- Associated Press - Tuesday, January 13, 2015

TOPEKA, Kan. (AP) - Kansas lawmakers looking for a bright spot in the state’s financial picture were told on Tuesday that even though falling gas prices are greatly reducing the amount of oil severance taxes the state is collecting, more money is going into the pockets of residents that can be spent on other things.

The state’s bipartisan legislative research staff in November lowered its estimate of how much the state would collect in fiscal year 2015, which began in July, by nearly $8.2 million. The new estimate was based on the price of Kansas oil being $80 per barrel.

“If we were going to do that today, you’d laugh us out of the room,” Chris Courtwright, principal economist for the Kansas Legislative Research Department, told the House Appropriations Committee on Tuesday.

The state’s oil price was $35.75 per barrel Tuesday, according to the Kansas Independent Oil and Gas Association.

“I’m not going to lie to you. We’re not going to make the oil severance tax estimate for state fiscal year 2015,” Courtwright said.

Lawmakers entered this year’s session facing a projected budget shortfall of $710 million, including $279 million for the current fiscal year. By law, the state cannot end a fiscal year in the red.

The projected shortfall resulted from personal income tax cuts enacted last session at the urging of Gov. Sam Brownback, who proposed last month to address the gap by diverting funds for highway projects and public pensions to general government programs.

The sharp decline in severance tax receipts had nothing to do with the governor’s tax policies, but rather was because Middle Eastern oil-producing countries are trying to run U.S. oil producers out of business by flooding the market with cheap oil, said Ed Cross, president of the Kansas Independent Oil and Gas Association.

As a result, oil producers in Kansas and across the country are re-evaluating their drilling plans, he said.

“When we have low oil prices for a sustained period, that affects the economy,” Cross said. “In some counties where oil and gas is produced in Kansas, the oil industry provides 25 percent of the employment.”

The impact of the current oil prices won’t be felt at the state level for a few months, Courtwright said, because there’s a two-month lag between when the oil is purchased and when the severance tax money makes it into the state’s general fund.

“While there’s bad news on severance tax receipts, there’s going to be good news on sales tax receipts,” he said. “Maybe some of that additional money bouncing around the Kansas economy through the multiplier effect will stimulate the economy.”

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