Provision of Alaska budget bill would boost 2024 dividend, depending on oil price

A section of Alaska’s newly passed state budget could turn into a windfall for state residents.

Called a “waterfall provision” by legislators, it calls for a payment of up to $500 for eligible residents in 2024 on top of the year’s Permanent Fund dividend.

Inserted by members of the Senate Finance Committee and modified at the request of legislators in the state House, Section 79 of the budget says that if the state earns more revenue than expected between July 1, 2023, and June 30, 2024, some of that money will be used for “a one-time energy relief payment as part of the Permanent Fund dividend.”

Under estimates provided to legislators last week, the state budget balances if North Slope crude oil averages $73 per barrel, as predicted by the Alaska Department of Revenue this spring.

If oil reaches an average of $83 per barrel, half of the bonus proceeds will spill over into the state’s Constitutional Budget Reserve, its principal savings account. The other half would pay for the $500 addition to the dividend.

The addition could be incrementally funded, too — at $78 per barrel, the 2024 dividend would be about $250 higher.

Conor Bell, an analyst with the Legislative Finance Division, said those thresholds come with some caveats. The division provides nonpartisan budget work for the Legislature.

There’s “all kinds of uncertainty” with oil revenue projections, Bell said. Those projections are based on certain assumptions about oil production — not just prices — and things like lease expenditures (which can be deducted from taxes).

“Ultimately whether there’s a waterfall is based on the actual revenue collected,” Bell said.

As late as April 11, the U.S. Energy Information Administration was projecting oil prices at $85 per barrel this year and $81 per barrel next year.

But the latest forecast, released May 9, is significantly lower: $79 in 2023 and $74 in 2024. 

At those prices, there would be little change in next year’s dividend.

Even still, the waterfall provision is having an effect. Several members of the state House who had sought a larger Permanent Fund dividend this year cited the provision as one reason to vote for this year’s budget.

“What has changed about the dividend certainly has been part of the final conversations,” said Rep. DeLena Johnson, R-Palmer, on Thursday, just after the House voted in favor of the budget.

“Would we have liked it to be higher? Absolutely,” she said. “But, you know, sometimes you only get to meet in the middle.”