Feb. 12, 2016 – “The State That Oil Built”
Oklahoma State Senate
Oklahoma City, Oklahoma 73105
February 12, 2016
From the desk of Sen. Rob Standridge
If you visit the State Capitol, there’s an oil derrick right across the street from the south entrance to the building. It marks the location of an oil well known as Petunia #1. For years it pumped oil from the ground below the Capitol, making us the only State Capitol in the nation with a producing oil well on its grounds.
Oklahoma has sometimes been called “The State That Oil Built.” Of our state’s 77 counties, 72 have oil or gas production. It was Oklahoma’s oil fields that shielded us from even worse times during the Great Depression, and again in the recent Great Recession of just a few years ago.
But we know that the energy industry has its ups and downs, and just as the state thrives when the energy industry is booming, down cycles also have a far reaching impact. In the summer of 2014, oil was around $100 a barrel. By last spring it had fallen to $70. Recently it’s dipped below $30 a barrel. No one should underestimate the impact it is having on our entire state. Before Christmas, more than 12,000 jobs in the oil field had been lost. Another 500 jobs have been lost since then.
All this means dramatic decreases in gross production tax collections, income tax collections, sales tax collections and more—and the impact on the state budget is evident. Just before Christmas, the initial projection was that there would be about $900 million less to appropriate to state agencies and services compared to a year ago. Now it is projected that amount will be $1.3 billion.
Certainly there are other issues that have reduced the flow of money into the general revenue fund. In recent years, more tax dollars have been apportioned or earmarked for specific things, like repairing Oklahoma’s roads and bridges, scholarships to help more students get college degrees and other worthwhile programs. But as the amount of earmarked dollars has increased, it’s meant fewer dollars were available for lawmakers to appropriate. It also means during economic downturns, there’s less ability to prioritize the resources we have. Another area that has reduced available funding is the state’s tax credits and incentives.
The downturn in oil prices has been driven by international economic forces—there is nothing we can do at the state level about that. But we know reducing appropriations to state agencies by $1.3 billion would be devastating to our schools, public safety and health services—what we refer to as the core services of government. The problem is those are among the areas of government that receive the lion’s share of the budget. If you did away with other areas altogether, it wouldn’t even come close to closing the gap.
There will have to be cuts, but the Senate is committed to a careful review of tax credits and even apportionments to determine if there are ways to mitigate the size of the cuts that will be needed in order to balance the budget during this economic downturn. It’s far too early to know exactly what the final plan will be, but it is absolutely essential that we consider these options as the session progresses.
To contact me at the Capitol, please write to Senator Rob Standridge, State Capitol, 2300 N. Lincoln Blvd. Room 417A, Oklahoma City, OK, 73105, email me at email@example.com, or call (405) 521-5535.