Economic Diversity

If the state wants to further diversify its economy, its leaders—Democratic and Republican alike—must accept and promote diversity.

Sounds obvious, right? But it bears repeating in light of declining state revenues directly related to natural gas production taxes. The state’s budget is tied heavily to its energy sector, and when gas prices fall and supplies increase, revenues can decline at a rapid rate. This is what has been happening recently, forcing budget cuts.

According to the OK Policy Blog:

The continued weakness of natural gas prices and production is the most important factor accounting for Oklahoma’s disappointing revenue collections. July collections from natural gas production to the General Revenue Fund (GRF) totaled just $22.2 million in July - a 75 percent decline from revenues for the same month a year ago, and $42.1 million less than the estimate certified in February by the State Board of Equalization. More than half of the total revenue shortfall in the GRF can be attributed directly to falling revenues from the gross production tax on gas.

The blog, which is part of the Oklahoma Policy Institute, points out that budget problems will persist without an increase in revenue from natural gas production taxes. It also wisely calls for “serious budget reform ideas” to put gas tax money in savings to be used when prices drop.

But I think another important issue is how the state is perceived by the rest of the nation. Oklahoma has long been seen as an energy state with a bevy of outrageous and outspoken politicians with narrow views. These include state Rep. Sally Kern and U.S. Sens. Jim Inhofe and Tom Coburn, who make the state’s residents appear intolerant and judgmental. How can the state expect to attract new big businesses outside the energy sector when it seems so backwards and so anti-diversity to so many people? Yet the mantra has gone on for years: “We need to diversify the economy.” This is an intangible issue that, admittedly, is difficult to quantify, but it exists and it does have an impact.

Other issues related to diversifying the economy include Oklahoma’s low college graduate rate, which is below the national average, and the fact some of our best and brightest graduates leave Oklahoma for better salaries and opportunities. These are systemic problems that impact economic development. The state needs an educated workforce to compete for businesses.