[Research Matters] 59. Managing Alaska’s Petroleum Nest Egg for Maximum Sustainable Yield
Alaska's state government relies almost entirely on petroleum revenues to pay for public services, and a new analysis by Scott Goldsmith, professor of economics at ISER, finds that:
- The state currently has a petroleum nest egg of about $155 billion, including both the value of revenues from oil and gas yet to be produced and money already in the bank. That's based on current information; the size of the nest egg fluctuates from year to year, with changing oil prices and assumptions about future production.
- The state could spend $6.2 billion a year in earnings from a $155 billion nest egg for decades to come and still preserve it for future Alaskans, taking population growth into account.
- This fiscal year the state is expected to spend almost $7 billion from the nest egg, or about $0.8 billion more than is sustainable. That includes spending for both public services and for Permanent Fund dividends.
- By spending more than is sustainable, the state is shrinking the next egg and passing a fiscal burden on to future Alaskans, and that burden will grow every year, unless the state reduces spending or finds an additional source of revenue besides petroleum.
See the full analysis, Managing Alaska's Petroleum Nest Egg for Maximum Sustainable Yield (1.1MB), by Scott Goldsmith, ISER Web Note No. 10.
Posted: March 28, 2012