March 2 (UPI) -- Lingering pressure from relative weakness in the oil economy should serve as a wake-up call for the shale-rich state of Oklahoma, the state treasurer declared.
Oklahoma is one of the top shale producers in the country and one of the first to recover after the economic collapse in the previous decade. Crude oil prices that were above $100 per barrel in recent years fueled growth, but the state has struggled in a new oil era that saw oil prices drop below $30 per barrel.
S&P Global Ratings lowered its credit rating for Oklahoma by one notch to AA-, but kept its outlook stable. State Treasurer Ken Miller said the downgrade came as no surprise, but should serve as a call to action.
"Perhaps the critique of Oklahoma's revenue problem coming from an independent, nonpartisan and credible third party will finally spur action to correct the revenue imbalance," he said in a statement.
S&P reported the Oklahoma's economy is diversifying away from oil and gas, but some metrics show a state of contraction against growth in the national economy. The ratings agency reported the state is struggling to close a budget gap.
"Gov. Mary Fallin's fiscal 2018 budget proposes no one-time revenues to achieve structural balance but hinges on broadening the sales tax base by applying the levy to services and increasing motor fuel taxes and cigarette taxes, among other revenue enhancers," the ratings report read. "The budget also eliminates corporate income taxes and sales tax on groceries."
S&P noted the state economy moved through previous contractions effectively by raising the state sales tax.
"Despite diversification of its economy since the 1980s oil sector downturn, ties to the oil industry remain strong, as evidenced by the state's substantial revenue shortfalls," S&P said.
Oklahoma's governor last year called for a state Day of Prayer for the struggling energy sector. Oil companies are spending more in Oklahoma, with February exploration and production activity up 26 percent year-on-year, but still lower than 2015 levels by 42 percent.
The state treasurer started the year by reporting the revenue stream for the shale-rich state of Oklahoma showed lingering, but easing, pressure from the energy sector downturn.