Oklahoma Economic Report

Oklahoma Oil and Gas AssociationNovember 14, 2014

Oklahoma State TreasurerKen Miller

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

Essential to Oklahoma

• The oil and gas industry is vital to the Oklahoma economy

• The industry comprises one-third of the state’s GDP through direct and indirect impact

• Annually contributes some $50 billion to the state’s $150 billion economy

Funding government

• The Gross Production tax has always been a significant source of revenue for state government

• Through earmarking and other factors, GP contributions to the General Revenue Fund (GRF) have decreased over the years

• For example, in FY-99, almost 88 percent of GP oil went to the GRF. In FY-14, the percentage was less than 47 percent

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

Current situation

• During FY-14, Gross Production from both oil and natural gas amounted to 7% of Gross Receipts to the Treasury (GRT) -- $860.1 million.

• During that same time, GP provided 5.9% of the GRF -- $333.2 million.

• Just last month, GP provided 7% of GRT and 2.4% of GRF

• Following months of double-digit increases, GP rose by 0.1% over the prior year in October’s GRT report

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

Crude Oil Apportionment

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

FY-99 FY-14

Natural Gas Apportionment

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

FY-99 FY-14

Nothing is simple

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

• This apportionment chart from the tax commission shows current allocations of Gross Production collections.

• Starting next fiscal year, the new 2% rate will be allocated 25% to County Highway Fund, 25% to schools and 50% to GRF

2010 fiscal challenges

• With the state, national and world economies seemingly in free fall, changes in GP collections were made in the waning days of the 2010 legislative session

• For FY-11 and 12, payment of horizontal and deep drilling incentive payments were delayed. The delay added $300 million in state revenue

• For FY-13, 14 and 15, the state is repaying the delayed incentives at a rate of $100 million per year

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

Incentive payment changes

• The same legislation changed the exemption period for horizontal wells by removing cost-recovery language

• It also changed how the incentives were paid – from a post-production rebate to the front end

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

Moving forward• The Kansas lesson: “Sometimes ideological experiments bring

unintended outcomes. I think Kansas is seeing that, and it serves as a reminder for the rest of us.” – Wall Street Journal, June 10, 2014

• Closer to home: “The ideal tax structure would generate a stable and diversified revenue stream that sufficiently funds core services while retaining the profit motive that drives entrepreneurship. It would not unfairly burden property owners, discourage consumption or reward idleness.” – Oklahoma Economic Report, May 31, 2012

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov

Questions?

KEN MILLEROKLAHOMA STATE TREASURER

www.treasurer.ok.gov