Analysis Shows Tax Reform Bills Could Lead to Cuts in Federal Royalty Payments to States

If the U.S. Senate goes ahead and passes the tax reform bill approved last week in the House, H.R. 1, it might lead to the loss of more than a billion dollars in energy production royalty payments for some states.

The Center for American Progress conducted an analysis of the bills passed by the House and a Senate committee and attributed the estimated loss of $1.3 billion in royal payments to an increase in the budget deficit over the next decade by $1.4 trillion to $1.5 trillion. It said the royalties would have come from federal oil, gas and coal.

While Oklahoma does not receive such payments, about half of the federal government’s royalties from energy production on federal lands goes to states. Of the western states, New Mexico received $368,604,000 in 2016 while Colorado’s royalty payments in that year came to $83,887,000. Total royalties to states last year came to $1.3 billion and without the money, some states would have to make cuts in some public services.

Under the Statutory Pay-As-You-Go budget law, if Congress passes a law that has unpaid costs, the government has to implement mandatory cuts or “sequestration” cuts to certain federal programs. Earlier in the month, the Congressional Budget Office reported to House leaders that their tax legislation’s cost would trigger the automatic elimination of a wide range of federal programs. On the list was the funding for mineral leasing payments to states.