Oklahoma's Response to New Federalism: Municipal Belt Tightening Amid State Abundance

Abstract

The Oklahoma economy is booming, and state revenues are climbing at record rates-thanks in large part to expanding oil and gas production. Oklahoma has one of the strongest economies in the country. (The state's jobless rate in November of 1981 was 3.8 percent, the lowest in the nation.) Thus, reductions in federal domestic spending have had little effect on state government. The big issue in the Sooner State is how much surplus there will be for the legislature to spend and which taxes should be cut and by how much. In 1981, differences between the governor and the legislature, and between political parties, centered around these questions. Oklahoma is among only a handful of states, mostly in the Southwest and West, with surplus revenues. Increased energy exploration and production is the principal reason. In 1981, more new oil and gas wells were drilled in Oklahoma than in any other state save Texas. With a 7 percent severance tax on the value of oil and gas production, the state treasury is bulging. (In its fiscal 1981 budget, severance taxes were 27 percent of total tax revenue, almost as much as the state income tax.)