No big bonanza seen for state government

OKLAHOMA CITY (AP) -- Oil prices have topped $30 per barrel, but there will be no spending spree by state legislators in 2001, leaders say.

One reason is that much of the new revenue flowing into the state treasury already has been spent. Another is that lawmakers no longer rely on shaky oil prices to fund general government operations.

"This kind of euphoric feeling that is in the air is almost totally related to sky-high oil and natural gas prices," said Sen.

Cal Hobson, D-Norman, appropriations vice chairman and head of the budget panel that handles education funding. He cautions a history lesson is in order for policy-makers.

"What we have to do is look back to another period in time, 1978 to 1982, when we also had artificially high energy prices,"

he said. "That was followed by the decade in the '80s, when there was damn near a depression in Oklahoma, with oil prices falling to a low of about $9 a barrel in 1985.

"The other point is we've got bills to pay, primarily large bond issues. There's phase one and phase two of the billion-dollar road plan. We're looking at about $107 million due."

Another $15 million is needed to fund the debt service on a $300 million capital bond program, he said.

Also, Hobson said, the Oklahoma Health Care Authority is now asking for an emergency $15 million appropriation, up from $9 million sought earlier. About $13 million is needed to annualize a state employee pay raise approved by the 2000 Legislature, and the Department of Corrections wants $28 million to catch up on bed space requirements.

"These are mostly debts that are coming due that we must pay,"

he said.

If energy prices hold up, the increased revenue headed to the state and counties will be substantial, however, and it can't be denied that the extra cash will come in handy when lawmakers write the budget for next year.

Through the first four months of the current fiscal year, oil tax collections total $42.8 million. That's more than half of the $79.4 million projected for the entire year, which was based on an estimate that oil prices per barrel would average $20.1.

Natural gas revenues that accrue to the General Revenue Fund total $128.1 million over the four months, compared with a 12-month estimate of $198.1 million.

Total GRF collections for four months are up 11.6 percent, but much of that is due to the higher gas prices, up almost 65 percent for the period.

The increases are fueling speculation that there will be a nice deposit next year in the constitutional Rainy Day Fund, which the governor and lawmakers have tapped in the past to make ends meet.

But officials say it is not a given that high oil prices will continue. After all, they say, it was fewer than two years ago that the Legislature was in special session to approve an oil industry tax break after prices fell to about $8 a barrel at one point.

"Eight months remain in the fiscal year and anything can happen over that time period," says Alison Frasier, deputy director of the Office of State Finance.

"At this point, it is too early to tell whether the state might make a Rainy Day Fund deposit at the end of the fiscal year. But I can say that I foresee no significant changes in our revenue outlook for the remainder of the year at this time, except for the anticipated reduction in motor vehicle tax collections."

The state Equalization Board, chaired by Gov. Frank Keating, will meet Dec. 3 to consider reducing the current revenue estimate by $8.7 million to reflect money that was knocked out when a car tag reduction bill was approved in a statewide vote.

The board also will consider removing $61.7 million from the estimate of national tobacco settlement money coming to the treasury. That action is necessary because of a constitutional amendment approved by the people in November setting up a tobacco settlement trust fund.

State government's financial fortunes are tied more closely to the national economy than in past decades, when oil prices meant good times, even if the nation was in a recession.

During the 1983 fiscal year, oil revenues made up 29.2 percent of money flowing to the GRF, compared with only 4.4 percent for the current year.

Since then, policy-makers have made a concerted effort to diversify the economy to avoid revenue shortfalls that caused severe cuts and tax increases after the '80s oil bust.

Excess revenue resulting from high oil prices now accrues in three education accounts -- a common school technology fund and two higher education funds, one for college scholarships and another for capital projects.

Keating and lawmakers chose to dip into the funds during the 2000 legislative session and likely will do so again in 2001.

"The reality is that all of us, in a bipartisan way, have decided we want to have a billion-dollar road plan," Hobson said.

"We wanted a $300 million capital improvement plan.

"Every member except one voted for a $3,000-per-teacher pay increase. Those were not one-time expenditures. Those are ongoing costs and they have to be funded and the most likely source of money to make these payments will be in large part the very healthy growth in collections from energy severance taxes."