Report finds that state dependence on fossil fuel revenue creates time-bomb budgets

One of the central arguments of The American Lands Council’s efforts to transfer federal lands to states – that it would mean more money for schools – just took a major hit. A new report by a well-respected source found that states that rely overwhelmingly on fossil fuel revenue from public lands eventually end up with ticking time bombs in their budgets.

The Brookings Institute report analyzed the budget history of states with a dependence on natural resource revenue to fill state coffers. It found that the cyclical nature of oil, natural gas and coal revenues is not just a poor source for steady funding of critical state services, but a foolish one.

The report is the latest evidence to undermine the potentially illegal, reckless and short-sighted effort by the American Lands Council to transfer federal lands to the states. The council tries to sell its shortsighted land grab under the ruse of increased funding for schools.

But the detailed study from the Brookings Institute undermines those misguided efforts.

The report finds that states lured to flashy natural resource revenue in good times often find it isn’t worth much more than fool’s gold when the inevitable bust strikes, and states can face critical budget shortfalls as a result.

Other risks of fossil fuel revenue for states, as detailed in the study, include:

State lawmakers facing budget cuts during bust periods are inevitably tempted to double down on the natural resource gamble, but that may be exactly the worst thing to do.

The authors of the study point out that states routinely consider raising the revenue by promoting even greater mineral production. The problem is that the maneuver does nothing to reduce the inherent variance of the revenue source, and likely leads to more controversy and less stability.

The ALC is trying to lure states and schools into supporting their land transfer agenda with the promise of more funding, but as this report lays out, it’s a pipe dream with potentially catastrophic consequences.

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