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How Much Does Alaska Have in Savings?
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What is a Fiscal Gap?

What is a Fiscal Gap?
The cost of government is on the rise, operating costs are expected to continue to rise at around 6% per year. There are many reasons for this increase in government cost including inflation, increased population and increased level of service. Whatever the reasons the reality is that government costs have been and continue to grow. It is important to note that we cannot solve the potential fiscal gap by budget cutting alone without destroying state services upon which Alaskans rely.
Spending Projections
If you watch TV or read the newspaper you have no doubt heard industry, elected officials and economists talk about declining oil production on the North Slope. There is a lot of heated debate around oil industry taxation but all sides acknowledge that production has been, and continues, to decline. From a peak of 2 million barrels per day, projections for 2012 are less than 600,000 barrels per day. This is our main source of revenue and it is a diminishing resource.
Declining Oil Production

As the number of barrels continues to decline eventually the amount of money collected on that resource will also decline. So far we have been shielded from the effects of declining production by high oil prices. If not for these recent high oil prices (and changes in the way the state taxes oil producers), Alaska might be facing a fiscal gap already.
Declining Oil Revenue
Revenue is declining and spending is rising. Unless something changes our spending will exceed revenue in the next few years. This chart shows historic and projected general fund revenue and spending for the 15 years 2007 to 2021. Data released after this analysis (Spring 2011 State Revenue Forecast) now estimate budget deficit begining in 2017. Shortfall year is subject to change based on revenue forecasts.
Fiscal Gap Expained
We have some time before things get critical, current projections show us running out of savings (NOT including the Permanent Fund Principal) in 2030. We have some options, including those listed here. However, it is unlikely that we will find a silver bullet, it is much more likely that the solution will be a combination of efforts to increase revenue and reduce spending growth. Making changes will be a challenge, but decisions made today have the potential to dramatically alter the options available down the road.
What Can We Do?

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