Capitol Considerations

by Senator Micheal Bergstrom

Oklahoma State Senate District 1

Oklahoma is in a recession.

That is not the case in most of the rest of our nation.

While that may seem like rather bleak news, don't worry, it gets worse.

For Oklahoma, according to the report issued in December by the state's board of equalization, it looks like the state is facing an $868 million revenue shortfall for our next budget, and since some of the funding sources that were used to plug last year's revenue shortfall are either unavailable or significantly reduced, legislators are probably going to find balancing this budget more difficult than it was last year.

Anyone remember that circus?

The other evening I was picking the brain of an Oklahoma oil executive. After all, oil and gas and the decline of their prices are the cause of this downturn, aren't they? That's what everyone says. Maybe they'll be our salvation.

What direction did he see the price of oil going, I asked. Did he think the Saudis would change their minds about reducing production? Would other members of the OPEC oil cartel follow Saudi Arabia's lead? I was looking for something positive to grab onto.

That oil executive told me that Saudi Arabia, whose high levels of output had helped to glut the global oil market and thereby drove down the price of oil, would most likely keep their current production levels low, but no, other OPEC members would probably keep pumping as they have.

Then he said this:

"Oil prices are artificially high right now."

His prediction, oil which was selling at that time for about $52 a barrel, will level out at about $42 to $45 a barrel.

If his prediction is correct, some Oklahoma producers will probably shut down or reduce production. If his prediction is correct, oil is not going to save us from the budget mess we now face.

We have to find another answer.

Some will argue that the answer is to just keep cutting waste.

The problem is that we've already done that. Sure, there's certainly more inefficiencies we can fix, some duplication of services that need to be eliminated, and some tax credits that must be modified and in some cases eliminated. I have a bill, SB41, to get rid of tax credits for the film industry, and another bill, SB95, which caps the payouts on wind tax credits at $25 million a year. (The Incentive Evaluation Commission has determined that both of those credits need to be stopped.)

And while doing things like what I suggest in the bills above will help us to fund things like a teacher raise (that's my bill SB97), it cannot fix our budget shortfall.

We just cannot cut our way to a balanced budget and meet the very real needs of Oklahoma's citizens. Which is why we will have to find ways to increase revenue.

I suggest we start by not giving away current revenue. We must change the trigger for, or do away with, the next income tax cut.

I am a conservative Republican and I am no fan of taxes, but everyone who has to do a family budget knows you don't try to eliminate your source of income when you have bills to pay. Well, that's exactly what the legislature did last session when it allowed the last tax cut to go into effect and drain $140 million from the state's revenue stream when it had a $1.3 billion revenue shortfall.

Does anyone else see a problem there?

So, let's use some common sense.

How about this? Let's have a production tax on the electricity produced in Oklahoma by wind farms.

Right now, the majority of our electricity produced by wind is exported out of state, and 93% of the firms responsible for that production are either owned by out of state firms or companies in other countries like South Korea. When the "Clean Line" transmission line from the panhandle to Tennessee goes online, 85% or more of the electricity produced by wind in Oklahoma will be going out of state.

Oklahomans, who have been subsidizing wind production, will get nothing for that as things stand now.

Oil and gas have a production tax. Why not electricity produced by wind?

It's certainly something worth considering.