DALLAS – Oklahoma entered a recession more than a year ago and may still be in one as oil and gas futures trade at less than half of their 2014 peak prices, according to recent economic data.
"The latest GDP data show Oklahoma entered a recession starting in spring of last year," state Treasurer Ken Miller said last week. "We will get new data late this month to show whether the recession continued into first quarter of this year; however, there is no indication of any marked recovery at this point."
Oklahoma joins Alaska, North Dakota, West Virginia and Wyoming as states that Moody's Analytics earlier this year found to be in recession. The latest data from the U.S. Bureau of Economic Analysis also showed New Mexico, Kansas, Nebraska, Iowa, and Montana posting negative growth in the fourth quarter of 2015.
Among all states, real gross domestic product at an annual rate ranged from 3% growth in Indiana to a 3.4% decline in Wyoming, according to the BEA.
After signing a patchwork budget in June that nearly eliminated the state's $1.3 billion budget shortfall, Oklahoma Gov. Mary Fallin went to visit ratings agencies in New York in hopes of averting a downgrade.
Joining Fallin on the trip were Miller, state Finance Secretary Preston Doerflinger, House Speaker-designate Charles McCall, and state Sen. Greg Treat, R-Oklahoma City, who is vice-chairman of the Senate Appropriations Committee.
Fallin told reporters she wanted to include legislators on the visits to ensure they understand the factors rating agencies consider when analyzing Oklahoma's budget practices.
The Sooner State is rated AA-plus by both Standard & Poor's Global Ratings and Fitch Ratings and Aa2 by Moody's Investors Service. All three agencies have Oklahoma on their watch lists for a possible downgrade.
After Fallin and the state's Republican legislative leaders devised a nearly balanced $6.8 billion budget through a variety of one-time fixes, Moody's issued a report saying the spending plan had negative implications for the state.
Analysts called the budget credit negative for the state because it shrinks reserves to about 6.5% of fiscal year 2015 revenue, its lowest level since at least fiscal 1994. Other budget-balancing measures include agency cuts, tax credit reforms and bond funding.
The BEA report of June 14 said Oklahoma experienced negative growth for three consecutive quarters beginning with the second quarter of 2015 and continuing through the end of the calendar year.
Whether that trend continued into first quarter of 2016 will be determined on July 27, when the BEA is scheduled to release new figures on state GDP.
Recognition of the state's recession was delayed for one quarter because Oklahoma's third quarter GDP was previously listed as growing by 0.1%, Miller said. The third quarter number was revised downward to negative 0.6% in the latest release.
Oklahoma's fourth quarter GDP decline of 2.8% positioned the state at 48th of the 50 states in terms of economic growth, above only Iowa, at a 2.9% drop, and Wyoming, down 3.4%.
Colorado and Utah, which both depend on energy production, grew at 2.8%.
Among the top energy states, Texas managed a 1.4% gain in gross domestic product, while Louisiana showed no growth.
In the Lone Star State, payroll job growth appears to be trending down with only 11,900 jobs added in April and 200 jobs added statewide in May, according to Robert Dye, chief economist at Dallas-based Comerica Bank.
"Even with stronger oil prices, downward momentum in the Texas economy may take some months to dissipate," Dye said.
Oklahoma's collections from gross production taxes on crude oil and natural gas remain below prior year numbers but have risen slightly for two months in a row after hitting a 17-year low in April, Miller reported.
June receipts are based on oil prices in April, when the spot price of West Texas Intermediate crude oil was $40.75 per barrel.
Receipts for the month were $925.7 million, down by almost $74 million or 7.4% from June 2015. Miller said the June total was the lowest in six years.
For fiscal year 2016 collections were $11.1 billion, down by more than $860 million or 7.2% from fiscal year 2015. The fiscal year's total was the lowest 12-month total since March 2013, Miller said.
Oil and gas gross production tax collections brought in $366.6 million during the 12 months, down by $331.2 million or 47.5% from the previous period.
Oklahoma City, the state's capital and largest city, has seen its fortunes decline sharply in the recession.
The city's sales tax revenue was down 7.7% in June from one year ago, and down a total 1.9% for the fiscal year ending June 30.
In June the Oklahoma City Council approved a $1.26 billion budget for the fiscal year that began July 1. The new budget is about 1% smaller than the amended fiscal year 2016 budget, according to city staff.
"With this budget we have tried to balance the fiscal realities of a smaller budget with the need to meet growth in our population and higher expectations from residents," city manager Jim Couch said.
In Tulsa County, which includes the state's second largest city, voters approved nearly $1 billion of bond projects by a comfortable margin in April. The projects include economic development and civic improvements on the Arkansas River.
According to S&P, a downgrade in Oklahoma's state rating would affect 99 other ratings.
"Thirty-two percent of the ratings in Oklahoma have negative outlooks, but the heavily negative bias of Oklahoma bonds is not an indication of the credit strength throughout the state," S&P analysts explained. "The negative outlooks result from Oklahoma's frequent issuance of appropriation debt."
Despite the sharply falling revenue, Oklahoma continued to reduce the state's personal income tax rate and tax breaks for the oil industry. Those tax cuts have compounded the state's revenue shortfall, S&P said.
Facing an official revenue crisis, the state authorized an $80 million use of constitutional reserve funds during the last fiscal year.
"While such reserves exist to provide flexibility in times of unexpected revenue shortfalls, as Oklahoma is experiencing now, the state has not increased reserves since fiscal 2012, despite periods of economic growth," analysts said.
"Lower fund balances could limit Oklahoma's flexibility if low oil prices, the strong dollar, and weakened global growth continue to constrain the state's revenues, or in the case of another economic downturn."