How much do Western state budgets rely on extractive industries?

Resource-reliant states feel pinch as fossil-fuel revenue dwindles.

 

Oil money runs Alaska. Residents don’t pay sales tax and the state income tax was abolished in 1980, after the completion of the Trans-Alaska Pipeline. Each year, Alaskans receive a check based on earned interest from the Alaska Permanent Fund, which invests pooled oil and mineral royalties. (Last year’s disbursement was a record high of $2,072 per person.)

It’s a formula that has served the state well for many years, but with oil prices tanking, the state is now grappling with a multi-billion dollar deficit in its budget, prompting calls for sweeping changes in how the government is funded. Petroleum revenues  plunged to a 21.3 percent share of the state general fund in the last fiscal year – down from 48.0 percent just one year prior, and 59.6 percent the year before that. The general fund itself has dwindled over the same interval, falling from $10.3 billion in 2013 to just under $4.9 billion in 2015.

An oil rig looms in the distance in Prudhoe Bay, Alaska. The state is facing a massive budget deficit due to falling oil prices.

Alaska’s plight is not unique. Western states — particularly Alaska, North Dakota and Wyoming — are among those most reliant on extractive industries, and are thus the hardest hit by recent crashes in the price of oil, coal and natural gas. In Wyoming, for instance, extractive industries accounted for over a third of the state’s GDP in 2013 — the highest proportion in the nation. The industries provide more than just jobs. Associated revenue from severance taxes — taxes on non-renewable resource extraction — is a pillar of each state’s general fund, supporting schools and other essential services.

That dependence on boom-and-bust industries makes for a lot of economic uncertainty. A Pew analysis showed that Alaska, North Dakota and Wyoming have three of the four highest levels of tax revenue volatility in the nation. Other Western states like California, Colorado, Arizona and New Mexico hold many of the top spots, due to a variety of factors not limited to severance taxes.

Here’s a breakdown of the role severance taxes played in Western state budgets in 2014.

Sources:

+Analysis from Pew Charitable Trusts using U.S. Census data.

++Totals for Selected State Government Tax Collections.

Note: Though severance taxes are a strong proxy for extractive industries’ state-level financial clout, they are just one of the revenue streams that state and local governments receive from resource extraction. They also collect gross receipt and sales taxes, property taxes and royalties when drilling occurs on state land.

Bryce Gray is an editorial intern for High Country News. He tweets at @_BryceGray.

High Country News Classifieds
  • LAND AND WATER CONSERVATION DIRECTOR
    The Land and Water Conservation Director is a full-time salaried position with the Mountain Area Land Trust in Evergreen, CO. The successful candidate will have...
  • ARIZONA PROGRAM MANAGER
    National Parks Conservation Association (NPCA), the nation's oldest and largest national parks nonprofit advocacy organization seeks an Arizona Program Manager. The Arizona Program Manager works...
  • CROWN OF THE CONTINENT COMMUNITY CONSERVATION SPECIALIST
    THE WILDERNESS SOCIETY is seeking a Community Conservation Specialist, for the Crown of the Continent DEPARTMENT: Conservation CLASSIFICATION: Grade 6 Specialist/Representative (Low of $54K) REPORTS...
  • ASSISTANT FARM DIRECTOR
    About The Organization Building community through fresh vegetables is at the heart of the Sisters-based non-profit, Seed to Table Oregon. Based on a four-acre diversified...
  • CARPENTER WANTED
    CARPENTER WANTED. Come to Ketchikan and check out the Rainforest on the coast, Hike the shorelines, hug the big trees, watch deer in the muskeg...
  • DYNAMIC EXECUTIVE DIRECTOR
    VARD is seeking an Executive Director to lead a small legal & planning staff dedicated to the health and sustainability of Teton Valley Idaho and...
  • WATER PROJECT MANAGER, UPPER SAN PEDRO (ARIZONA)
    Based in Tucson or Sierra Vista, AZ., the Upper San Pedro Project Manager develops, manages, and advances freshwater conservation programs, plans, and methods focusing on...
  • CAMPAIGNS DIRECTOR
    Southeast Alaska Conservation is hiring. Visit https://www.seacc.org/about/hiring for info. 907-586-6942 [email protected]
  • FINANCE & GRANTS MANAGER
    The Blackfoot Challenge, located in Ovando, MT, seeks a self-motivated, detail-oriented individual to conduct bookkeeping, financial analysis and reporting, and grant oversight and management. Competitive...
  • WADE LAKE CABINS, CAMERON MT
    A once in a lifetime opportunity to live and run a business on the shore of one of the most beautiful lakes in SW Montana....
  • CONTRIBUTING EDITOR, BOOKS, CULTURE AND COMMENTARY (PART-TIME, CONTRACT)
    High Country News is seeking a Contributing Editor for Books, Culture and Commentary to assign and edit inquisitive, inspiring, and thought-provoking content for HCN in...
  • STATEWIDE COMMUNITY ORGANIZER
    ABOUT US Better Wyoming is a nonprofit, nonpartisan advocacy organization that educates, organizes, and mobilizes Wyoming residents on behalf of statewide change. Learn more at...
  • EXECUTIVE DIRECTOR
    TwispWorks is a 501(c)3 that promotes economic and cultural vitality in the mountainous Methow Valley, the eastern gateway to North Cascades National Park in Washington...
  • CLEAN ENERGY ADVOCATE OR DIRECTOR
    Location: Helena, Montana Type: Permanent, full time after 1-year probationary period. Reports to: Director of Policy and Legislative Affairs. Travel: Some overnight travel, both in-state...
  • PROFESSIONAL GIS SERVICES
    Custom Geospatial Solutions is available for all of your GIS needs. Affordable, flexible and accurate data visualization and analysis for any sized project.
  • DEVELOPMENT DIRECTOR
    Restore Hetch Hetchy, a 501 (c)(3) nonprofit organization, seeks experienced development professional to identify and engage individuals and institutions who are inspired to help underwrite...
  • PUBLIC LANDS COUNSEL
    The successful candidate will be the organization's lead counsel on public lands issues, including reviewing federal administrative actions and proposed policy and helping to shape...
  • GUIDE TO WESTERN NATIONAL MONUMENTS
    NEW BOOK showcases 70 national monuments across the western United States. Use "Guide10" for 10% off at cmcpress.org
  • RARE CHIRICAHUA RIPARIAN LAND FOR SALE
    40 acres: 110 miles from Tucson: native trees, grasses: birder's heaven::dark sky/ borders state lease & National forest/5100 ft/13-16 per annum rain
  • ENVIRONMENTAL GEOPHYSICS
    "More Data, Less Digging" Find groundwater and reduce excavation costs!