On Tuesday, the Board of Equalization certified a preliminary estimate of the revenues available for next year’s budget. The numbers confirm that while the worst of the fiscal crisis is over, the state is experiencing a slow, incomplete recovery that will fall far short of restoring key services to pre-downturn levels.

The preliminary FY ’13 estimates, developed by the Oklahoma Tax Commission and Office of State Finance, will form the basis for the Governor’s Executive Budget that will be delivered in early February; the Board will meet again in mid-February to provide revised estimates that will be binding on the 2012 Legislature. As we see in the chart below, collections to the General Revenue (GR) fund are expected to continue their recovery next year from their collapse during the recession of 2008-09. Next year’s GR is estimated at $5,540 million, which is 19.9 percent greater than FY ’10.  Yet next year’s revenues are expected to remain 7 percent below their levels of six years ago (FY ’07), even as the cost of providing services rises due to inflation, population growth, and increased caseloads. Read the rest of this entry »

Continuing high unemployment rates, weak economic growth, and stock market volatility are all contributing to concern and uncertainty about the national economy. But how’s Oklahoma faring in these turbulent times? I recently spoke with Chad Wilkerson, the Oklahoma City Branch Executive of the Federal Reserve Bank of Kansas City about conditions in the Sooner State. This is an edited and abridged transcript of our conversation on August 24, 2011.

David Blatt: How would you characterize the current state of Oklahoma’s economy?

Chad Wilkerson: I would say things are still pretty solid for us. We’ve had fairly solid job growth over the past year. Unemployment’s down to 5.5 percent, and in some parts of the state… it’s less than 5 percent.

However, I think that measure may be overstating the degree to which we’ve recovered from the recent recession. There’s been a fairly sizable number of people drop out of the labor force in the last couple of years. This has been interesting me of late because of the fact that Oklahoma’s unemployment rates are down to a level that many economists consider full employment levels, 5 – 6 percent. But if the same share of the adult population was looking for jobs today as in 2007, our unemployment rate for the state would be a little over 8 percent. That’s probably too high because I think the share of the population that was looking for jobs in 2007 was also a bit abnormal – the boom was going on, perhaps too many people were looking for jobs from a productivity standpoint. So our actual unemployment is probably somewhere between 5 and 8 percent. We’re probably not quite fully recovered, but we’re still doing much better than the nation. Read the rest of this entry »

Despite a modest recovery in the overall economy, a new study from the Federal Reserve Bank of Kansas City finds that low- and moderate-income populations continue to face increased hardship in Oklahoma and other states in the Tenth Federal Reserve District.

The FRB of Kansas City conducts a quarterly survey of non-profit and community organizations that serve low- and moderate-income (LMI) populations in the Tenth District.* Respondents are asked about the economic conditions of the clients they serve. The results are used to construct indices measuring the financial condition, service needs, jobs availability, affordable housing, and credit access of LMI populations.  The June report found conditions continuing to worsen for LMI populations in the 2nd quarter of 2011, although in some sectors the gap between the number of respondents reporting things are getting worse and those reporting things getting better is narrowing : Read the rest of this entry »

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 »

June’s jobs report saw Oklahoma’s unemployment rate hold steady at 5.3 percent, the fifth lowest rate in the nation. But the Bureau of Labor Statistics’ household employment survey showed that the number of employed Oklahomans declined by 6,900. To try to make sense of the numbers, I spoke with Lynn Gray, Director of the Economic Research and Analysis Division of the Oklahoma Economic Security Commission. This is an abridged and edited transcript of our conversation.

David Blatt: If we step back and look at what’s happening in the labor market in Oklahoma over the past six months or the past year, what is the story there?

Lynn Gray: Well, it’s actually kind of a disappointment. The unemployment rate in the state has dropped from 7.0 percent to 5.3 percent. The number of unemployed has dropped by 30,000 –  from 122,000 to 92,000. On the surface that look great, that is a very good recovery. The average person who hears this might assume that 30, 000 people went from unemployed status to employed status. But that hasn’t happened. Employment is only up by about 6,400 in the household survey in the past year. The number of unemployed has fallen by 30,000, but the number of employed is only up by 6,400… This tells me that this really is a weaker recovery than just the unemployment rate by itself would indicate. Read the rest of this entry »

State Finance Director Preston Doerflinger yesterday announced that June General Revenue (GR) collections came in $78.1 million, or 15.7 percent, above last year and $66.2 million, or 13.0 percent, above the official certified estimate. The June collections brought to an end the 2011 fiscal year and confirmed the increasingly solid recovery of Oklahoma’s tax collections that has been apparent over the course of the year. As can be seen from the first chart, the final quarter of FY ’11 marked the second quarter in a row where revenues exceeded the prior year by over 12 percent and the fifth straight quarter of year-over-year quarterly revenue growth.

For the full year, General Revenue increased by $487.1 million, or 10.5 percent, from the depths of FY ’10. However, as we can see, revenue collections remain substantially below pre-downturn levels. This year’s GR came in 14.2 percent below FY ’08 and remains considerably below collections of five years ago, FY ’06. Read the rest of this entry »

The latest monthly report of General Revenue (GR) collections announced by Treasurer Ken Miller provided the strongest indications yet that state revenues are on a firm path to recovery. For the 11th time in the past 12 months, monthly revenue collections surpassed those of the same month a year ago; as the first chart shows, January’s growth of 19.5 percent was easily the strongest we have yet seen:

Read the rest of this entry »

The first part of this week I am attending the annual State Fiscal Policy Conference organized by the Center on Budget and Policy Priorities. While most of the conference sessions focus on the fiscal challenges facing state governments – and the need to pursue balanced and fiscally responsible approaches to preserving core public services in these difficult times – the opening plenary featured an informative and convincingly-argued talk on the prospects for the national economy by Mark Zandi, the chief economist for Moody’s Analytics and one of the nation’s most perceptive and widely-respected economic policy analysts. In recent years. Zandi has gained particular prominence both as an adviser to the McCain campaign during the 2008 Presidential election and as co-author, along with former Federal Reserve Vice Chairman Alan Binder, of an important report this past summer that found that federal stimulus measures had a huge and positive impact in turning around the economony and averting a full-scale Depression.

Zandi’s talk, which he titled “Struggling to Hit Escape Velocity,” made three major points about  the economy. The first was that the economic recovery, which had been gathering steam in late 2009 as a result of the spending and tax cut provisions of the stimulus bill passed by Congress in February 2009, has lost momentum over the past six months. Real GDP, which grew 3.3 percent in the second half of 2009, slowed to 2.7 percent in the first half of 2010 and is on pace to grow just 2.0 percent in the second half of this year. This is “painfully slow growth” which will not be enough to forestall further increases in the unemployment rate, which he expects to creep back above double digits in 2011. Zandi identifies two main culprits for the slackening economy: the declining economic impact of the stimulus package and the European debt crisis of earlier this year, which battered stock prices,  reversed growing business and consumer confidence, and slowed private sector hiring.  Although the European crisis now seems to be over, Zandi believes it set back the American recovery by a good six to 12 months. Read the rest of this entry »

We’re nowhere close to being out of the woods. That’s been our message of late on the state’s budget outlook (you can take a look here at our blog post analyzing of the most recent monthly revenue collections and here at the memo (PDF) on the budget we distributed to candidates). While revenue collections over the past 8 months have rebounded 5 to 10 percent from the previous year, they remain well below pre-downturn levels. And even though revenues are recovering, the use of over $1 billion in non-recurring revenues from the federal stimulus bill and state Rainy Day Fund  in this year’s budget to avert catastrophic budget cuts ensures that Oklahoma policymakers will face substantial shortfalls in building next year’s budget. Read the rest of this entry »

Today’s announcement of the monthly General Revenue collections brought incontestable good news:

State revenue collections in March topped prior year collections for the first time since December 2008 and the official estimate for a second consecutive month, State Treasurer Scott Meacham announced today.

Collections beat the official estimate by an impressive $81.4 million, or 25.5 percent. For the third quarter of FY ’10, collections fell short of the estimate by just 2.4 percent; by comparison, for the second quarter, revenues were more than 27 percent below the estimate.

Compared to the same month in 2009, collections in March were $6.4 million, or 1.6 percent, higher. The chart below, which we have been using in recent months to put this year’s collections in a longer-term perspective,  reveals the extent to which March marks a sharp and decisive upturn in revenues. The month’s collections were back to just over 90 percent of the average collection for the same month over the past five years.  In each of the previous nine months, collections remained mired below 85 percent of their five-year average. Read the rest of this entry »

On January 11th, Chad Wilkerson, the Branch Executive of the Oklahoma City office of the Federal Reserve Bank of Kansas City will be giving a free public lecture on “The Economy Around Us: Recession and Recovery”. Wilkerson, who serves as the Federal Reserve’s regional economist, will look at historical business cycles and current economic trends to offer his assessment of what to expect of the Oklahoma economy as the national recovery begins to take hold. We heard Chad speak on the economy back in April and can highly recommend him as a  perceptive and well-informed presenter.

The talk, which will take place from 12 – 1 pm at the Oklahoma History Center, is part of the Policy & Practice lecture series hosted by the Oklahoma Department of Human Services Office of Planning, Research and Statistics and University of Oklahoma Center for Public Management. Other speakers in the Spring 2010 series include Harvard economics professor David Cutler addressing health care reform; NPR correspondent John Hockenberry on eliminating stereotypes; and Charles Wilson of the Center for Children and Families in San Diego on the impact of childhood trauma.