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OKLAHOMA CITY – The state’s finance secretary is telling all appropriated state agencies to brace for 2-4 percent reductions beginning next month, as Oklahoma lawmakers stare down a budget deficit that could top $1 billion by the time legislators come into session.

Preston Doerflinger told reporters the state has found itself in “a very challenging situation,” as he prepares to declare a revenue failure.

“Almost every major tax category is in decline, because of our biggest industry is in decline,” Doerflinger said. “I think the hole could get bigger this year and next year.”

Doerflinger, House Speaker Jeff Hickman and Appropriations Chairman Sen. Clark Jolley told the press that oil is to blame for the shortfall, now estimated at $900 million.

“That’s the ripple effect when you see the biggest industry in the state go through the bust of a 70 percent loss in the price of oil,” said Hickman. “Even we hadn’t cut personal income taxes at all over the last decade, an oil price collapse like this would still blow a hole in our budget. That’s the reality of living in an energy state.”

Hickman said there has been a “ripple effect” as the price of oil has dropped and energy companies have shed jobs.

He points to 11,600 Oklahomans who have lost their jobs in the oil industry and are no longer receiving a paycheck and, therefore, are not paying income taxes.

Appropriated state agencies should prepare for 2-4 percent cuts in allocations from the general fund, said Doerflinger.

“There will be discussion then about consolidation or elimination of some of those agencies as we go down the path,” he said, noting some agencies have lost a quarter or a third of their budgets.

Speaker Hickman stressed education is not among the sectors suffering the most, pointing to a 5.8 percent increase in funding since 2007. Other departments have not been as lucky, he said.

Lawmakers said they will focus on finding alternatives for one-time funding sources, used in the past to plug budget holes.

“For Oklahoma, we have an opportunity to try to right the structural deficit ship that we have been riding on for decades,” said Jolley. “But it will be painful. It will be difficult and will require sacrifices and tough choices.”

Speaker Hickman also vowed to reviewed tax breaks and credits.

One thing lawmakers said they will not do is raise taxes, because voters have made it clear they do not want it to happen and any increase would be difficult logistically.

Three-quarters of both chambers would have to vote for a tax increase to get it to the Governor’s desk for a signature.

Voters can also approve a tax increase at the polls, which Jolley said can be a lengthy process.