CHICAGO, Oct 8: The chill in the air in many parts of the United States is raising concerns among state officials who fear higher heating costs this winter on top of high gasoline prices will eat into their budgets.
Officials are also worried about the trickle-down impact from consumers, who may have to cut spending to cope with higher energy prices.
Lower spending would translate into lower sales tax collections, which account for about a third of state revenue.
Gasoline and diesel prices are about $1 a gallon higher than a year ago.
The US Energy Information Administration has forecast a 34 per cent rise in heating oil costs and a 52 per cent jump in natural gas bills this winter due in part to supply disruptions from hurricanes in the Gulf of Mexico.
The head of the EIA has said those numbers will be revised upwards next week to factor in data following late September’s Hurricane Rita.
“The focus is higher energy costs and what they will do to consumers and consumer spending and the sales tax collections and the economy as a whole,” said Arturo Perez, a fiscal analyst at the National Conference of State Legislatures.
With most states just completing the first quarter of fiscal 2006, it was too early to tell what escalating energy prices will do to their budgets, Perez said.
Still, state fiscal officials are evaluating the potential impacts of higher costs to heat buildings and run large fleets of vehicles, Perez said.
While Indiana, for example, reported this week its first quarter revenues were essentially on target, state budget director Charles Schalliol said he remained cautious.
“We don’t know yet what impact higher gasoline and energy costs will have on revenue, but we do not believe the full impact has been felt,” he said in a statement.
If energy prices climb as expected, Perez said states may be hit with supplemental funding requests from various agencies or from primary and secondary public school districts that depend on states for most of their funding.
A survey of more than 500 school districts by the Association of School Business Officials International found almost all the districts reported being adversely affected by rising fuel prices.
To deal with the problem, districts said they were consolidating bus routes, prohibiting school buses to idle, cutting field trips and travel for athletic events, reducing spending on students and turning down thermostats.
“When prices increase this rapidly, you look for whatever efficiencies you can find,” said Ronald Skinner, director of government and public affairs at the school group.
State governors have also started energy conservation campaigns, promoted the use of alternative fuels or called for tax breaks to fight rising energy prices.
Eight Midwest states have agreed to cut natural gas consumption by 1 per cent a year in each state, saying that a 1 per cent reduction over at least five years could cause a 13 per cent reduction in wholesale prices for natural gas.
Minnesota Governor Tim Pawlenty signed legislation last week making his state the first in the nation to require biodiesel made largely from soybeans in diesel fuel. The state also mandates a 10 per cent ethanol blend in gasoline.
With Connecticut residents likely facing “the highest energy costs in history,” Gov. M. Jodi Rell this week called for an income tax credit for low and moderate-income residents to help offset those costs.
