Looming peak oil demand, a world fossil-fuel glut and Republican tax-cut ideology has structurally changed the state of Oklahoma’s revenue collections, resulting in abysmal and embarrassing funding for education, social services, health programs and corrections.
— Carbon Brief (@CarbonBrief) March 19, 2017
Renewable energy sources, such as wind and solar power, continue to grow incrementally around the world, lessening the need for fossils fuels, especially to produce electricity. New oil reserves, such as the tar sands in Canada, have been discovered throughout the world in recent decades. Oklahoma, as we all know, has been sustained by the fossil-fuel industry, which now pays a limited amount of production taxes.
The only thing that could push up oil prices, and thus increase production tax revenue on a major level for Oklahoma, would be a seismic disruption in the fossil fuel supply chain caused by a world war or at least a major conflict involving several countries. Obviously, that’s nothing to wish for, although I bet there are people who have their fingers crossed it will happen.
Meanwhile, most Oklahoma Republican politicians, whether they actually believe it or not, push the idea that tax cuts actually help the economy by increasing state revenues, but that’s not the truth. The truth is the state currently faces an $878 million shortfall in an average budget of approximately $7 billion. The truth is this comes after income tax cuts that primarily benefited wealthy people that then led to huge cuts to state agencies, including our education systems, in recent years. The truth is the state has cut public education funding on a percentage basis the most of any state in the country since 2008.
It’s difficult not to see the state at a huge breaking point. The Trump presidency will make it worse. More deregulation of the fossil-fuel industry and ending particular rules on energy companies related to the environment, which the Trump administration supports, will only accelerate global warming and pollution, and possibly the number and intensity of earthquakes here, while increasing the glut of oil, which drives prices even further down.
Obviously, tax breaks given to oil and gas companies have had a major impact on the state’s revenue collections, and they should be renegotiated, but the larger story is that Oklahoma should never rely again on the fossil fuel industry for its financial foundation, both in terms of tax revenues and employment. Oklahoma leaders need to embrace this new reality. The oil booms, unless created by world calamity, are most likely over or will taper off in weak gasps.
As usual, with only a month or so left in the legislative session, the Oklahoma Legislature and Gov. Mary Fallin have yet to offer up a workable budget for next fiscal year. The legislature supposedly wants to raise teacher salaries, but how can that happen with such a major budget shortfall?
Some partial and interim answers to what has become a systemic Oklahoma government revenue problem do exist: Significantly raises taxes on incomes at $250,000 and above on a graduated scale and then tax fossil fuel production at much higher levels. The likelihood of this happening anytime soon is practically nil, but there’s really no other alternatives.
The larger issue, of course, is to diversify the economy with different industries and businesses to boost tax revenue, but attracting such development is difficult in a state in which schools have four-day learning weeks and the college graduation rate is much lower than the national average. Our earthquake crisis, caused by an element of the fracking process used by the oil and gas industry, doesn’t help either. The volatile weather here isn’t a big draw.
What should be obvious to every thinking person in Oklahoma at this point is that the state is broke and broken, and no elected leader has a viable plan or the will to fix it.