Higher oil prices mean higher revenue

Monday, February 21st 2000, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) -- Gov. Frank Keating is counting on higher oil production revenue to help him balance his budget this session. But the governor will need the Legislature's help and the cooperation of the state's top educators before he is free to dip into the state's gross production tax money.

Keating set aside millions of dollars in oil severance taxes to balance his proposed budget for the fiscal year that begins July 1. But all of Oklahoma's oil tax revenue is already locked up in dedicated education accounts, and the Republican governor doesn't have the key.

The Legislature revamped how it manages and appropriates the state's oil revenue last year when it passed a $29 million oil relief package to help producers who, at the time, were struggling to survive. Worldwide oil prices dipped to less than $10 a barrel in January 1999 to reach the lowest inflation-adjusted price since the Great Depression.

Producers said they could not afford to pay Oklahoma's 7 per cent tax on oil production and stay in business. The Legislature reacted by passing an oil tax cut that gives producers a break when prices are low. The measure cuts the tax to 4 per cent when the price of oil drops between $14 and $17 a barrel. The tax would decline to 1 percent when the price dips below $14 a barrel.

At the same time, lawmakers moved oil taxes away from the state's General Revenue Fund to eliminate unpredictability in the fund's revenue projections caused by fluctuating oil prices. The Legislature created three common education and higher education capital revolving funds that dedicate oil tax money to education-related capital improvements when the price of Oklahoma sweet crude hits at least $14 a barrel. Oil taxes collected when the price is less than $14 continues to be dedicated to education and local county road projects.

Keating supported the idea when it passed. But rising oil prices and increasing tax revenues have made the dedicated funds attractive targets for budgetary raiders. "The funds are doing very well right now," said Shawn Ashley, public information officer for the Office of State Finance. With the price of crude oil hovering around $30 a barrel, the three funds collectively contain about $45 million and will have about $70 million at the end of the fiscal year June 30, Ashley said.

State finance officials have some ideas for the new pots of tax money. The governor's budget for the next fiscal year recommends spending $46.1 million in oil tax revenue collected during the 1999 and 2000 fiscal years. "It's part of the governor's general budget recommendations," Ashley said. Each of the three dedicated funds had accumulated more than $14.9 million at the end of January and are estimated to each contain more than $23.9 million at the end of the fiscal year June 30. "He's putting the money to the best use possible, using a portion of it for what a lot of people would contend are pressing needs and then leaving the remainder to deal with the specific reason the funds were originally created," he said.

Trouble is, neither Keating nor the Legislature has the authority to spend the money on anything but their dedicated purpose -- a stumbling block that will take an act of the Legislature to solve. "We advance that idea in the budget," Ashley said. So far, there are no specific proposals to spend the dedicated money for other purposes. Gaining access to the funds will become easier after June 2001, when the oil tax cut expires. The gross production tax will rise back to a flat 7 pe rcent and revenues will again be deposited in the General Revenue Fund, Ashley said.

Next year, state finance officials project the three funds will each accumulate more than $20.4 million in oil tax revenues. The governor has no specific plans for appropriating those funds, Ashley said. Keating's budget proposes putting the oil tax money in a new dedicated education account "to fund various education initiatives." But the budget is not specific about how the money would be used, and the prospect of losing dedicated revenue does not sit well with some educators. "We're all pretty much counting on that," said Superintendent of Education Sandy Garrett. Education officials need money in the dedicated Common Education Technology Fund to connect all of the state's public schools to Oklahoma's statewide Internet service, OneNet, Garrett said. "We only have 46 percent of our schools connected to One Net," she said. â€œNo funds were appropriated for school technology last year, and the state needs $62 million to connect every school site to One Net, Garrett said. "I would be very supportive of working with the governor for it to go to Oklahoma education technology," Ms. Garrett said. "We certainly need it for educational technology."

Higher Education Chancellor Hans Brisch said he is eager to receive revenues from the two other dedicated funds -- the Oklahoma Tuition Scholarship Fund and the Higher Education Capital Fund. "We are very supportive of funding the needs of students," Brisch said. But how the money is appropriated and from what source is up to the Legislature and the governor, he said. "We want the money. A buck is a buck. I don't care what cookie jar it comes out of," Brisch said.