Today we published “An Incomplete Recovery: The State Budget Outlook 2012-2015.” This is the third of our annual series of forecasts for the state budget. Our goals for this project are both to inform leaders and citizens about the state’s likely fiscal path and to advocate for better fiscal policies and decisions.

“An Incomplete Recovery” sums up the forecast part of the story. These are the key findings:

• The General Revenue Fund (GRF), which makes up 76 percent of the state’s budget in FY ’12, will continue its slow recovery. As we discussed here, GRF revenue has now grown over the prior year for 18 straight months. Unfortunately, revenue still remains 15.9 percent below the peak levels of FY ’09. Our forecasts indicate it will be two more years, FY ’14, before GRF revenues reach pre-recession levels.
• Much of the revenue decline and subsequent slow recovery can be attributed to the severe economic downturn, but not all. Read the rest of this entry »

For the eighteenth consecutive month since May 2010, General Revenue (GR) collections grew compared to the prior year. October GR was $24.3 million, or 6.3 percent, above collections in October 2010. All major taxes brought in more revenue than one year ago.

Read the rest of this entry »

Oklahoma is facing serious challenges when it comes to having the resources to provide the sorts of public services that help create jobs and build a strong economy.

Yet while the need to chart a sound, sustainable fiscal course is urgent, our policymakers too often are flying blind. Legislators routinely make spending and revenue decisions that will have long-term consequences without access to key information about the cost of funding existing obligations in the coming years.

Two recent reports from the Center on Budget and Policy Priorities (CBPP) suggest a pair of sensible budget management tools that Oklahoma should adopt .

• Current services budget: This tool would provide lawmakers and the public with the cost of maintaining today’s level of programs and benefits.
• State PAYGO requirement: It would require all new spending and tax cuts be fully paid for. Read the rest of this entry »

Though revenue collections continue to show steady growth, state budgets remain under great stress. After three successive years of funding cuts, most state agencies are operating this year with appropriations that are at least 10 percent less than prior to the economic downturn. Even if the economy does not slip back into recession, the prospects are dim that revenues will grow sufficiently to restore funding to pre-downturn levels and begin to tackle our long-term obligations.

Budget-cutting efforts in Washington are adding to the perils confronting the state budget. Federal spending has a major impact on both the state economy and the state budget. The federal government spent $38.5 billion in Oklahoma last year, which works out to $10,256 for each resident.  The largest component of federal spending is for direct payments to individuals for Social Security and Medicare, along with salaries and wages to military personnel and other federal employees based in Oklahoma. Read the rest of this entry »

Highway 51 Bridge between Wagoner and Coweta. Photo by flickr user doug_wertman used under a Creative Commons License.

Last week, Gov. Fallin announced a plan to fix the state’s decaying bridges by 2019. The proposal involves putting more money in the ROADS fund, which receives a portion of income tax revenues that would otherwise go to the state’s General Revenue Fund.

OK Policy released a statement on the Governor’s plan that was mentioned by both The Oklahoman and The Tulsa World:

We welcome Governor Fallin’s focus on fixing Oklahoma’s crumbling bridges. However, we must note that her proposal would be paid for entirely by diverting more income tax revenues from an already cash-strapped state budget. At the same time, Governor Fallin and other state leaders are promoting further cuts or outright abolition of the income tax. This should remind us that the income tax remains vital for funding Oklahoma’s needs and that we cannot meet our obligations to pay our bills while undermining our revenue base.

The Oklahoman included a response from the Governor’s spokesperson that the effort to fix bad bridges “does not reflect a lack of commitment to other areas of government.” Fallin’s office told The Oklahoman, “much of the additional transportation funding would come from growth revenue, and Oklahoma has enjoyed nice growth in revenue this fiscal year.” Read the rest of this entry »

[This post has been changed slightly from the original. An earlier version questioned SoonerPoll's reliability without providing evidence to back up that claim.]

As part of the agreement to raise the federal debt ceiling, Congress will vote on a Balanced Budget Amendment this fall. Every Republican Senator has endorsed it. So have many Oklahoma state legislators.

So what’s the problem with a Balanced Budget Amendment?

#1: The BBA endorsed by Senate Republicans is not really about balancing the budget.

In fact, this amendment would make it much harder if not impossible to balance the budget, because it would require any tax increases to have a two-thirds majority in both houses of Congress.

On top of that, it says total spending cannot exceed 18 percent of GDP. To understand how radical this is, we should realize that not a single year’s budget under the George W. Bush or Reagan administrations would be constitutional under this rule. Even Rep. Paul Ryan’s budget plan, which included cuts so unpopular that they were quickly abandoned by Republicans, would have spent too much under this amendment. Read the rest of this entry »

Noble McIntyre is the senior partner and owner of McIntyre Law, an Oklahoma personal injury law firm.

Traffic fatalities in Oklahoma decreased from 765 in 2006, to 627 in 2010, according to the Oklahoma Executive Budget for Fiscal Year 2012 (FY2012). That’s an encouraging trend, but I don’t think anyone would disagree that it could be improved. Unfortunately, the state of Oklahoma seems to feel those numbers are good enough because the budget for the Oklahoma Department of Public Safety (ODPS) is being cut by 3 percent for Fiscal Year 2012. While this may mean a reduction in law enforcement, or fewer personnel working to provide Oklahomans with drivers’ licenses, what’s really going to suffer are public safety education programs, which could further reduce traffic fatalities in the state. Read the rest of this entry »

Once again, OK Policy is getting in touch with its inner dweeb (as if the outer dweeb wasn’t scary enough) and beginning work to develop new four-year forecasts of revenue and budgets for the state of Oklahoma. We’ve written elsewhere of our concerns (and others’) about Oklahoma’s official revenue forecasting and how we’ve designed fiscal policy to depend on poor forecasting. We won’t repeat those arguments now, though we certainly reserve the right to do so later.

Good forecasting starts with a sober look back at previous efforts. We first undertook the forecasting project in 2009, in response to rapidly falling state revenues. Our first forecast brief, released in November of that year, used six different models to forecast state General Revenue Fund (GRF) revenues for four years (here’s a summary of how those forecasts are developed). With the books now complete on FY ’11, we can look back to judge how we did and compare our performance with the official projections certified by the Board of Equalization. Read the rest of this entry »

In this video blog, OK Policy Director David Blatt provides an overview of the deficit reduction agreement reached this summer by Congress and President Obama. The  deal calls for close to $1 trillion in cuts to discretionary programs over the next ten yeas and additional automatic, across-the-board spending cuts if Congress fails to enact a further $1.2 trillion in deficit-reduction measures by January 15, 2012.

For more detailed analysis of how the debt deal might impact the federal budget, click here for an in-depth summary by Richard Kogan from the Center on Budget and Policy Priorities.  Or, click here for a few succinct power point slides on the subject developed by OK Policy. An earlier blog post summarized some of the best analysis of the agreement.

Oklahoma’s fiscal situation presents an apparent paradox. We have now seen state tax collections rise for five consecutive quarters and exceed prior year collections by 10.5 percent. At the same time, the state budget is still being cut. This year’s budget of $6.511 billion is $255 million, or 3.8 percent, smaller than last year’s and $614 million, or 8.6 percent, less than FY ’09.  Budget cuts are continuing to affect all areas of state government, with agencies and school districts forced to reduce and eliminate programs, lay off staff, and curtail services to the public. Unfortunately, looking ahead to FY ’13, we should anticipate minimal restoration of the funding cuts that have been absorbed these past three years, even if the state’s economic recovery continues.

The explanation for the paradox of deeper cuts coinciding with growing revenue is two-fold. First, revenue growth associated with the economic recovery has been insufficient to return to pre-recession levels. General Revenue collections in FY ’11 remained 16.5 percent below FY ’08 and substantially below levels of five years ago. Just as significantly, the rebound in state tax collections has been unable to compensate fully for the loss of substantial non-recurring revenues that were used to limit cuts. In particular, the legislature used large amounts of federal stimulus funds and state rainy day funds to balance the budget in the first two years of the crisis. It also adopted various other ‘revenue enhancement measures’ to address the shortfall, including suspending or deferring payment of tax credits, issuing bonds, transferring cash and revolving fund balances, and raising fees. Read the rest of this entry »

The Office of State Finance today released General Revenue collections for July, the first month of FY ’12. Total collections were $385.0 million, which was $14.9 million, or 4.0 percent above July 2010, and $17.0 million, or 4.6 percent, above the certified estimate for the month. State Finance Director Preston Doerflinger noted:

While there was moderate growth in receipts, collections dipped from the overall double-digit growth rate for FY-2011.

While revenues continue to recover from their sharp decline during the downturn, the recovery remains only partial, as can be seen from this table:

Read the rest of this entry »

Now that default has been averted and the agreement to raise the federal debt limit has been signed into law, attention here in Oklahoma has shifted, at least temporarily, from politics back to the weather (or, from the debt ceiling to the sweat ceiling). Although the full implications of the agreement will not be understood for months, or years, it is clear that the deal to lower the deficit will have far-reaching consequences for federal and state budgets and the economy. For those looking for concise analysis of  the agreement’s  fiscal and economic implications, here are a few pieces worth reading:

• Good short summaries of the basic mechanics of the deal are provided by this White House fact sheet and by the Center for American Progress; the full bill and accompanying materials can be found here.
• In a statement by Robert Greenstein, the Center on Budget and Policy Priorities argues that “the deal places the nation on a disturbing policy course and sets what may become important precedents that are cause for serious concern.” The Center is especially worried that the deficit reduction framework set up by the agreement paves the way for cuts of “an unprecedented depth” to discretionary spending programs and makes a balanced approach that includes additional revenues an unlikely outcome. Read the rest of this entry »