Oil Price Drop Will Trim State Revenues

Sharply falling prices will reduce royalties earned on tidelands oil revenues by $240 million during the next fiscal year, a much sharper drop than previously expected, the State Lands Commission reported Thursday.

The shortfall is expected to create problems with Gov. George Deukmejian’s proposed $36.7-billion budget for the fiscal year that will begin July 1.

Deukmejian based his budget on earlier estimates by the Lands Commission that royalties from tidelands oil fields would produce $425 million in revenue.

Jim Trout, assistant executive officer of the Lands Commission, said new estimates, based on a drop of more than $10 a barrel in the price of crude oil since the governor introduced his budget in January, indicate that tidelands revenues will produce only $185 million in fiscal 1986-87.

Jesse R. Huff, director of the state Department of Finance, which helps the governor prepare his budget, had no immediate reaction to the new Lands Commission estimates.

Huff said, however, that some good news was mixed with the bad, because the price decline also means that it will cost less to buy fuel for state cars and asphalt for roads and highways. He also said that lower oil prices will have a broad beneficial effect on the state economy, which will bring higher revenues from sales, income and other taxes.

In another budget development, Deukmejian sent a letter to Democratic legislative leaders strongly critical of Legislative Analyst William G. Hamm’s analysis of his spending plan. Deukmejian rejected Hamm’s proposal to cut some education programs while raising student fees at the University of California and California State University.

“If my priorities as governor were to raise taxes and cut education, I would welcome this report. But they’re not,” said Deukmejian.

The governor also said he was rejecting a Hamm proposal to raise motor vehicle and drivers license fees.

Responding to Deukmejian’s letter, Senate President Pro Tem David A. Roberti (D-Los Angeles) noted that Deukmejian previously has denied that the student fees he implemented and the motor vehicle license fees he raised were tax increases.

“It’s astounding (that) the governor now admits that he has raised taxes because he increased both fees at California colleges and motor vehicle license fees,” Roberti said.