DALLAS — A continuing decline in severance tax revenues caused by low natural gas prices will not blow a hole in Oklahoma’s proposed fiscal 2013 budget, Finance Secretary Preston Doerflinger said Friday.
“We do not anticipate that the natural gas situation will lead to a state budget hole in fiscal year 2013, just as it hasn’t caused a revenue problem for the current fiscal year,” he said.
“The easiest thing in the world to sell is doubt and fear, even if there’s little or no basis for it,” Doerflinger said. “As public officials, we have an obligation not to be an alarmist and to be cautious in our assessment of the overall economy and not get bogged down in negativism over one aspect.”
Lawmakers said last week that the prolonged slump in natural gas prices could cut the money available for appropriations next year.
Rep. Earl Sears, R-Bartlesville, chairman of the House Appropriations Committee, Senate President pro tempore Brian Bingman, R-Sapulpa, and House Speaker Kris Steele, R-Shawnee, said they were troubled by the slide in severance tax collections as the final budget is being developed.
Doerflinger said growth in overall general fund revenue, spurred by increased oil production and exploration, has more than compensated for the drop in the natural gas tax.
“That’s because the energy industry as a whole is growing, as is our entire state economy,” the finance secretary said. “Of course, we are concerned about low natural gas prices and are hoping they will rebound.”
“In fact, we’re expecting to end this fiscal year with a surplus that could exceed $300 million,” Doerflinger said.
The Board of Equalization in February certified $6.6 billion of general fund spending for next year. State appropriations are limited to 95% of anticipated annual revenue.
The board reduced the official estimate of fiscal 2013 revenue from the natural gas production tax to $188.4 million, a revision from December 2011’s estimate of $267.3 million.
The natural gas production tax is expected to generate $273.1 million in fiscal 2012, down from $275.9 million in fiscal 2011 and the $308 million in the December outlook.
Oklahoma’s revenue picture for fiscal 2013 is based on a 7% tax on an average wellhead price for natural gas of $3.64 per 1,000 cubic feet. The closing price for natural gas on April 27 at the New York Mercantile Exchange was $2.19 per 1,000 cubic feet.
If natural gas prices drop below $2.10 per 1,000 cubic feet, the tax rate falls to 4%. Oklahoma Treasurer Ken Miller said that for every $1 decline in the price of natural gas, state revenues drop by $70 million.
Doerflinger said revenue from the sales and income taxes are up as a result of energy activity due to high oil prices and new drilling techniques.
“The economic activity generated by the upsurge in the oil fields, plus growth in other areas of our economy, should easily offset any revenue loss from declining natural gas tax collections, caused largely by the unusually mild winter weather,” he said.
