The state's budget crisis has been blamed on low oil prices, but it affects local governments too. That's because a portion of oil and gas tax revenue is earmarked for counties and schools.
Canadian County Commissioner David Anderson told The Journal Record’s Dale Denwalt that Canadian County now gets about half as much money than what it received during the height of the drilling boom, when a barrel of oil went for more than $100. It’s now down to $40:
The revenue drop has shown up in delayed road improvement projects. “Roads that we could conceivably pave, we’re looking at having to just maintain the gravel that’s on them now,” he said. “It has slowed us down.”
Julius Vizner, an analyst with Moody’s Investor Services, said those direct effects are significant, but not as widespread as the general effect on the economy.
From Denwalt:
A report Moody’s issued this month warns that oil production severance taxes that go to the state’s general revenue fund are down 98 percent in the current fiscal year. In the previous fiscal year, the report stated, local governments received $124 million in revenue from the oil severance tax. Vizner said it’s probably going to get worse. “Moreover, in the last few months of available data, we’ve seen active rig counts decline to levels not seen since before the 2009 recession,” he said. “We think that the state will adopt some mix of spending cuts and/or one-off revenue items such as reserves to balance their budget in 2017.” Severance taxes, also referred to as gross production taxes, are distributed based on a specific formula. Counties, for example, receive a little more than 7 percent of collections, with another 3.75 percent going to the County Bridge and Road Improvement Fund.
Sales tax revenue makes up the most money that local governments receive; in the past year, it’s fallen by 7 percent, Denwalt writes:
Anderson has also seen that effect, particularly on mineral rights owners. “There’s less money in the economy through there,” he said. “A lot of farmers buy tractors and pickups and do pretty major things with their oil and gas royalties. It’s a widespread economic impact when we see a reduction like that.”
KGOU relies on voluntary contributions from readers and listeners to further its mission of public service to Oklahoma and beyond. To contribute to our efforts, make your donation online, or contact our Membership department.
