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In Oklahoma, Low Energy Prices Drive State Budget Crisis

Jan 19, 2016
Originally published on January 19, 2016 5:30 pm
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ROBERT SIEGEL, HOST:

In Oklahoma, the economy runs on oil. The energy industry drives 1 in 5 jobs and is tied to almost every type of tax source. So falling oil prices have created a state budget crisis. Joe Wertz of State Impact Oklahoma sent this report.

JOE WERTZ, BYLINE: Crude oil prices have dropped more than 70 percent, and that's created problems across government agencies in Oklahoma. Jason Murphy is a project coordinator for the state Water Resources Board.

JASON MURPHY: Is it weird if I'm not wearing pants?

WERTZ: Murphy slides on a pair of waders, unspools a sensor probe and splashes into the frigid Canadian River east of Oklahoma City.

MURPHY: We're getting water temperature, conductivity, dissolved oxygen, pH.

WERTZ: The information helps Murphy's team evaluate the health of this river, which is a source of public drinking water. Fieldwork like this is one of the most important things his agency does. But with the price of oil sinking to 12-year lows, officials in Oklahoma face budget cuts that threaten their most essential functions. J.D. Strong is the state water board's executive director.

J.D. STRONG: We're essentially down to the point where we don't have anything left that's not mission-critical.

(SOUNDBITE OF ARCHIVED RECORDING)

PRESTON DOERFLINGER: So there you have it, folks. Almost every major tax category is in decline because of our biggest industry is in decline.

WERTZ: Plummeting oil prices forced Secretary of Finance Preston Doerflinger to declare a revenue failure. That led to mid-year cuts in current funding levels at every state agency. Oklahoma now faces a budget gap of at least $900 million. No one knows the depth or length of the current oil downturn, but Doerflinger says the effects will worsen if drilling stoppages and layoffs continue.

DOERFLINGER: I think the hole could get bigger this year and next year.

WERTZ: Oklahoma is not alone. Low oil and natural gas prices are driving down government revenues in Alaska, Louisiana and Texas. Low coal production is adding to the tax problem in West Virginia and Wyoming. North Dakota is hurting, too, but state funding is protected by saving's funds set up to siphon off billions in boom-time oil taxes. Oklahoma has a rainy day fund, but it's much smaller. And lawmakers dipped into it last year. Doerflinger and other leaders say it might be time for a bigger state savings account.

DOERFLINGER: Panicking about the situation is not productive. We need to use this as an opportunity to do things we may not otherwise have the will to do.

WERTZ: Employee buyouts and furloughs are being considered, and some agencies could be closed. Teachers are getting layoff notices. Schools could be shuttered. Oklahoma House Speaker Jeff Hickman says years of Republican-backed tax cuts are not to blame.

JEFF HICKMAN: Oil busts have blown holes like this in budgets under Democrats. They've blown holes in budgets under Republicans alike for decades, and they probably will do so in the future.

WERTZ: Back at the river outside Oklahoma City, Jason Murphy emerges from the icy water, and the sensor starts spitting out information.

MURPHY: I've got plenty of dissolved oxygen - 11-and-a-half milligrams per liter and a pH just under eight.

WERTZ: His boss, assistant chief of water quality Bill Cauthron, says crashing oil prices and funding cuts could limit their fieldwork.

BILL CAUTHRON: We'll tweak the program in the ways that make scientific sense. You know, maybe we'll sample less parameters. Maybe we'll sample less sites.

WERTZ: Oklahoma hasn't had a revenue failure since the great recession. The current budget crisis is smaller, but it doesn't make the solutions any easier. For NPR News, I'm Joe Wertz in Oklahoma City. Transcript provided by NPR, Copyright NPR.