It was about ‘how do you spend money wisely?’ And I think we’re always going to be proponents of spending money wisely. Spending money wisely is not taking money out of savings when you don’t need to.”
Alaska doesn’t have a statewide income tax or sales tax. An annual transfer from the Alaska Permanent Fund accounts for about 60% of the state’s general-purpose revenue. Oil accounts for about 25%, but that proportion can fluctuate with the price of oil.
While the new forecast doesn’t specifically predict the length of the Iran war, state forecasters appear to doubt President Donald Trump’s claims of an imminent end to the fighting.
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 Thursday, 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 $75.00 per barrel, which assumes that prices will begin FY 2027 over $80.00 per barrel and decline throughout the fiscal year,” forecasters wrote.
They went on to explain that the forecast is especially volatile and unpredictable this time around.
“While the price forecast is $75.00 per barrel, there is approximately a 10% chance that oil prices could average $130.00 or higher, and a 10% chance they could average $45.00 or lower. This range reflects the genuine uncertainty present in today’s market,” 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 during FY27. Now, the forecast is above $6.7 billion.
The next two months of the legislative session will decide how that money gets spent.