Jul. 29--With natural gas prices still in the basement, budget officials are revising their estimates of how much Oklahoma can collect in gross production taxes on the product, a key source of state revenue.

The state's fiscal year is less than a month old, but already a revenue shortfall appears likely.

The natural gas estimates will play a large part in determining how much of a bite state agency heads will have to take out of their already-reduced budgets.

State Treasurer Scott Meacham has asked the state Tax Commission to come up with new estimates on the gross production tax on natural gas. Revenue for the 2010 fiscal year, which began July 1, is based on estimates made in February.

Meacham said it's expected state officials should know early next month whether money given to state agencies should be reduced and by how much. State revenue has come in below estimates each of the past six months. The shortfall has grown significantly each of the past three months; revenue in June was 30 percent below estimates.

If the state finance office declares a revenue shortfall, budget officials will determine how much of a cut will be necessary for the rest of this fiscal year. Unlike the federal government, Oklahoma cannot practice deficit spending and can spend only what it brings in each year.

Natural gas prices remain below $4 per 1,000 cubic feet. The budget for this fiscal year is based on gas prices averaging $5.22 per 1,000 cubic feet. A year ago, natural gas was about $13 per 1,000 cubic feet.

The price of oil has rebounded in recent months to about $67 a barrel. A year ago, the price was about $140 a barrel.

In June 2008, the state collected $105 million in gross production taxes on natural gas and oil. A year later the state collected $13 million. While total 2009 fiscal year gross production collections, which consist of taxes paid on natural gas and oil production, were 5.5 percent below the estimate, in June they were off the estimate by 81.7 percent.

This year's state budget anticipates gross production taxes on natural gas to be about $427 million. The tax two years ago brought in about $685 million.

State reduced oil dependency After the oil bust of the 1980s, state officials passed legislation to wean state government off oil gross production taxes. Now, the first $150 million in gross production taxes on oil goes to various education funds. Anything more than that goes to the state's general fund.

This fiscal year's budget calls for no money from the gross production tax on oil to come into the state's general fund.