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Energy funding buoys Oklahoma school districts

by The Oklahoman Editorial Board Published: June 12, 2014

CRITICS of a state drilling incentive crowed about the financial bonanza that school districts would reap if Oklahoma’s drilling tax were increased. A more honest analysis shows the bonanza that schools are already reaping from Oklahoma energy production. Much of that activity is the result of a competitive tax system.

This is evident in updated U.S. Energy Information Administration figures on oil output. The agency found that Oklahoma produced 388,000 barrels of oil a day in March, the highest state output in a quarter of a century and an increase of 80 percent compared with March 2010.

This surge in production has fueled increased tax collections, even with a lower incentive rate in place. Tax collections on oil and natural gas production in May rose by nearly 28 percent over last year. For comparison, during the first quarter of the 2010 budget year, the state collected $77.4 million in gross production taxes on oil production. By the first quarter of budget year 2014, that figure had surged to $124.5 million, even after rebates to energy firms.

The numbers are consistent with the conclusions of a report commissioned by the State Chamber Research Foundation. Released in January, the report said the energy industry is already the single largest contributor to state revenues, providing more than $2 billion — about 22 percent of state collections.

This year, the Legislature increased, to 2 percent, the tax rate on horizontal wells for the first 36 months of production. The rate was 1 percent for the first 48 months. The rate for vertical wells was lowered from 7 percent to 2 percent, for the first 36 months.

The positive ripple effects from drilling dollars passing through the economy can’t be ignored. Oil and gas firms made an estimated $10.2 billion in purchases in Oklahoma in 2011. Although the oil and gas industry comprises just 3.2 percent of firms statewide, the industry accounts for 5 percent of Oklahoma’s wage and salary workers and pays 7.2 percent of all employee compensation in the state. Those workers then pay personal income taxes, which further boost school funding.

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by The Oklahoman Editorial Board
The Oklahoman Editorial Board consists of Gary Pierson, President and CEO of The Oklahoma Publishing Company; Christopher P. Reen, president and publisher of The Oklahoman; Kelly Dyer Fry, editor and vice president of news; Christy Gaylord...
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