Back in January, I reported that the State of Oklahoma was considering a new SWF that would mitigate financial fallout from volatile oil and natural gas prices. Yesterday, the new fund was overwhelmingly approved in the House (86-4) and is expected to soon pass in the Senate.
This new policy will see gross production tax collections above a three year average sequestered in the new stabilization fund. If collections drop below the three year average, the fund will deposit the difference into the general revenue fund. This fund will join the pre-existing “Rainy Day Fund” in Oklahoma, which already has around $600 million.
It is quite interesting to see a single US state with two SWFs. What is it about Oklahoma that makes SWFs so appealing? I see two factors:
- It is rich in natural resources; the state is the second biggest producer of natural gas in the US and fifth in crude oil. As such, its economy is dependent on commodity prices, which explains the stabilization fund.
- Politically, the state leans Republican in national elections. Also, the House Speaker (who proposed the new SWF) is a Republican. However, the state has had a Democratic governor since 2003. So, perhaps the new SWF represents a policy tool implemented by Republicans (i.e. fiscal conservatives) to discipline the spending of a Democratic governor?
Whatever the case, Oklahoma now joins Alaska, Alabama, New Mexico and Wyoming as US states that sponsor SWFs.
Completely agreed. This is a tool to make vote buying by the other side harder. An interesting use of gvt surplus (similar to the Australian Future Fund), but here in a country (US) that has severe budgetary problems.
It is interesting to see how SWFs can be used as internal political devices to discipline the spending by rivals…