The State Capitol in Juneau has two elevators that lawmakers ride all session long — up to committee rooms, down to the chambers, back up for negotiations.
This year, oil prices are taking lawmakers on a similar ride.
The higher prices climb, the better the outlook for Alaska’s oil-dependent budget. But it also hits regular Alaskans through their utilities, groceries, fuel – the cost of living.
It’s no secret the State of Alaska depends on oil production for a big chunk of its budget. So when oil prices spiked after the United States and Israel attacked Iran in late February, on its face, that was a good thing for the state’s budget.
But House Finance Committee Co-Chair Rep. Neal Foster, a Democrat from Nome, says he’d rather have low oil prices. Foster represents much of the Seward Peninsula and northern edge of the Yukon-Kuskokwim Delta in Western Alaska.
“For somebody who makes $200,000 a year, energy costs are a small portion of their income. Somebody making $20,000 a year that's huge, so it impacts our district tremendously,” Foster said.
Excluding his hometown of Nome, over one in five people in Foster’s district are living at or below the poverty line, according to U.S. Census Bureau data. That's over twice the statewide average.
And even if the spike in global energy prices is short lived, fuel buyers in Western Alaska may be stuck paying for fuel with prices inflated by the war for an entire year.
That’s because most communities in Western Alaska get just one or two big fuel deliveries a year because of sea ice and economies of scale by buying and shipping in bulk. Resale prices within those communities are essentially locked in until the next delivery.
Fifteen communities in the region buy their fuel through the Norton Sound Economic Development Corporation’s bulk fuel program. The Nome-based nonprofit’s Chief Operating Officer, Tyler Rhodes, said by buying together, the program is able to pass along savings to customers. NSEDC also offers interest-free loans to communities so they can pay for their massive fuel bills over time, for up to a year.
The exact price NSEDC pays for fuel depends on fuel prices the month its massive delivery tanker is loaded. This year, Rhodes expects the ship to be loaded up in May and then get underway toward the Bering Strait.
Rhodes said trying to wait until prices are lower isn’t really an option – villages running low on fuel after a long and historically cold winter can’t wait.
“Our supplier’s delivery schedule is fairly rigid and some of our communities are already running very low on fuel inventory or are even completely sold out, necessitating fuel delivery at the first opportunity,” Rhodes said in an email.
By summer, that big ship will be on the horizon offshore from Nome. Like worker bees, small barges will buzz back and forth from the tanker, ferrying loads of heating oil and gas to the region's coastal villages.
Down in Juneau, Rep. Foster feels a sense of urgency, too. Foster worked with his caucus to add $17 million to the House’s version of the budget for the dormant Alaska Heating Assistance program. To Foster’s frustration, the Senate cut the funding three weeks later.
“When folks start to look at programs to get rid of, and things to reduce. It's the things that hit low-income people the most, and it's just made me so angry,” he said.
The state-run program was defunded in 2015. Foster said for a family of five, it provided over $4,000 a year. And he said unlike other assistance programs focused on heating oil, it could be used to buy propane to cook with or gas for four-wheelers.
At the time, the state program supplemented the federal Low-Income Home Energy Assistance Program, which is still going but is restricted to very low-income Alaskans.
Foster said he sees the writing on the wall this summer, with resellers’ prices almost certain to jump once they factor in their costs.
“If there's going to be any pain, I would rather see that at the state level. That does mean reduced services,” Foster explained. “But if we're going to cut somewhere, I think we should cut oil tax credits. You know, that's where it should be coming from, not everyday Alaskans.”
The Senate did propose a $150 energy relief payment for Alaska residents that qualify for the Permanent Fund Dividend. If every PFD-eligible Alaskan received the check, it would cost the state about $96 million – over five times the House proposal that would only benefit low-income households.
The Senate draft budget also includes a $1,000 PFD, the same as last year.
The Senate is still fine-tuning its budget ahead of a floor vote. It’ll then likely go to a conference committee, which could revive the heating program. But line items in the Legislature’s final budget can still be picked off by the governor’s veto.
Legislators are aiming to send their final budget to the governor by the end of the regular session, May 20.
