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The issue for 2016 in energy-rich states and localities will be sliding tax revenues — and what to do about the decline.
Energy prices are down, by a lot. So production is also down. That’s true in the oil patch and true in the coalfields. As a result, taxes based on oil, gas, and coal production are shrinking.
The New York Times reports that Alaska is considering an income tax — the first in 35 years — to make up for a decline in oil revenues.
Alaska is the champion of energy-related revenues. Nine out of every 10 dollars spent by the state comes from taxes on oil produced within the state.
But with oil prices and oil production down, the Times reports that two thirds of the revenue needed to fulfill the state’s $5.2 billion budget “cannot be collected.”
And that’s just the beginning. Alaskan residents have been receiving yearly checks from the state based on oil royalties and energy taxes. Most recently, the payments have amounted to about $2,000 per person.
So, Governor Bill Walker, an independent, is proposing smaller checks (about half of the current take) and a state income tax of 6 percent of whatever an Alaskan resident owes to the feds to make up for the decline in oil prices and production from Prudhoe Bay.
Coal-state governors and legislatures are also dealing with significant declines in tax revenues.
Coal production is down, so taxes on coal are down. By a lot.
In West Virginia, taxes on coal, oil and gas are off by a million dollars a day. Wyoming is facing a budget shortfall of $159 million next year, according to the Wall Street Journal.
So governors — Democrats and Republicans alike — are cutting. Democrat Earl Ray Tomblin cut spending at all West Virginia agencies by 4 percent, except the Education Department, which was cut 1 percent. Wyoming Republican Governor Matt Mead instituted a hiring freeze and is proposing a $215 million budget cut for an upcoming two-year budget.
Wyoming has not seen the layoffs that have swept West Virginia. The Journal notes that in Boone County, West Virginia, 2,700 mining jobs have been lost since 2011, the most of any county in the U.S. Boone used to pay for free trash pickup with money from a coal severance tax, but those revenues are slipping away.
Beginning in January, Boone will start charging residents $15 a month for regular trash removal.
There are more local consequences to the decline in energy-related revenues. In Eastern Kentucky, we’ve seen a county close its senior citizen center.
What is happening in your community? Write below in the comments section or on the Daily Yonder Facebook page about how the decline in energy prices is affecting your local government.
Bill Bishop is a founding editor of the Daily Yonder and currently serves the Yonder as contributing editor.