Alaska, North Dakota and Texas face a dramatic drop in revenue heading into 2015 because of plunging oil prices, which hit a six-year low Monday.
The price of oil — recently $100 a barrel — dropped below $50 a barrel Monday for the first time since April, 2009, reported The Wall Street Journal. Consumers are benefiting from the drop, with gas prices as low as $2 a gallon, but the news is bad for lawmakers now facing revenue cuts in states like Alaska that depend heavily on oil production.
Alaska does not have a state income or sales tax, and depends on oil revenue for most of its budget. State officials increased the state’s estimated 2015 budget shortfall to $3.5 billion in December, after wrongly predicting in April that oil prices would remain above $100 a barrel in 2015, reported The Hill.
Alaska can tap into $14 billion of rainy day funds, but financial analysts worry it won’t be enough, reported Politico. Moody’s Investors Service downgraded the state’s outlook from “stable” to “negative” in December. “The oil plunge caught them off guard, and now they are trying to recalibrate,” Moody’s analyst Ted Hampton told Politico.
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