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Economy

As Oil and Gas Prices Fall, Kansas Could Face Another Budgetary Challenge

Kansas and other states that receive taxes from the production of oil and natural gas, could face budgetary challenges as prices fall.

Two taxes are tied to oil and gas prices and production: severance and property taxes.

The severance tax is a state levy on minerals extracted from the ground in Kansas, while property taxes are also collected by the state and most local governments on oil and gas wells.

Revenue Department spokeswoman Jenine Koranda says "We may not have anticipated the full extent of the drop in crude oil prices and possible production cutbacks that we are currently seeing, thus we may possibly miss the estimate on severance tax revenues."

Severance taxes generated about $126 million for the general fund last year, part of which goes into the state's $6 billion general fund budget.

A bigger effect will likely be seen in property tax collections, which help fund the public school system and are the primary source of local revenue for most cities and counties.

According to the Department of Revenue, oil and gas wells account for almost 7 percent of all assessed property value in Kansas.

Last year, that produced $45.9 million in state property taxes alone, most of which goes into the school finance system.