The latest state revenue collections announced today provided mixed news:

State revenue collections in February exceeded the official estimate for the first time since December 2008, but fell short of prior year collections for the same month, State Treasurer Scott Meacham announced today.

Preliminary reports show General Revenue Fund collections in February are $220.6 million. That amount is:

• $17.3 million, or 7.3 percent below the prior year; but,
• $0.8 million, or 0.4 percent above the estimate.

February collections were buttressed by $25 million in gross production taxes on oil that were allocated to the General Revenue Fund and by stronger-than-expected income tax collections. After tax refunds, the state took in net income tax collections of $10.7 million in February, whereas the official estimate was for a net loss of $9.1 million in income tax payouts. Read the rest of this entry »

There is definitely something in the air. Over the past several weeks, there has been a heavy flurry of attention paid to the state’s system of tax expenditures, the array of over 450 exemptions, credits, deductions and the like that allow taxes not to be paid when they otherwise would. Yesterday, we released an in-depth issue brief which we titled “Let There Be Light: Making Oklahoma’s Tax Expnditures More Transparent and Accountable.” In our press release, we stated:

While the merits of granting tax preferences can be debated as a matter of principle, the reality is that they are unlikely to be abandoned entirely. There is a chance now to build on important progress made in recent years in increasing disclosure and scrutiny of tax expenditures to really get a handle on which tax breaks are worthwhile and effective, and which are wasteful giveaways.

Read the rest of this entry »

We may never have expected to see the day when the announcement that monthly revenue collections had come in 16.7 percent below the prior year and 20.8 percent below the certified estimate would be taken as good news. But after the pummeling that revenue collections have suffered over the past 12 months,Treasurer Scott Meacham may be forgiven for putting a positive spin on January collections that were announced Tuesday:

Meacham said January’s numbers are somewhat encouraging, even though they remain below prior year collections and the official estimate.

“We’re not out of the woods yet, but we are seeing some positive movement,” he said.

Read the rest of this entry »

Last week I attended the Stand Up for Seniors advocacy forum which focused on the impact the state’s worsening economic and fiscal situation is having on programs serving seniors. State Treasurer Scott Meacham was among the elected officials who addressed the gathering. In laying out the budget challenges we are facing and the limited tools at our disposal for mitigating the severity of budget cuts, Treasurer Meacham shared a conversation he had a couple of months back with a friend who expressed frustration at the inability of state government to operate more like a business. Businesses in the downturn are responding by cutting back, reducing expenses and payroll, and simply doing whatever it takes to get through until the economy recovers. Why, asked his friend, can’t state government just do the same? Read the rest of this entry »

As state leaders struggle to find solutions to this year’s revenue shortfalls and funding gaps, it is not too soon to draw lessons from the current state fiscal crisis to design policies that will allow us to respond better the next time the economy falters. This post, the second in a four-part series that will recommend changes to our budget and tax system, looks at options for strengthening our budget reserve funds.  Our first post recommended enhanced and expanded budget forecasting; subsequent pieces will consider multi-year revenue commitments and tax expenditures. Together, our proposals are designed to improve the Legislature’s ability to manage budget downturns.

Like most every state, Oklahoma has established a budget reserve fund to put money aside during times of robust growth that is then made available to cushion the impact of economic downturns.  Oklahoma’s Constitutional Reserve Fund, known as the Rainy Day Fund (RDF), was created by a vote of the people in 1985. Under the Constitution, deposits are made into the Rainy Day Fund of all General Revenue (GR) collections that exceed 100 percent of the final certified estimate made by the State Board of Equalization for a given year. Deposits are capped at 10 percent of the General Revenue Fund certification for the preceding year.  If the RDF is already at its cap, additional surpluses spill over to the General Revenue Fund. Read the rest of this entry »

The latest monthly budget release (PDF) from Treasurer Scott Meacham provided some good news and some bad news. The bad news is that October revenues fell well short of projections, as they have in each month of the current fiscal year. General Revenue (GR) for October was 18.2 percent  below the official estimate and 23.7 percent below below last year’s collections. The good news is that the shortfalls are slightly less than in previous months. Over the first three months of FY ’10, General Revenue collections averaged 26.0 percent below the estimate and 29.5 percent below prior year collections. October’s slightly improved performance led the Treasurer to declare:

I am cautiously optimistic that October collections could show our economy has finally bottomed and we may start seeing some recovery in actual revenue collections. Read the rest of this entry »

Yesterday’s announcement of state revenue collections for September marked the end of a truly dismal quarter. Collections for the 1st quarter of FY ’10 were 29.5 percent below the first three months of FY ’09. The graph below shows that this continued and amplified the trend of the final two quarters of last year, when revenues  dropped by 15.3 percent and 26.3 percent, respectively. The graph also shows how much more severe the current fiscal crisis is than the one earlier this decade, where the worst quarter saw revenues fall by just over 12 percent.

Read the rest of this entry »

Anyone hoping for signs that the state’s budget woes had already hit bottom found little to cheer in Tuesday’s  revenue announcement [PDF] from Treasurer Scott Meacham. August General Revenue (GR) collections came in nearly 32 percent below one year ago. As the chart below shows, this is the worst monthly performance compared to the prior year since the state fiscal crisis hit in January. Read the rest of this entry »

As you’ve no doubt already heard, the worst fears about state revenue collections in the beginning of the new fiscal year were confirmed yesterday with the release of July General Revenue (GR) collections. The Treasurer’s office announced that July revenues were down 26.3 percent compared to a year ago and came in 18.1 percent below the certified estimate upon which current year appropriations were based. This year’s July GR collections were not only $120 million below last year’s; they were the lowest since FY ’03, at the depth of the previous recession, without adjusting for inflation or the growth in the overall state budget in the intervening years. The sole glimmer of good news in yesterday’s announcement: July’s 26.3 percent decline in revenue collections compared to the same month in the prior year was actually slightly less than the year-to-year declines suffered in June (- 30.1 percent) and May (-27.7 percent). This suggests that the state budget may have already hit rock bottom. However, the climb back up will likely be long and will definitely be hard.

July’s revenue shortfall led Treasurer Scott Meacham to implement an immediate 5 percent across-the-board cut to agency appropriations for the month of August. The Treasurer said that he will be meeting with Governor Henry and legislative leaders to discuss how to handle the budget crisis, stating:

“We have several options. These include potential use of the Rainy Day Fund, tapping additional federal stimulus money and other responses,” Meacham said. “However, I would warn state agencies that additional cuts may very well be coming.”

For now, implementing cuts to all agencies in equal proportion to their share of appropriations from the GR fund is the only course that is constitutionally available. This approach, however, is unable to take into consideration the differing capacity that agencies have to absorb budget reductions and the differing impact of potential cuts on services that are essential to the health, well-being, and security of Oklahoma families and communities. In a blog post last month, OK Policy suggested an approach for dealing with shortfalls, including being ready to call the Legislature back into Special Session in the fall and tapping the Rainy Day Fund to minimize the extent and severity of cuts. We will continue to monitor the budget situation closely, and in collaboration with policymakers and partners in the community, be working to develop recommendations and strategies for how to proceed.

Last week, State Treasurer Scott Meacham unveiled the the state revenue report for June, 2009. Revenue was below the previous year, for both  the last  month and the fiscal year as a whole, as we reported earlier.

It’s natural to wonder what could happen in the just-started budget year, FY ’10. Even though it will be a month until the first months’ revenue are known, Meacham was willing to speculate:

It appears very likely at this point that Fiscal Year 2010 revenues will be less than
originally estimated by the tax commission. That means a revenue shortfall is probable.

This week, Meacham and others are talking about what to do about it. According to the Tulsa World,

Cutting appropriations to agencies would be the first action. Meacham is asking state agency directors, many of whom are dealing with 7 percent cuts this fiscal year, to look for further reductions because of the likelihood of a revenue shortfall. … If the revenue shortfall is prolonged or steep, budget cuts likely won’t be enough, Meacham said. When cuts start affecting employees and vital services, the rainy day fund has to be considered.

It may be premature to declare a revenue shortfall when we haven’t seen any revenues for FY ’10. While recent trends have been quite discouraging, most economists expect a rebound to take hold soon.A growing economy in the spring of 2010 can make up for some bad months this summer and fall. Further, our Constitution only allows the Legislature to appropriate 95 percent of certified revenues; we can absorb a 5 percent shortfall for the year.

Whether or not there’s a shortfall, though, we can assess the tools we have available and see if we can improve them in a way that helps this year and beyond. We should use these tools–now and in the future–to be sure we maintain adequate and consistent public services for Oklahomans. Here are some suggestions: Read the rest of this entry »