Alaska's oil bust results in crude reality for state budget

JUNEAU, Alaska -- Oil closed on Thursday at $46 a barrel -- that is a 20 percent drop from a year ago.

The oversupply has oil-producing states like Alaska over a barrel. The nation's tallest state is in a $4 billion hole.

Alaska is known for peaks that reach for the sky, but right now, the state has a mountain-sized hole to fill.

"We need to fix Alaska and we need to do it now," said Alaska Governor Bill Walker.

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Alaska Governor Bill Walker. CBS News

Even if they closed every public school and jail in the state, and laid off every state employee, it still wouldn't fill the hole, the governor said.

Falling oil prices force Alaska-based company to lay off employees

The problem is oil. The price per barrel has fallen off a cliff, from a high of $107 in 2014 to as low as $26 earlier this year. Oil and gas revenue funds up to 90 percent of state spending, the money pays for every bridge, road, and school.

"We've had this roller-coaster of an economy because we've hooked our horses to one commodity -- oil -- and we rode it up and down," Walker said. "This is the day of reckoning."

Walker wants state lawmakers to impose Alaska's first income tax in 35 years, and cut the annual check each resident gets for their share of oil revenue. Oil companies would pay more too.

"If taxes go up, credits go down, there'll be less production," said Kara Moriarty.

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Moriarty represents Alaska's oil and gas companies and says they will be forced to further cut production and jobs. Last year, there were 19 working oil rigs in Alaska, but today there are 10.

"When we fail, the state fails right along with us," she said. "To continue to ask more from us at a time when we're losing money, it will have economic impact."

Rhodney Cantu was laid off when Shell recently abandoned its plans to drill off Alaska's north coast.

"I apply to a minimum of four jobs a day," he said.

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Rhodney Cantu. CBS News

He said families are concerned.

"What are they going to do? How are they going to make next month's rent or mortgage?" he asked.

But he also says he doesn't think Alaskans are ready to pay an income tax.

"There will be a lot of grumpy people," he said.

The governor knows his plan is not popular, but said he is willing to be a one term governor if he get's what he wants.

"If that's the price I pay to fix Alaska, I'm more than happy to pay it," he said.

That could be the crude reality of Alaska's oil bust.