Newspaper article THE JOURNAL RECORD

$418 Million State Deficit Foreseen Due to Oil Prices

Newspaper article THE JOURNAL RECORD

$418 Million State Deficit Foreseen Due to Oil Prices

Article excerpt

The state's budget deficit could hit $418 million next year if Oklahoma crude oil prices drop to $15 per barrel, Sen. Robert Cullison, D-Skiatook, said Friday.

If a $418 million shortfall becomes reality, that will wipe out the $415 million raised by last year's record-breaking tax increase.

"We should expect budget cuts possibly as high as 20 percent next year, if this happens, instead of the current 9 percent cutback," said Cullison, chairman of the Senate Finance Committee.

State leaders are anxiously watching the daily oil price quotes, as they prepare for the revised, lower 1987 budget estimate that will be certified Thursday by the State Equalization Board.

West Texas Intermediate crude oil, under contract for March delivery, closed at $16.45 per barrel this week.

"I'm just basing this on common sense," Cullison said. "We know that $15 oil is possible, and maybe $10 oil. We originally figured our budget on $23-per-barrel oil, which is totally unrealistic."

Cullison is not trying to grab headlines.

He earned considerable respect last year from his legislative colleagues and the Capitol press corps for his level-headed approach to writing the liquor-by-the-drink law.

"We know we lose $11 million directly, right off the top, in gross production taxes for every dollar drop in the price of oil," Cullison said.

"Then, taking into consideration the income tax, sales tax, ad valorem tax and other revenue we're going to lose from people leaving the state, because of the fall-out from the oil industry, I would say we lose another $9 million in related taxes every time the price of oil drops $1 per barrel," Cullison said.

That kicks in a simple formula, Cullison said: a $20 million loss in state tax revenues for every $1 drop in the oil price, times an $8-per-barrel price decline (based on the expectation that oil will drop from $23 to $15 per barrel), equals a $160 million decline in state tax revenue. …

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