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New CREG Report Sounds Revenue Alarm

The message in the January 2015 CREG report was about as surprising as the sunrise this morning: the state’s revenue forecast is even worse today than it was three months ago.

  The following table reports annual General Fund revenue growth for 2016-2020, as predicted by CREG in October and today, respectively:

 

CREG Oct 2014

CREG Jan 2015

Severance taxes

1.7%

0.2%

Sales-Use taxes

2.0%

1.6%

PWMTF

4.9%

3.5%

All other

1.0%

-0.2%

TOTAL

2.1%

1.2%

In other words, total General Fund revenue growth is now predicted to be just over half of what the forecast said three short months ago!

In its January report, CREG predicts that over the five fiscal years 2016-2020, the state will have a total of $174.6 million less to spend than what it predicted in October. The bulk of the change is attributable to a downward adjustment of severance tax revenue:

 

2016

2017

2018

2019

2020

Revenue adj.

-13.7%

-13.9%

-14.2%

-14.8%

-15.3%

On average, CREG now forecasts 14.4 percent less severance-tax revenue per year in 2016-2020 than they did in October.

And this is, again, just for the General Fund. Severance taxes feed more than a dozen different accounts, from the General Fund, the Budget Reserve Account and the Mineral Trust Fund to State Aid to County Roads. The General Fund and the Budget Reserve Account get about one quarter each of every severance-tax dollar.

All in all, the January CREG report predicts flat severance tax revenues through 2020. The comparison to the October CREG report is downright alarming:

 

CREG Oct

CREG Jan

Difference

2016

$941.6

$775.3

-$166.3

2017

$966.4

$793.7

-$172.7

2018

$982.5

$804.1

-$178.4

2019

$1,002.3

$814.0

-$188.3

2020

$1,023.8

$825.1

-$198.7

(All numbers in millions of dollars)

With a predicted General Fund revenue increase of 1.2 percent per year, our state lawmakers have some very tough decisions to make, this session as well as next. This situation will require much more than stopgap measures and reliance on the federal government. It will take drastic, structural, permanent reforms to government spending.

In the coming months, Republic Free Choice will present its own proposals for such reforms. Beginning in February, four reports will analyze the structural deficit and present spending reforms that will help the state avoid the serious problems associated with a structural deficit.

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Saturday, 23 September 2017
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