Alaska Governor Bill Walker is optimistic that the doubling of oil prices in the last year will boost his state’s economy and help fill its $3 billion budget hole, a situation that prevails even after the state government cut spending by 44 percent.

At the same time, he noted in his annual state of the state speech before the legislature, it’s time for Alaska to diversify its sources of revenue to prevent another energy-driven downturn.

“I was elated to hear of a new find in the National Petroleum Reserve-Alaska with the potential to increase oil production by up to 100,000 barrels a day,” on top of the current 500,000 barrels per day, the governor said. “We have new opportunities with a new administration in Washington, DC, to secure access to the coastal region of the Arctic National Wildlife Refuge.”

But, the governor added, oil “is no longer the sole answer. We must diversify our portfolio.”

Oil revenues once provided 90 percent of Alaska’s state government funding. But with production down 75 percent of its peak in the 1980s, oil revenues provide only 30 percent of the state budget.

Alaska can no longer “continue to build a government funded primarily from one resource alone,” the governor said.

It’s not that Walker is proposing diversification away from energy production, however. The most promising opportunity the governor identified in his speech was to develop the state’s natural gas reserves. “The most recent North Slope oil and gas lease sale, the biggest in a decade, demonstrated just how much resource potential there is in Alaska,” Walker said. He believes China will be a major buyer of that gas.

But natural gas alone will not lead Alaska out of its fiscal straits. Also on the table, at least from the governor’s perspective: a new state income tax—Alaska hasn’t one, up to now—that would expire after three years.