By Timothy Cama - 12/11/14 05:17 PM EST
Low oil prices are likely to lead to a $3.5 billion deficit in Alaska’s state budget this fiscal year, the state predicted.
The new estimate is $2.1 billion higher than the last forecast, which was based on oil prices averaging $105 a barrel in the fiscal year that ends June 30, The Associated Press reported.
Revenue from oil drilling accounts for the majority of Alaska’s state budget.
The state may have to dip into savings to pay for programs, the AP said.
Despite lower oil prices in the short term, acting Revenue Commissioner Marcia Davis said “our long-term view is optimistic.”
“Greater investment by the oil and gas industry on the North Slope and solid performance of state investments makes Alaska’s overall financial health sound,” she said Thursday, according to AP.
Alaska previously survived low oil prices in the 1980s, but production volumes have fallen since then.