Falling oil prices hurt state budgets

Sarah Gardner Nov 17, 2014
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Falling oil prices hurt state budgets

Sarah Gardner Nov 17, 2014
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Oil prices are falling. Good news, right? 

It all depends on where you sit. If you’re trying to balance a state budget that relies heavily on oil taxes, it’s crunch time.

Louisiana, which has relied on oil and gas tax revenue for 12 to 15 percent of its budget in recent years, is adjusting its revenue forecasts. They now expect $90 million less from fossil fuel taxes than planned. Greg Albrecht, chief economist at the Louisiana Legislative Fiscal Office, says this past spring they expected oil prices to stay around $95 a barrel well into 2015.

“In fact, for a couple months into this fiscal year, we had hundred-dollar-plus a barrel of oil prices,” says Albrecht. 

Oil has been trading for under $80 a barrel recently. Political observers in Louisiana expect some cuts in healthcare and higher education as a result of the revenue shortfall.

In North Dakota last year oil and gas taxes made up over half of all state revenue. But Pam Sharp, director of the state’s Office of Management and Budget, isn’t predicting a disaster. State law requires most of that money go into various reserve funds, not the general fund. 

“The way the oil taxes are structured in North Dakota … I think it puts us in really good shape to weather that kind of storm,” Sharp says. 

Falling oil prices do mean less money for North Dakota’s reserve funds, including the Strategic Investment and Improvements Fund. That pot of money goes to much-needed infrastructure in the oil boom state, including roads and school construction loans. Sharp does expect, however, that in this two-year budget cycle alone, North Dakota will collect $6 billion dollars in oil and gas taxes.

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