The Alaska Citizen's Guide to the Budget

1.2.2 Constitutional Budget Reserve Draw $ .474 billion

The Constitutional Budget Reserve (CBR) was established to provide cash to fund government (the general fund) during periods of temporarily low oil prices when revenues fall short of expenditures. It has been funded by the proceeds of settlements of tax and royalty disputes with the oil companies. Most of the large disputes with the oil companies have now been settled and little in additional dedicated revenues is expected in the future. Growth of the CBR will come primarily from any earnings that are retained in the CBR. In FY 2002 dedicated contributions from oil settlements and earnings added about $240 million to the CBR.

In theory the CBR should grow in size over time because the general fund is supposed to repay the CBR when oil prices are high and revenues exceed expenditures. In fact because of falling oil production, the general fund has run at a deficit almost since the inception of the CBR. The cumulative draw on the CBR, and the amount owed it by the general fund is now close to $5 billion.

In developing the FY 2002 budget, we expected a shortfall in general fund revenues requiring a draw of $.474 billion from the CBR. The actual size of the draw by the end of the fiscal year depends upon actual general fund revenues and expenditures. For example, an increase in the price of oil by $1 over the entire year would reduce the size of the CBR draw by about $65 million.

The CBR is expected to have a balance of about $2.4 billion at the end of FY 2002 (July 1, 2002).

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