Recent Items

Oil And Gas States Forced To Cut Education Spending

Lambert here: Should be interesting to see how this plays out in 2018 and 2020.

By Tsvetana Paraskova, a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at OilPrice.com.

The oil price slump has put pressure on the budgets of the U.S. oil and coal states that have been struggling with lower energy tax revenues and difficult decisions about which public-sector financing they should reduce. Higher budget deficits have led to cuts across the board, and education has been one of the sectors on the chopping block.

This week, Wyoming became the latest in a series of oil and coal producing states that have cut funds from education. Oklahoma, North Dakota and Alaska had already lowered some of the funding for various education programs throughout last year, when the sting of the low oil prices was most painful to monthly tax collections.

Last year, six of the top eight oil-pumping U.S. states slipped into recession, S&P Global Ratings said in a report in January. Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, and Wyoming saw their economies shrink in 2016, while Texas and Montana had GDP growth much smaller than in 2015, estimates in the report show.

“The sharp pullback in exploration and production during the past 18 months has inflicted considerable damage on the economies of the oil producing states,” S&P said back in January.

While the oil price crash was affecting drilling and consequently, oil revenues of the states, U.S. coal production was also dropping. In the first quarter of 2016, U.S. coal output hit its lowest quarterly level since a major coal strike in the second quarter of 1981, the EIA said last June, with coal production from the Powder River Basin in Montana and Wyoming declining the most in tonnage and percentage since the previous quarter. Related: Oil Prices Wait And Watch For OPEC’s Next Move

And Wyoming was the latest U.S. state to cut from education funds. Governor Matt Mead approved on March 13 a K-12 education spending plan that cuts $34.5 million from schools.

The education funding shortage was a result of the downturn and previous years of generous spending. Wyoming’s State Superintendent of Public Instruction Jillian Balow told The Casper Star-Tribune in December that historically high spending levels are now untenable.

“The truth of the matter is that we’re going to need to think about funding education as a Chevy rather than a Cadillac in the future,” Balow told the newspaper.

Since around 30 percent of Wyoming’s spending on education comes from federal mineral royalties, and another 30 percent from property taxes often backed by these minerals, it’s hardly a surprise that the state has cut some of the education spend. Future funding for some of Wyoming’s educational programs could really depend on the state of the U.S. oil and coal industries, The Atlantic notes.

Across the oil producing states, North Dakota’s Revised Executive Budget Recommendation 2017-2019 prioritizes K-12 education, but envisages a $31-million reduction to higher education.

In the middle of last year, Alaska Governor Bill Walker cut a total of $150 million in budget allocations to schools, the university and the state education department.

“I especially struggled with the funding to education, which I have consistently prioritized. But a $4 billion deficit means nothing can be insulated,” Governor Walker said.

In Oklahoma, some school districts have switched to a 4-day school week to save funds in light of declining oil revenues.

It’s in Oklahoma, however, that the more stable and relatively higher oil prices since the beginning of this year started turning in increased gross receipts to the Treasury.

Mostly driven by rising oil and gas production collections, gross receipts to the Treasury grew by 0.5 percent on the year in January at $990.5 million, putting an end to a 20-month string of shrinking collections, State Treasurer Ken Miller said. Related: Can OPEC Resist The Temptation To Cheat?

Low prices and curtailed production in the oil field led us into the latest downturn, and it appears rising prices and production are leading us out. Several data points — rising state GDP, rig counts, business conditions, and employment — give reason for cautious optimism,” Miller noted.

Receipts in February also inched up compared to February last year.

So, higher oil prices are helping Oklahoma’s revenues, while Wyoming’s coal is not thriving, either in production or in revenues for the state. Despite the oil price recovery from last year’s lows, the U.S. coal and oil states still have substantial budget gaps to fill in, and would be wise to continue sticking to some form of austerity in spending and budgeting.

Print Friendly
Tweet about this on TwitterDigg thisShare on Reddit0Share on StumbleUpon0Share on Facebook0Share on LinkedIn1Share on Google+0Buffer this pageEmail this to someone
This entry was posted in Energy markets, Guest Post, Income disparity, Politics on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

28 comments

  1. visitor

    “People are our most valuable asset”.

    “Education will qualify the labour force for the knowledge economy”.

    “Re-vamped curricula are the solution to the incoming robotic revolution”.

    “Unemployed people can be integrated in the working force through re-training and the acquisition of new skills”.

    And something about drawing my revolver whenever I hear politicians, CEO, and so-called experts talk about a highly qualified work-force.

  2. Steve H.

    What is the purpose of education?

    Frank Templeton used the analogy of the nation being a house, and needs good strong bricks to build. The schools being the refractory, and the citizens the bricks.

    It’s been explicitly stated for over a decade that college-level skills are outdated by graduation. So it’s about learning to learn, they say.

    Is it the Credentialling of pre-schoolers? Or football teams as feeder systems for the military? Or just publicly subsidized day-care to keep parents in the labor pool?

    Perhaps the increase in charter schools and homeschooling is an evolutionary process of variation for an uncertain future, most will fail but no one knows which will succeed.

    My millenial friends think the credentials are almost meaningless. The knowledge is online for free. They can pursue their interests despite no occupation available. As David Ehrenfeld said: “4. Have a practical trade, a skill, or an alternative occupation that you can resort to if conservation biology cannot support you on a full-time basis. There are trades that are always in demand, regardless of circumstances. Pick one.”

    In the oldens it was readin’ writin’ ‘n’ ‘rithmetic. Parker tells me his cohort thinks in a different way, memetic, pictures and videos being an explicit mode with implicit emotional connotation. My old-school methodology worries about loss of analytic capacity. But in port cities, where pidgin bridges a gap between two languages, the kids growing up create an actual language with syntactic rules. So I find I can’t say the old way is better for the new world. I can say I don’t trust the corporations to teach the children.

    1. Portia

      Wealthy people will always be able to get their children a full and well-rounded education. Their skills and knowledge set will set the standard for what it means to be “educated”, and the gap will continue to widen between the “classes” with regard to “codes” and power structure hierarchy. I think it’s fine to home-school your children, but you must be educated yourself to do that, or have access to good curriculum to use. Learning online is fine right now, but who knows what the anti Net Neutrality people will get up to in the near future. Perhaps we will get children spending much more time outdoors and get a generation of people who love the Earth and understand that it is our support system. That would be good

      1. jackiebass

        Generally home schooling has been a failure as well as online education. There are several reasons but the biggest is motivation. Unless the child and the person supervising them is extremely self motivated, these two forms of leaning soon lose their glitter. The result is that these students become drop outs in these forms of learning. Once this happens it’s difficult to get these students interested in going back to a traditional school or any other means of acquiring an education. We hear of the success of a relatively few cases but don’t hear much about all of the failures. Schools and the educational process reflect the community where they exist. the way to improve the so called failing schools is to improve the failing communities where they exist.

    2. EyeRound

      Agree with Steve H. and others here who are skeptical about the value of what passes for “education” (public or charter) today.

      I would add that this article seems to be PR for the next hike in oil prices. “Don’t you want to support education funding by paying more for your heating oil, more for your gas, etc. etc.? Rising oil prices are a good thing!”

      I’m also skeptical about states’ budget allocations and how state legislatures are and have been colluding with big oil in making policy and spending decisions. Big oil was exploring and locating oil reserves in these 8 states since at least the middle of the 20th century. They have been buying up massive sectors of real estate and exerting political influence in states’ governments commensurate with their land holdings for a long time.

      1. Lord Koos

        It may be safe to assume public education cuts are happening partly because it’s the Republican plan… the budget crisis as an excuse to further ideological goals.

        1. steelhead23

          The fairy tale of the ant and the grasshopper is often employed to suggest that fiscal conservatives are the ants, laying-in stores for the coming winter, while the spendthrift grasshopper grows fat eating summer grass, only to starve during the winter. A common bumper sticker seen around Texas read: “Please God, give us another oil boom, we promise not to piss it away this time.” Yet, they did piss it away. Among the unfortunate realities of our politically-obsessed leadership is that they are all grasshoppers, quite willing to ignore the fact that winters and economic downturns happen for one more blade of grass (votes).

  3. Marlene Alvarado

    Because these states depend on taxes from dirty, polluting, unhealthy oil and gas revenues, because the capitalist corporation that own them refuse to invest in alternative, clean energy the children of those states now suffer. Isn’t capitalism great!

    1. Jim Haygood

      Outlaw petroleum energy, and the planet’s human carrying capacity will drop to a few million impoverished souls. Let’s do it for the children! /sarc

          1. different clue

            Is that an inevitable force and fact of nature? Or is that an artifact of overmechanizing and understaffing of agriculture? How much less oil would suburban homeowners need to burn to grow their own suburban homefood than what is burned per food unit on the megafarms?

  4. Ron

    In the Bakken much of the natural gas production is flared in fact so much is flared (burned on site)
    that it can be seen from space.

    The effects include loss of revenue to the state of North Dakota, loss of income to the land owners, and of course loss of income to the country as a whole.
    The Bakken has become a natural gas field driven by tax credits or tax avoidance since the production losses (flaring) can be written off.
    So the sate loses revenue and has to cut back on education to pay some who can wax fat on tax avoidance.
    Talk about eating your seed corn !!!!

  5. Vatch

    It is very unfortunate for the students and their parents, although there is an upside if one doesn’t mind indulging in a bit of schadenfreude. The fossil fuel billionaires could see their fortunes shrink, so they’ll have to decide whether or not they must reduce their political donations to odious causes. The Koch brothers and Harold Hamm are among those who could be affected, as well as this guy:

    https://en.wikipedia.org/wiki/Chris_Cline

    Cline said that humankind will benefit more from cheap and abundant energy than from overreacting to what he calls minimal increases so far in atmospheric CO2 and the level of the world’s oceans. In an interview with Bloomberg, Cline said “As far as the social acceptability of coal, I like to think I’m part of supplying the cheapest energy in America.”

    How charming — rationalizing greed by denying science.

  6. vegeholic

    My school just hired a new football coach for $6 million a year. Maybe the players can go out into the provinces during the off-season and use those leg muscles to do some old fashioned percussion drilling to generate some more oil and gas revenue. Or maybe the coach could donate some of his salary to the English department, or maybe for school lunches. I see many gifting opportunities.

  7. rps

    “Oil and gas…cuts education” segues into last week’s “Race to the Bottom: Cities and States Spend >$45 Billion Per Year Competing for Jobs.”

  8. rps

    According to CBPP, five of the eight states with the deepest K-12 education funding cuts also decreased income and/or corporate taxes from 2008 -2017. Oklahoma is at the top of the list cutting taxes by -26.9% (see graph)

    1. flora

      Yep. Cut income/corporate taxes and fill the budget hole with energy revenues or severance taxes. When the energy revenues go down do the state leges propose raising income/corporate taxes back up to where they were? In Kansas the state lege this session tried rolling back the tax cuts. Gov. Brownback vetoed that legislation. The lege will try again, this time for a veto-proof passage. Don’t know if they can do it. Kansas now has a budget so far down the drain it’s a struggle just to see daylight. This has been a multi-year increasing disaster. Last election Kansans voted out a big group of Brownback’s strongest ‘no tax hikes ever’ allies and voted in a group of sane moderates. I think eventually the other states’ voters will do the same. But it will take a few years of things getting worse and worse: schools, childrens’ health programs, Medicaid, social services, roads & bridges, the state judiciary, community funding, etc. The Koch backed grouped AFP ran this play in Colorado several years ago and succeeded in getting votes that lowered the tax base to unsustainable levels. After a few years of this Colorado’s state budget was so bad and state services so poor that Colorado voters “kicked out” the AFP pols. (Colorado has been doing much better.) By then the APF road show had moved to Kansas and started here. Now our pols are trying to kick the AFP tax loons out. Meanwhile, the AFP road show has now moved on to Iowa and is starting there.
      AFP tax cutters are like a bad case of the flu that’s goes ’round from state to state. imo.

      1. flora

        adding: one additional play for AFP and others of like mind is to support tax funded vouchers for private or charter schools, since the public schools that they’ve underfunded have become “unable to do the job of educating our children.”

        1. rps

          Charter schools are the progeny of the Clintons and their Wall Street hedge fund buddies. The New Market Tax Credits was extended and made permanent by Obama in 2013 (and of course lobbied by John Podesta- Center for American Progress and his brother’s Podesta Group). JPMorgan Chase promised 115% proceeds for a 7-year investment of $5–20 million for financing charter school construction in ‘empowerment zones’(code for impoverished areas). The plan in progress: underfund schools at state level. Next, sell the public lies about the failures of public education system. Lastly, get the public to demand privatization.

          Education is Wall Street’s targeted pot of gold with the added bonanza of pocketing the $69.4 billion federal education budget plus all states education budgets.

          1. rps

            Excerpt from WP: …The 2001 Consolidated Appropriations Act, passed by Congress and signed into law by President Clinton, included provisions fromthe Community Renewal Tax Relief Act of 2000 [..] provided tax incentives for seven years to businesses that locate and hire residents in economically depressed urban and rural areas. The tax credits were reauthorized for 2008-2009, 2010-2011, and 2012-2013.

            As a result of this change to the tax code, banks and equity funds that invest in charter schools in underserved areas can take advantage of a very generous tax credit. They are permitted to combine this tax credit with other tax breaks while they also collect interest on any money they lend out. According to one analyst, the credit allows them to double the money they invested in seven years. Another interesting side note is that foreign investors who put a minimum of $500,000 in charter school companies are eligible to purchase immigration visas for themselves and family members under a federal program called EB-5.

            Forbes: Too bad the kids in charter schools don’t learn any better than those in plain-vanilla public schools. Stanford University crunched test data from 26 states. About a quarter of charters delivered better reading scores, but more than half produced no improvement, and 19% had worse results. In math, 29% of the charters delivered better math scores, while 40% showed no difference, and 31% fared worse […]Nor does the evidence show that charters spend taxpayers’ money more efficiently. Researchers from Michigan State and the University of Utah studied charters in Michigan, finding they spent $774 more per student on administration, and $1,140 less on instruction.

            About the only thing charters do well is limit the influence of teachers’ unions. And fatten their investors’ portfolios.

  9. run75441

    Lambert:

    Perchance, sarcasm on your part? that they picked education to whack. “rps” has picked up on it also.

  10. A1

    This is really no big deal – resource based states have been doing this forever. Times are good education becomes gold plated – times are bad education gets cut. Whole countries do this as well – Saudi, Iran, Canada, Russia………..

    1. Jim Haygood

      First they came for the cakes, and I said nothing …

      Venezuela mandates that 90 percent of wheat must go towards the production of bread, not pastries and cakes. This week four bakers were reportedly arrested for violating that rule and using too much flour for brownies and sweet breads.

      According to The Guardian, bakers have protested the rule on the grounds that most bakeries can’t afford to devote so much wheat to bread, because it’s the more expensive pastries that actually keep the lights on.

      Last week, the government sent inspectors to around 700 bakeries in Caracas, Venezuela, to make sure they were using at least 90 percent of their wheat for bread, and not using more than 10 percent for more expensive things like pastries, croissants, and cakes.

      http://www.thedailymeal.com/venezuela-bakers-arrested-baking-brownies-pastries-instead-of-bread/31917

      Just hand over the contraband croissants, comrade, and nobody gets hurt.

    2. rps

      “I know no safe depositary of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power.” –Thomas Jefferson

  11. susan the other

    And just wait till Nevada Geothermal comes online. Can you say Appalachia America? Or whatever. I honestly think we need a new industry that caters to the New Homesteader. Self-sufficiency on steroids.

Comments are closed.