- Associated Press - Thursday, February 12, 2015

OKLAHOMA CITY (AP) - Low energy prices and the resulting layoff of hundreds of workers in Oklahoma’s oil patch will nearly double the state’s projected $300 million budget hole for the upcoming year, state officials said Thursday.

House Speaker Jeff Hickman, R-Fairview, said oil and natural gas prices have remained substantially below what legislative budget writers had predicted for the fiscal year that begins July 1. And those low prices have forced Oklahoma energy exploration and production companies to lay off workers, pushing state income tax collections lower, Hickman said.

“The income tax revenue stream has declined,” said Rep. Earl Sears, R-Bartlesville, chairman of the House Appropriations and Budget Committee. An economic firm used by the Oklahoma Tax Commission to develop revenue forecasts for the state has projected a potential reduction of 3,800 oil and natural gas jobs in Oklahoma in 2015, officials said.

Other budget issues, including a multitude of tax credit programs for industry, are also contributing to the state’s budget woes, Sears said.

Next year’s projected budget shortfall “will be significantly larger” than the $300 million officials estimated in December, but Sears declined to reveal the actual number ahead of Tuesday’s meeting of the state Board of Equalization, which will certify revenue for the upcoming fiscal year.

Democratic House Leader Scott Inman of Oklahoma City said analysts are projecting next year’s budget shortfall will be about $600 million.

“It appears that our budget hole has grown nearly twofold,” Inman said. “We’re in a dire situation.”

Gov. Mary Fallin’s secretary of finance, Preston Doerflinger, said revenue figures are not final but that indications are next year’s budget gap will double.

“Ever since oil started dropping, we have known scenarios like this could occur,” Doerflinger said in a statement. “We cannot control oil prices, but we can control and improve the structure of the budget to better meet the needs of the day, as the governor has long suggested.”

Oklahoma will have $6.9 billion available to spend in the upcoming fiscal year, nearly $300 million less than the $7.2 billion budget for the current fiscal year, the board which certifies revenue said.

Fallin noted that state has a “rainy day” reserve fund. The fund contains $535 million and about $201 million could be tapped during a revenue failure.

“With a healthy savings account and a robust economy, we are in a good position to face this challenge and overcome it,” Fallin said in a statement.

Hickman said the state’s growing budget shortfall will likely mean state agencies will face a new round of budget cuts next year.

“The discussion is quickly turning to what will the amount of budget cuts be to state agencies.” the House speaker said. While one-time expenditures might be affordable, additional dollars for new or expanded services will likely not be available, Hickman said.

“Every state entity needs to be prepared for less dollars than they received,” he said. “We’ll be looking very closely at budgets.”

The shortfall also makes it less likely that legislation to increase teacher salaries and substantially increase spending in public school classrooms will be possible, he said.

“It takes away the ability to address that with dollars this year,” Hickman said. “It does not take away the discussion about long-term funding.”

Inman, the Democratic leader, blamed the growing shortfall on “a lack of leadership and fiscal mismanagement of the state budget” by the House’s GOP majority.

In spite of the growing budget shortfall, a quarter percentage point income tax cut supported by House Republicans is still scheduled to go into effect on Jan. 1, he said. The reduction to a top rate of 5 percent is expected to cost the state about $147 million annually when fully implemented.

“That can only be described as fiscal irresponsibility,” Inman said.

Hickman said the income tax cut will not affect efforts to prepare a budget for the upcoming year.


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