Oklahoma has a strict system of constitutional tax and spending limits. The Oklahoma Constitution (Article X) attempts to protect taxpayers from unwise budgeting in several ways.

Article X, Section 23 requires that the budget be balanced. This is accomplished by limiting appropriations for seven major funds to the projected revenue as certified by the Board of Equalization. The Legislature cannot appropriate more than 95 percent of certified funds for the upcoming year. This allows for a cushion in case of a revenue shortfall. If General Revenue Fund (GRF) revenue exceeds the 95 percent level it flows into the Cash Flow Reserve Fund and can be appropriated in the future. GRF revenue that exceeds 100 percent of the certified amount flows into the Constitutional Reserve Fund (also known as the Rainy Day Fund).

If GRF revenue falls below the 95 percent level during the year, a budget shortfall is declared and across-the-board cuts become necessary, proportional to the shortfall. This means that spending remains within available revenue throughout the year.

The Constitution and laws of Oklahoma also divide state money between a number of funds. These are separate entities that track how specific money is received and spent. Funds help keep track of how much restricted revenue has been earned and help guarantee it is used only for legal purposes. Funds are described below the graph.

There are six certified funds. Only 95 percent of certified revenue may be appropriated each year from the certified funds.

• Revenue that is not restricted legally flows into the General Revenue Fund, which can be used for any legal purpose of the state. As shown in the chart, GRF accounts for approximately seven of every ten state appropriated dollars in FY '11, or $4.6 billion. Because it is not restricted in use, it also becomes the source of most discussion and conflict.
• The Lottery Trust Fund, which collects the 35 percent of Oklahoma Lottery sales reserved for education and distributes them according to legal requirements ($62 million).
• Several smaller certified funds collect money for various specific purposes. These include C.L.E.E.T., which collects a $9 fee assessed in court cases and reserves them for use of the Commission on Law Enforcement Education and Training ($3 million in FY'11); Commissioners of the Land Office Fund, which collects earnings from lands that are held for education purposes and reserves them for financing education ($7 million); the Mineral Leasing Fund, which collects royalties from minerals on federal lands and reserves them for financing education ($6 million); the Public Building Fund, which collects lease and royalty income on lands reserved for public buildings and reserves them for improving those buildings ($2 million).

There are several funds that are not limited by the 95 percent rule and technically are not appropriated, but authorized for specific purposes by law.

• The Special Cash Fund collects monies in excess of the 95 percent estimate and other unused cash amounts. It may be appropriated for any legal purpose of the state ($206 million in FY'11).
• The Education Reform Fund implements the House Bill 1017 education reforms of 1991 by collecting sales tax and a portion of "growth revenue, " which may only be allocated to the State Department of Education ($600 million).
• Three funds collect just under one-third each of the gross production tax on oil and reserve them for education technology, college student aid, and higher education capital improvements. These funds are limited to the first $150 million of the allocated gross production tax revenue; any excess flows to the GRF ($145 million).
• The Transportation Fund collects motor fuel taxes and other restricted funds and reserves them for road and other transportation purposes. It may be allocated only to the Oklahoma Department of Transportation ($216 million).
• The Tobacco Settlement Fund uses funds paid by major tobacco companies from a lawsuit to recover costs of treating tobacco-related disease and restricts funds to certain health-related purposes. It may only be allocated to agencies providing health services ($19 million).
• The American Recovery and Reinvestment Act (ARRA) Fund uses funds from the 2009 ARRA, or stimulus act. In FY'11, the budget allocates $199 million from the State Fiscal Stabilization Fund, mainly for education purposes, and $340 for an increased federal share of Medicaid health insurance costs.
• The Rainy Day Fund may be appropriated in circumstances described on the following page. In the 2010 session, the Legislature appropriated $372.9 million from this fund, of which $100.0 million is reserved for use in FY ’12.

The Constitution includes two other important taxpayer protections. First, appropriation growth from one year to the next cannot exceed 12 percent plus the rate of inflation (Article X, Section 23). Second, tax increases cannot be adopted unless they are approved by a three-fourths vote of the Legislature or a vote of the people (Article V, Section 33, commonly known as State Question 640).

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