Oil prices are a scapegoat Wednesday, Dec 17 2014
Bobby Jindal and the leges have been blaming the state’s fiscal woes on the sudden drop in the price of crude oil.
If one merely looks at the “spot” prices regularly reported in the media it seems like a much bigger issue. It’s nothing like the “oil bust” of the 1980s. At that time a majority of the state revenues were from oil severance taxes. That is no longer the case.
Additionally, the state’s severance tax revenues are based on the contract price, not the “spot” price. For example, some of the companies currently drilling in the Tuscaloosa Marine Shale have pre-sold their potential finds at $96 per barrel. That is the price on which the taxes will be paid. The consensus in the oil industry is the current downturn in oil prices is temporary. It may last 6 months or it may last a year; it is not a forever thing.
Also reducing the impact on state revenues, as pointed out by Lege Fiscal Office economist Greg Albrecht, low oil prices means savings for consumers. Their spending shifts to other items on which sales taxes are collected. For businesses, especially small businesses, it means more profit which means higher income taxes.
The major problem in the current budget and creating the $1.4 Billion revenue shortfall projected for next year’s budget is not a reduction in revenues, but overspending. Overall revenues have grown every year that Jindal has been governor. However, he and the leges have consistently spent not only one-time revenues on recurring expenses, but imagined revenues under the guise of “efficiencies” which cannot be measured.
Blaming oil prices is merely a scapegoat for passing fiscally-irresponsible budgets for the last 7 years. Don’t let those responsible avoid the blame. It’s time to hold Jindal and the leges’ feet to the fire by telling them to set better priorities based on real, as opposed to imagined, revenues and amorphous efficiencies.
They’ve got one more chance to get it right in the 2015 Regular Session. If they don’t the first order of business for the new governor and new leges in early 2016 will be to hold a special session to raise taxes and reduce services to balance the final Jindal budget.
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