Close-up Of Metal Chain Linked With Paper Clip

OK Policy’s analysis of the General Appropriations bill and budget documents released this week shows that far more than half of the additional revenues agreed to by legislative leaders and Gov. Fallin as part of the FY 2017 budget consists of non-recurring revenue that will not be available in future years. This reliance on one-time funding ensures that Oklahoma will remain mired in a deep budget hole going into FY 2018, even if energy prices recover over the coming year.

The Legislature is set to appropriate $6.778 billion for FY 2017.  The budget includes $1.046 million in revenue enhancements that have been added to the amount certified by the State Equalization Board in February. Of this amount, less than $200 million is clearly new recurring revenue from ending or limiting tax breaks and improving tax collections. The Legislature has also capped the rebate for economically at-risk wells, a move which boosts projected revenue collections for FY 2017 by $111 million but is less real new revenue than avoidance of revenue losses.  Additionally, there is $132 million in the budget that is transferred from the Cash Flow Reserve Fund. Previously, these transfers have been counted as one-time money, but under HB 3206, money from the Cash Flow Reserve Fund will become part of annually certified funds. Counting this revenue brings new recurring revenue up to $432 million.revenue_enhancements

The remaining $614 million in revenue enhancements are all non-recurring. They include:

  • $373 million in transportation funds that have been made available to support the FY 2017 budget. This includes $200 million to be transferred from the ROADS fund that will be replaced by bond issues, $73 million to be transferred from the Department of Transportation’s Construction and Maintenance Fund; $50.2 million from the State Transportation Fund, and $50.0 million from the County Improvement for Roads and Bridges Fund;
  • $100.0 million in transfers from state revolving funds. Of this total, $53.0 million consists of agency revolving funds that agencies are instructed to use as part of their FY 2017 appropriations. The remaining $46.8 million are transfers from revolving funds to the Special Cash Fund for appropriation to various agencies. Among the revolving funds tapped for the largest amounts are the Weigh Station Improvement Fund ($12.5 million), Public Safety Revolving fund ($12.3 million), Insurance Commissioner Fund  ($6 million),  Tourism and Passenger Fund ($5 million), Higher Education Fund ($4 million),  Consumer Credit Administrative Expense Fund ($4 million); Environmental Quality Fund ($4 million) and Security Commission Fund ($3.9 million).
  • $65.9 million from the Rainy Day Fund as part of the Department of Education’s FY 2017 funding;
  • $36 million from the State Treasurer’s Unclaimed Property Fund;
  • $26.3 million from the sale of railroads;
  • $12.9 million from a one-year $5 hike in the cost of motor vehicle tags (HB 3208).

Admittedly, some of these “one-time” revenue measures, such as tapping  the Unclaimed Property Fund and agency revolving funds, have now become regular practice and can almost be considered “recurring non-recurring” revenues. But others, in particular the nearly $375 million in transportation funds, will leave budget holes that will need to be filled.

Over the past four months, we saw growing awareness among legislative leaders of the state’s structural budget deficit and heard repeated commitment to use this year’s massive budget shortfall as an opportunity to make structural reforms that would put our budget on more sound long-term footing. Lawmakers had many chances to do so by rolling back tax cuts, reducing tax breaks, and selectively raising taxes or broadening the tax base. Ultimately, the Legislature failed to make those hard choices and instead slapped a bunch of band-aids onto gaping wounds.