Credit Stability

S&P Global Ratings' outlooks on its Oklahoma and Wyoming ratings remain positive and it raised its ratings on Alaska and Louisiana in 2024 reflecting, in part, these states' demonstrated commitment to preserve and enhance reserves. Although some reliance on mineral-related revenues remains, states have diligently implemented measures to support budget predictability by isolating revenues away from general operating funds or using them for one-time purposes, such as pay-as-you-go capital, one-time payments to provide temporary taxpayer relief, or to reduce long-term liabilities.

Table 1

Despite their improved credit quality, mineral-producing states are not immune to the potential downside from the global energy markets and the broader U.S. economy, which could weigh on underlying credit strengths and the need to maintain budgetary flexibility. Aside from strong reserves, states have other financial tools at their disposal, including tighter spending controls and conservative forecasting to mitigate the potential strain on their budgets and economies.

The Economic Outlook Exhibits Growth For Now

The exceptional economic growth that was the hallmark of 2023 began to normalize in 2024 and isn't likely to repeat itself in the near term as mineral-producing states continue to realign their growth expectations.

Notably, the 10-year compound annual growth rate for such states (except Texas and New Mexico) is lower than the median state growth rate of 1.79%, ranking them among the slowest growing states compared with peers. Texas' continued economic diversity and population growth has helped anchor it among the top of the list. Absent further diversification or a catalyst for growth for the balance of states, we anticipate this trend will persist.

Softer growth for now doesn't portend credit weakening as state revenue outlooks capture anticipated deceleration in economic growth. Nevertheless, we continue to monitor how evolving energy and global trade policy shifts could affect economic growth expectations for mineral-producing states, given that the U.S. exports a large share of oil, gas, and products derived from mineral production.

Table 2

Table 3

Mining Sector Employment Is Holding Its Own

The mining sector employment picture continues to be mixed but nevertheless positive across states. Louisiana and Oklahoma remain well below their 2014 levels with only New Mexico above 80% of its 2014 levels.

Productivity and output gains from advanced methods and technologies for oil and gas extraction, coupled with current price dynamics, suggest employment growth for the sector will remain muted in the short term. To the extent our baseline holds, sector employment should remain durable and not weigh down overall employment should other sectors begin to soften.

Chart 1

Chart 2

The Oil And Gas Price Outlook Shifts Yet Remains Range Bound

Evolving sector dynamics--including weaker underlying fundamentals and the decision by OPEC+ to increase oil supply--have contributed, in part, to the downward revision of our oil price assumptions for the remainder of the year. We revised upward our Henry Hub natural gas price assumptions on tighter fundamentals and a cold winter (see S&P Global Ratings Revises Oil And Gas Price Assumptions On Uncertain Geopolitics And Market Fundamentals," published March 6, 2025, on RatingsDirect).

Table 4

Chart 3

On balance, we believe softer oil prices paired with stronger natural gas prices are unlikely to move the needle materially on a state's revenue generated from mining activities over the near term. At the same time, based on current production assumptions, if sustained, prices stand to further support more stable and predictable revenue collections for mineral-producing states, namely severance taxes.

Appendix

• Alaska: The current reported constitutional budget reserve fund (CBRF) asset balance as of Jan. 31, 2025, was $2.823 billion, or 45.3% of forecast unrestricted general fund revenues for fiscal 2025 from the spring 2025 revenue forecast (2025-2035). The percentage of reserves is based on the CBRF balance as of Jan. 31, 2025.
• Louisiana: The March 29, 2025, statewide election will determine if changes to the reserve policy will be enacted. If passed, estimated reserves would be reduced to approximately 23% of projected fiscal 2025 state general fund direct revenue.
• New Mexico: Includes mineral production taxes and rents and royalties. Estimated fiscal 2025 general fund reserve levels total approximately $3.3 billion.
• North Dakota: General fund, budget stabilization fund, and strategic investment and improvement fund.
• Oklahoma: Rainy-day fund and revenue stabilization account, fiscal 2025 projection from Office of Management and Enterprise Services' December projections.
• Texas: Reserves include projected 2024-2025 biennium-end balances of $24.3 billion in the economic stabilization fund. Mineral-related revenues reflect combined oil and natural gas production taxes as a percent of general revenue-related funds.
• Wyoming: Reserves include the general fund, budget reserve account, legislative stabilization reserve account, and school foundation program balances expected as of June 30, 2026, on an annualized budgetary basis. Oil price assumptions are performed on a calendar-year basis. The percentage of oil-related revenue reflects total severance tax collections as a percentage of general fund revenue.