States with energy-dependent economies, such as Louisiana, Alaska and Texas, have seen real consequences for their state budgets come with the decline in the price of crude oil and are weathering the shortfalls to varying degrees of success, The Washington Post reports.
Alaska, more than any other state, is threatened by the low prices. Energy-related tax revenue accounted for more than 90% of Alaska’s unrestricted general fund revenue in the 2013 fiscal year, according to the report.
In New Mexico, energy-related tax revenue accounted for about 17% of that revenue. In Louisiana, 13.5%. Despite producing the largest share of crude oil in 2013, oil tax revenue in Texas accounted for well below 10% of overall general fund revenue.
Texas is arguably weathering the tight purse-strings the best, according to the report. Texas has diversified its economy since the oil bust of the 1980s and has a strong rainy day fund.
A state’s ability to adjust also depends on how much actual prices differ from state forecasts used to construct their budgets. When the 2015 fiscal year began for most states on July 1, the price of U.S. crude oil was about $105 per barrel. Today, it’s in the low $50 range.
Alaska forecast that the average price of oil produced on its North Slope would be $105 per barrel. Earlier this month, it was revised down to $76. The average over that roughly five-month period was nearly $92, or 13% off of Alaska’s starting estimate.
Louisiana has revised its oil price forecasts for 2016 from $95 to $83 per barrel, and officials expect to readjust that forecast again before the fiscal year is over. Louisiana’s budget loses roughly $12 million for every dollar the annual average falls.
If oil prices remain low, some state lawmakers will face tough decisions over raising or implementing taxes—Alaska has no sales or income tax—cutting spending or tapping reserves. Read the full story from The Washington Post.
