A revised reduction in the amount of money natural gas gross production taxes will bring into the state's treasury in the coming fiscal year may not be low enough, two members of the state's budget board said Friday.
The state Board of Equalization, made up of several elected officials, will meet Tuesday to decide whether to approve the revised estimates from the state Tax Commission of how much legislators will have to appropriate.
“We have to look at our information the Tax Commission is giving us; they've been doing this for many, many years and getting accurate figures as close as they can get,” said Gov. Mary Fallin, chairman of the Board of Equalization. “I don't want to just pull a number out of the air. I want to make sure that we're using factual information from marketplaces.”
State Treasurer Ken Miller, also on the Equalization Board, said members could vote to reduce the estimated price of natural gas, which would result in reducing the amount of money lawmakers would have to appropriate this year.
“We would rather be conservative than miss it in the other direction,” he said. “The other down side to missing it by being too conservative is a reduction in spending and larger Rainy Day (savings fund) deposit at the end of the fiscal year. And that's not such a bad down side.”
The Tax Commission on Thursday revised estimates it made in December on how much money lawmakers would have to appropriate for the 2013 fiscal year, which begins July 1. Their figures show legislators should have about $43.4 million in estimated tax collections; December figures showed a projected legislator-appropriated budget of about $6.5 billion.
Biggest gains are due to projected increases in income taxes and sales tax.
Anticipated revenue from gross production taxes on natural gas was cut by about $86.9 million since the December estimate. Natural gas was estimated in December to bring in $267.3 million.
The Tax Commission approved lowering the estimated prices for natural gas, which is hovering around $2.45 per 1,000 cubic feet. In December, Tax Commission economists used $4 per 1,000 cubic feet. It was lowered to $3.64.
Miller said he was concerned about the lower natural gas prices because other estimates indicate prices could stay in the $2.50 per 1,000 cubic feet range for the next year or so.
“I'm still not comfortable with the $3.64 number for natural gas,” Miller said. “We'll continue to digest that and have discussions among the other Equalization Board members prior to the meeting. I hope that we can either better understand the number and get comfortable with it or change it.”
The better-than-expected revenues shown by this week's revised estimate should cut in half a projected budget hole of about $100 million for the 2013 fiscal year.
Effects of oil estimate
The Tax Commission approved increasing in the price of oil, which is about $102 a barrel. The Commission used an estimate of $92.50 a barrel in December; the latest revenue estimate is based on $96.62 a barrel.
The high price of oil has spurred drilling activity in the state, which means the state will have to pay more in rebates to oil and natural gas companies than estimated two years ago.
To help the state get through a significant budget shortfall in 2010, oil and natural gas companies agreed to have the state suspend for two years a rebate program on oil and natural gas produced through certain more expensive drilling methods. It was estimated they would have been paid $150 million in rebates for the two-year period, which ends July 1. The agreement called for the state to pay back the energy companies $50 million a year for three years beginning with the 2013 fiscal year.
Actual drilling figures, however, showed the state owes $294 million in rebates on oil and natural gas from horizontal and deep wells. As a result, the state will have to pay oil companies $98 million a year for three years.
Miller said the increased drilling activity benefits the state.
“When that gas is coming out of the ground, people are employed to pull it out of the ground,” he said. “Those folks that are working the gas and oil rigs are having incomes and they go and spend those incomes on goods and services, and so we see a strong update in our income and sales tax collections. It's all connected.”