Tags: State | Oil | Prices | Revenue

State Treasurers Expect Falling Oil Prices to Boost Revenue

Thursday, 04 Dec 2014 08:19 PM

U.S. state treasurers are anticipating a boost in sales revenues from plunging oil prices, which give people more discretionary spending power, but that is tempered by fears of the harm it could to do energy-focused states.

Oil prices have fallen by more than a third since June and price forecasts have collapsed in the wake of the Organization of the Petroleum Exporting Countries' decision not to cut output despite a global glut.

"It's a net positive for Washington, because it certainly creates lower energy costs and our consumers will benefit, and we are not really a big energy production state," said James McIntire, State Treasurer, Washington, speaking on the sidelines of the National Association of State Treasurers' conference.

Low gasoline prices are contributing to supporting consumer spending, which rebounded in October.

"On the commerce side is where I think the benefit is," said Ted Wheeler, Oregon state treasurer. "Anything transportation related - tourism is a huge component of economic activity in the state of Oregon and we know for a fact that when prices are low, people travel more... they come to Oregon and spend more money."

According to a recent S&P report, states that are particularly reliant on sales tax for revenues include Washington, Florida, Arizona, Indiana and Tennessee.

"It's a little early in the game to know the net result but it is beneficial to have some correction in energy prices as they have been traditionally high and that's been an issue in the struggling economy," said David Lillard, state treasurer of Tennessee.

But while it would reduce operating costs to the state government, it would put drilling-based investment industries at a disadvantage, he said.

Moody's in an October report said a large drop in oil prices would be credit negative for some of the top oil-producing U.S. states, particularly Alaska, which depends on oil tax revenues to fund nearly all its operating budget.

"As a state that does some oil and gas production, I anticipate that it will have some impact in the long run both on revenue for the state as well as tax receipts for state government," said Ron Estes, Kansas state treasurer.

Utah State Treasurer Richard Ellis said while lower oil prices could impact the amount received from energy severance tax, it was a small part of the budget and maybe offset by increased consumer spending.

© 2017 Thomson/Reuters. All rights reserved.

 
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U.S. state treasurers are anticipating a boost in sales revenues from plunging oil prices, which give people more discretionary spending power, but that optimism is tempered by fears of the harm it could to do energy-focused states.
State, Oil, Prices, Revenue
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2014-19-04
Thursday, 04 Dec 2014 08:19 PM
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