Report Details Strategies for Energy States to Weather Booms and Busts
An article by Mike Maciag details strategies energy states could use to weather the boon and bust cycles of their economies. After noting the recent financial troubles of Alaska, North Dakota, and Louisiana, Maciag shares news of a report recently released by the Brookings Institution, which calls on states "to rethink how they’re collecting and spending severances taxes derived from natural resources." In fact, "States can do a better job, the report authors say, of channeling oil revenues to stable trust funds that better weather the boom-and-bust cycle."
Specifically, the report "recommends that a portion of states’ annual severance tax revenues be diverted to permanent trust funds"—steps eight states have taken so far. Maciag details the experience of Pennsylvania and Ohio, "two oil-rich states that levy little or no severance taxes" and have had trouble navigating the politics of implementing new taxes.
As for states that have already established trust funds, the report "further [outlines] a series of recommendations for states that have already established trust funds," including "a solid governance framework, clear investment strategy, transparency standards and well-defined fiscal rules…"