Tax bill could cost cash-strapped Western states $1.3 billion in oil, gas and coal subsidies

U.S. Department of Labor chart

The Republican tax overhaul passing Congress today could cause states in the Western U.S. to lose nearly $1.3 billion in oil, gas and coal royalties that they rely on heavily.

"Neither the House nor Senate versions of the bill are completely funded; Republicans argued economic growth spurred by the cuts would offset their cost," Rebecca Beitsch reports for Stateline. "That lack of funding could ignite a 2010 federal law that requires across-the-board budget cuts, including withholding from states their portion of the money that oil, gas and coal companies pay to operate on federal land, when Congress approves a deficit-increasing measure." 

Losing those royalties would be big blows for states such as Wyoming, New Mexico and Montana, whose budgets have suffered in recent years because of falling energy prices. The cuts would likely hurt schools and other social services, since those states tend to use royalty payments to fund those systems, Stateline reports.

Montana, for example, would lose $24 million in royalties if the tax bill goes through as is, which the state revenue agency projects would cause the state to lose $122 million. Just five months ago, state lawmakers attended a special session to address a $227 million budget shortage.

Wyoming would be hard-hit, too. It received more than $664 million in royalty payments last year (the most of any state) and has $770 million two-year budget deficit.

"The law that would trigger the cuts, the Statutory Pay-As-You-Go Act, also known as "pay-go," requires across-the-board cuts to certain programs if legislation passed by Congress increases projected deficits. An analysis from the nonpartisan Office of Management and Budget determines the amount of the cuts," Stateline notes. Congress can vote to waive the law, which is exactly what some Republicans are suggesting." It has voted 16 times to waive such cuts.