Gaping deficits wrought by tumbling fossil fuel prices are forcing states like Alaska and Wyoming to slash spending, but little is being done – at least for now – to address politically unpopular, longer-term questions about new revenue models that would lessen their dependence on boom-and-bust industries.
This year severance tax revenue in Wyoming is projected to fall to about 70 percent of 2014 levels. In Alaska, a more-than $4 billion deficit has set in, just three years after a $13 billion budget surplus. Policymakers are considering minor tax increases on things like motor fuel and alcohol and a planned tax on newly legalized marijuana that would collect a relatively small amount. But there may be no lasting fix for Alaska and Wyoming unless broad-based, unpopular taxes are introduced to help diversify revenue. For years, Alaska’s oil production has been on a downward trend, and Wyoming coal output has fallen steadily this decade. Those declines raise troubling questions about the road ahead.