After two straight years of cuts, the state’s budget situation remains dire. Despite the economic recovery and improving revenue collections, the state faces a huge shortfall for next year. The substantial non-recurring revenues that were used to balance the budget over the past two years, including federal stimulus dollars, state reserve funds, and assorted one-time revenue enhancements,  have mostly dried up.  The Board of Equalization has certified some $500 million less in available revenue for FY ’12 than what was appropriated for the current year budget. As we stated in our recent issue brief on protecting core services:

The impact (of budget cuts) is being felt by Oklahoma families, businesses and communities in far-ranging ways… Deeper cuts will further impinge the ability of state agencies to fulfill their core missions and may seriously affect the well-being of schoolchildren, seniors, persons with disabilities, correctional and public safety officers, and other members of our communities.

In this context, the Governor and legislative leaders are actively considering additional ongoing or one-time revenue sources that could avert truly catastrophic cuts to core services. One option being discussed is appropriating this year’s “5 percent money” for next year’s budget.  This post explains the “5 percent option” and suggests why, on balance, we think a portion of this money should be used, along with other revenue solutions. Read the rest of this entry »

When the Board of Equalization met last week and certified more revenue for the upcoming fiscal year, there was one word on everyone’s mind: Oil. Of the total $106 million increase in the February estimate compared to the Board’s initial estimate in late December, $64.3 million was attributable to expectations of higher oil revenues.  Higher revenue projections were based on the assumption of rising oil prices – the Tax Commission is forecasting an average FY ’12 price of $90.77 per barrel -  and increased production.

If these assumptions prove true, they will continue a rather dramatic shift in Oklahoma’s since 2008 as oil production has caught up to or surpassed natural gas production as an engine of growth in the energy sector.  After peaking in mid-2008, the price of both oil and natural gas plummeted in late 2008 and early 2009. Since then, the price paths of the two commodities, which usually move closely in sync, have diverged sharply, with oil reaching just under $90 per barrel in January 2011 while natural gas remains stuck at close to $4.00 per MCF. Read the rest of this entry »

The State Board of Equalization met yesterday to certify revised revenue estimates and appropriations authority for the upcoming year’s budget. Not yawning yet? Then do we have a 6-minute video blog post for you!

For the full Board of Equalization Board packet and OK Policy’s newly updated presentation on the state’s budget situation and outlook, click here to visit our Current Budget Information page

On Monday, Governor Mary Fallin introduced her FY ’12 Executive Budget (click here for the full budget or here for appropriations total by agency).  Although state revenues have begun to rebound from the recession, the recovery is projected to remain slow and incomplete during the year ahead.  In December, the Board of Equalization certified available revenues of just over $6.1 billion for next year’s budget, which is some $600 million less than what was appropriated in the current budget year. Legislators used some $1.2 billion in non-recurring money from the federal stimulus bill, the state’s Rainy Day Fund, and assorted one-time measures to bring this year’s budget into balance.

In presenting her budget, Governor Fallin tried to strike a balance between a pair of principles and priorities. On the one hand, she insisted that the the budget would be balanced almost entirely through spending cuts and not revenue increases: Read the rest of this entry »

With the state anticipating large budget shortfalls – estimated by Republican legislative leaders as in the vicinity of $600 million -  for the upcoming fiscal year, there is renewed talk from state leaders about the need to protect “core public services” from the full impact of potential cuts. While the interpretation of core public services varies, most officials define the term to include education, health (which may encompass human services), public safety and transportation.

The graph below presenting the allocation of current year (FY ’11) state appropriations shows why the task of balancing the budget without cuts to core services or new revenues is so difficult, if not outright impossible:

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Earlier this month, we released a brief that provided our projections for state revenue collections for Fiscal Years 2011 through 2014.  Last week, the State Board of Equalization certified its official preliminary revenue estimates for FY ’12, along with updated projections for FY ’11, which we discussed in this blog post. The Board’s forecasts are very closely aligned with ours.  For FY ’11, our middle forecast is for General Revenue collections of $4.969 billion, compared to $4.949 billion projected by the Board, a difference of $20 million, or a mere 0.4 percent. For FY ’12, we are forecasting GR of $5.121 billion, which is $19 million, or 0.4 percent, above the official estimate certified by the Board of Equalization.

We point this out for two reasons. First, to unabashedly toot the horn of our forecasting guru, Paul Shinn, for developing a methodology that so closely anticipates the numbers developed for the Board of Equalization (you can read the technical memorandum explaining his  methodology by clicking here). This is the second year of our forecasting project; last year, Paul’s middle forecast for FY ’10 GR came in within 3.5 percent of actual full-year collections. Read the rest of this entry »

The State Board of Equalization met yesterday to certify preliminary revenue estimates for the upcoming budget year, FY ’12. These estimates 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 2010 Legislature.

The preliminary FY ’12 estimates, developed by the Oklahoma Tax Commission and Office of State Finance, suggest that state revenue collections will continue to recover from their precipitous drop during the economic downturn, but that the recovery will remain slow and incomplete. As we see in the chart below, FY ’12 collections to the General Revenue (GR) Fund are expected to be $5.103 billion. That is an increase of  $500 million, or 10.9 percent, from FY ’10 but some $850 million, or 14 percent, below the pre-downturn peak of FY ’08. Next year’s collections will remain considerably below levels of six years ago, even as the cost of providing services rises due to inflation, population growth, and increased caseloads.

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Today OK Policy released “A New Fiscal Reality for Oklahoma: The State Budget Outlook, 2011-2014,” our second annual multi-year budget forecast. Click here for the full 10-page brief or here for the 1-page summary. Dangerously nerdy readers also can check out the 17-page technical memorandum that describes our assumptions and methods.  If you just want the elevator speech, here it is:

We can choose to keep on emptying the revenue stream, spending on favored programs without demanding results, and taking life one fiscal year at a time, as we have through many years. Or we can choose to reevaluate our environment and craft a new fiscal approach that values good planning, effective spending, and generating sufficient revenue to make Oklahoma smarter, safer, and more competitive. We must choose wisely. Read the rest of this entry »

The ongoing state budget crisis has meant fewer state employees are assuming greater responsibilities.  Sterling Zearley is Executive Director of Oklahoma Public Employees Association, the largest association representing state employees. I spoke with him by phone on November 16^th. Here’s a transcript of the interview, which has been edited for length and clarity.

David Blatt: The past two years have seen increasingly deeper cuts to the state budget. What has been the impact on state employees?

Sterling Zearley: Well, as you know, we’ve lost approximately 2,000 state employees in the last year, which concerns us because we know state employees provide a great service to the state of Oklahoma…Last year we did a voluntary buy-out (VOBO) which helped to keep from doing so many RIFs (Reductions-in-Force). The problem is, when you do VOBOs, you lose a lot of your long-term employees and you lose a lot of institutional knowledge when those employees leave state service.

DB: What agencies are currently facing the greatest challenges in managing budget cuts and shortfalls?

SZ: Well the main one we’ve been most worried about is DOC. Right now we’re at 70 percent staffing and we’re at 99 percent inmate capacity. That really concerns us for the safety not only of the employees but of the general public. Right now they’re doing furloughs one day a month. You still have to have minimum personnel to manage those inmate populations. We know pretty much each week  you have only 75 percent percent of your staff there of that 70 percent because that’s their furlough week . [See DOC Director Justin Jones' recent post on the agency's funding crisis] Read the rest of this entry »

Last week I attended the annual State Fiscal Policy conference hosted by the Center for Budget and Policy Priorities, the top non-governmental organization analyzing state fiscal policy across the nation. The message we heard was clear and grim: As rough as the past two years of  revenue shortfalls and budget cuts have been here in Oklahoma and across the states, the upcoming budget year, FY ’12, is going to be even worse.

This chart created by the Center presents the story succinctly:

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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 »

One of the most important provisions of the stimulus bill passed by Congress last February was the assistance provided to beleaguered state budgets in the form of enhanced federal matching rates for Medicaid. Now, as Oklahoma and other states remained mired in a deep fiscal crisis, the prospects seem good for an extension of the enhanced federal Medicaid match for an additional six months. This is one of the few promising signs on the fiscal horizons, and good news for the hundreds of thousands of Oklahoma families that receive health insurance coverage through Medicaid. Read the rest of this entry »