Title: And one year later... NYTimes Article.
Post by: Kenosha on August 15, 2006, 08:09:46 am
quote:
OIL BOOM ENDS SOONER THAN OKLAHOMA PLANS
By ROBERT REINHOLD (NYT) 1240 words
Published: November 21, 1983
OKLAHOMA CITY, Nov. 19 -
For the last five years Oklahoma was doing fine, really O.K. The dust yielded its black gold and the state spent like a wildcatter with a gusher. It seemed that the great oil and gas boom would never quit.
The tax money rolled in and the state spent nearly $1 billion on new highways, buildings and schools. It raised teachers' salaries, renovated veterans' homes and hired more state police. The state budget doubled to $1.6 billion from $800 million in five years, and even so, Oklahomans enjoyed 16 tax cuts in that time as the out-of-state buyers of the state's natural gas and oil picked up the tab. Last year the voters rejected a special rainy-day fund. There would never be a rainy day in Oklahoma, they figured, at least not any time soon.
And then it all ended, with a vengeance. The oil and gas boom burst. 'No Choice' Except Higher Taxes
Last Monday Gov. George Nigh, facing a dramatic ''revenue failure,'' urgently called a special session of the Legislature for Nov. 28. He said he would ask the lawmakers to raise $500 million or more in new taxes that will be needed to maintain current state services over the next 18 months.
''I think we have no choice,'' Mr. Nigh said. ''I did not become Governor to preside over the demise of progress in this state.'' He added: ''We have reached the point of no return. Our choice is to step backward or - my option is to preserve the programs.''
Critics, even many of his fellow Democrats, complained that Mr. Nigh, who had resisted tax increases before, was slow to recognize the implications of the rising world supply of oil and the subsequent collapse of oil prices, and that he had allowed the state to become lax on money issues.
Oklahoma's problem is symptomatic of the agonizing realignment that is going on in both government and private business throughout the oil patch.
As recently as April of last year, the national and local press was full of stories portraying Oklahoma as a land of endless opportunity and negligible unemployment. Sales of Mercedes-Benz automobiles, Rolex watches and swimming pools soared as billions in outside money poured in to finance deep-gas drilling in Oklahoma's great Anadarko Basin. The oil industry had always done well here, but with the boom the new wealth spread throughout the state and it seemed that nearly everybody was sharing in the oil industry's prosperity. A Boom in Bankruptcies
Today the only boom is in Federal Bankruptcy Court in Oklahoma City and Tulsa, where bankruptcy petitions have more than doubled over last year. The crush is so great in the Western District here that lawyers and creditors seeking information have to take a number from the clerk.
''You'd think we in Oklahoma would have learned from previous boom- busts,'' said Neil Dikeman, associate director of the Center for Economic and Management Research at the University of Oklahoma. ''But people just could not believe the boom would burst again. Nobody thought the oil and gas industry would disintegrate at the speed it did. We did not put back any of the surpluses during the bright years.''
And so now the state agencies face a budget shortage of 23 percent this month and 19 percent next month unless the Legislature acts quickly. If it does not act, an estimated 8,000 teachers and state employees will have to be laid off, nearly 9,000 students turned away from state colleges and prison inmates forced to triple up, among other things. Under its Constitution, Oklahoma must balance its budget. Both Republicans and Democrats are demanding that any tax increase be accompanied by cuts in services. Test for Governor Nigh
The situation is the first real test of leadership for Governor Nigh, who took office in January 1979 as the boom gathered momentum and who presided over what he called in an interview the ''four best years Oklahoma ever had.'' In the decade since 1972, the state's gross production revenue from oil and gas extraction rocketed to $745 million from $72 million, and this allowed Oklahoma to expand services greatly while maintaining one of the lowest personal tax burdens in the country.
The first signs of trouble appeared a year ago when the ripples of the oil bust began to depress sales and income tax revenues. According to Odie A. Nance, chairman of the Tax Commission, total collections in the fiscal year 1983 have dropped 3 percent after increasing by 17 to 30 percent over each of the previous four years. Last November the revenue collected by the state failed to meet expectations for the first time in history. The slack was taken up by diverting $90 million from a reserve fund and making some cuts, but the worst was yet to come.
Now, unless taxes are raised or services cut or both, the state faces a $110 million shortage on the $1.6 billion budget for the fiscal year ending next June, and at least another $250 million shortage for the next fiscal year. Because the state is required to maintain a reserve fund of 10 percent of the budget in addition to meeting the budget shortage, this means a deficit of more than $500 million over the next 18 months. Criticism of Governor Mounts
Mr. Nigh has not yet disclosed how he plans to make up the difference, but it is widely assumed he will ask to increase the current 2 percent sales tax by one or two cents. Each cent would add about $200 million a year.
Criticism of the Governor is growing. In the boom years ''we frittered away our tax base,'' said State Representative Cleta Deatherage of Norman, a Democrat who until recently was chairman of the House Appropriations and Budget Committee. ''It was very short-sighted to whittle away $100 million a year, but the Governor did not see it that way.''
The surpluses, she asserted, were spent for ''ordinary'' things like new state buildings rather than for economic development to attract new industry. ''During the boom we did not have to make any hard decisions in order to increase funds for highways and schools and such,'' she said. ''It has been more than a decade since the political leadership in Oklahoma has had to make any hard decisions. We are not very used to it. We are pansies.''
Meanwhile, Oklahoma's business leadership frets over what it sees as a loss in the momentum that lifted the state out of the general economic torpor that followed the Dust Bowl days of the Great Depression, when thousands of Oklahomans fled the state.
Today Oklahoma watches unhappily as it lags behind the national recovery. Unemployment for October was 8.1 percent, an increase of two-tenths of a point over September. While that was still below the national average of 8.7 percent, it was a staggering increase for a state that long boasted the lowest unemployment rate in the country. At the height of the boom the unemployment rate here was only 2.7 percent, and as recently as June 1982 Oklahoma was still tied for the lowest rate in the country. A year later it was not even in the top half.
Dale Mitchell, head of the Fidelty Bank here, said the state now has a ''wonderful opportunity'' to cut fat. Even more important, he said, the state needs to rebuild its spirit and woo back outside investors. ''It's not going to be easy to rebuild,'' he said. ''We've lost more momentum that we realize. We could slide back into mediocrity if we do not do something significant over the next two years.''
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