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Volatile Texas oil and gas industry threatens billions in school funding,


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Texas’ reliance on the oil and gas industry could jeopardize up to $29 billion in public school funding over the next 15 years, according to a new study by two nonprofit policy groups.

The report, released Wednesday by the Center for Houston’s Future and Texas 2036, analyzed the impact of declining oil- and gas-related revenue under various scenarios over the next decade and a half, when the Lone Star State will celebrate its bicentennial.

The analysis calls attention to the state’s “complex, difficult-to-forecast and increasingly at-risk” method of funding public schools with gas and oil revenue — a strategy that is susceptible to the market swings that caused 60,000 Texas oil and gas job losses in 2020.

“Most people would be surprised to learn that K-12 education in Texas is affected by world oil prices,” said Brett Perlman, the CEO of the Center for Houston’s Future, which conducted the study. “That would be a surprise to people. But when you start to look at this in more detail, what you find is that there is quite a significant link. And so what happens over the next 15 years in world oil prices is going to matter a lot to the state of Texas.”

Researchers said the recent power outages across the state and the coronavirus pandemic underscore the need to prepare for seemingly unthinkable and devastating scenarios.

“State officials and policymakers would do well to begin planning today for the possibility that the economic role that oil and gas plays in the state of Texas might be significantly different in the future,” the report said.

In 2019, the oil exploration and production industry contributed about $13.5 billion in revenue to state funds. That year, about $6 billion in public school funding could be linked to the oil and gas industry, either through property taxe collections or other revenue — about 20 percent of total expenditures for K-12 schools, according to the analysis.

The state’s Permanent School Fund, a more than $46 billion endowment, is also tied directly to the success of oil exploration, as it is funded solely by the industry’s returns.

“If we live in a world where we do have low oil prices over a sustained period of time, the impacts could be quite large,” Perlman said.

The study evaluated the potential consequences of price drops using three “low-but-plausible” scenarios, compared to a constant pricing of $60 a barrel, roughly the current rate. The three scenarios included one in which oil prices drop steadily over the next 15 years to $30 a barrel; one in which the industry fluctuates between $30 and $40; and, finally, one that predicts two cycles with prices fluctuating between $30 and $40.

In the worst-case…

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