Archive for 2010

State revenue forecasts: Looking backward

by | September 15th, 2010 | Posted in Blog, Budget | Comments (1)

Last year at this time, OK Policy began a revenue forecasting project. Our efforts stemmed from the limitations of official revenue forecasting efforts, which are limited to two annual forecasts prepared for the Board of Equalization, issued in December and February, each covering only the remainder of the current year and the year ahead. In stepping into this void, we had several goals:

  1. To help state leaders, agencies, and citizens better understand and prepare for the impacts of the FY ’10 budget shortfall;
  2. To encourage the legislature and governor to develop a cohesive plan for managing the shortfall while minimizing impacts on  services that Oklahomans depend on;
  3. To better understand how long the revenue downturn would last and the path back to normal revenue levels; and
  4. To encourage the state to build better forecasting and financial planning into the budget process.

Our forecasting brief summarized our forecasts and recommendations. This post looks back at how well those forecasts worked.

The graph below suggests that our efforts were generally on target. The graph shows our six forecasts, along with the “middle scenario” and the actual revenue the state received. (Our technical memorandum describes how each forecast was devised.)

continue reading State revenue forecasts: Looking backward

Revenues: Despite improvements, next year’s die is cast… unless the Legislature acts

by | April 13th, 2010 | Posted in Blog, Budget | Comments (1)

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.

continue reading Revenues: Despite improvements, next year’s die is cast… unless the Legislature acts

From the frying pan to the fire: As FY 10 budget battle re-erupts, the real hard work waits

by | March 2nd, 2010 | Posted in Blog, Budget | Comments (3)

Just when it looked as if the the extended negotiations over how to address FY ’10 budget shortfalls were finally resolved, a new wrinkle emerged this week.  As a means to protest the continued failure to find supplemental funds for senior nutrition programs in the Department of Human Service, Senate Democrats refused to approve the emergency clause on a bill to transfer $30 million to the Special Cash Fund . Without an emergency clause, the transfer cannot take effect until July 1st, which threatens a whole series of agreements between the House, Senate and Governor intended to put this year’s budget to rest. (Update: an agreement was announced Wednesday afternoon on funding for senior nutrition programs allowing the emergency clauses for the funding bills to be passed).

continue reading From the frying pan to the fire: As FY 10 budget battle re-erupts, the real hard work waits

Budget deal (2): Social service agencies shut out of additional funding, again

by | February 22nd, 2010 | Posted in Blog, Budget | Comments (3)

For the second time in less than a month, the Governor and legislative leaders have announced an agreement on how to address the huge shortfalls in this year’s budget caused by declining revenue collections. This second agreement is not much different than the initial January agreement: monthly across-the-board cuts of ten percent of allocations from the General Revenue Fund will continue for the rest of the year, with the extent of cuts to some agencies mitigated by additional funds. This “addendum” to the January deal involves two main components:

continue reading Budget deal (2): Social service agencies shut out of additional funding, again

Revised revenue certification – budget gaps smaller but still perilous

by | February 16th, 2010 | Posted in Blog, Budget | Comments (0)

This morning, the State Board of Equalization will meet to certify the revised FY ’11 revenue estimates (we’ve posted the certification packet to our website). The February certification is binding on the Legislature as it develops the FY ’11 budget – the Legislature can appropriate above the February certified estimate only based upon changes in law approved during the current session, not changes in economic conditions.

continue reading Revised revenue certification – budget gaps smaller but still perilous

FY '10 Budget: Not a done deal?

by | February 8th, 2010 | Posted in Blog, Budget | Comments (1)

Just before the start of the Legislative session, Governor Henry announced that he had reached an agreement with Speaker Benge and President Pro Tem Coffee on the FY ’10 budget.  Faced with projected mid-year revenue shortfalls of slightly more than $800 million, the leaders agreed that agency appropriations from the General Revenue Fund would continue to be cut by 10 percent for the remaining months of the year, with supplemental funding made available to certain agencies (Common Ed, Higher Ed, Health Care Authority, Corrections and Rehab Services) to mitigate the extent of cuts.

continue reading FY '10 Budget: Not a done deal?

A first look at the Governor’s FY ’11 budget

by | February 2nd, 2010 | Posted in Blog, Budget | Comments (3)

In Monday’s State of the State address, Governor Henry laid out the broad parameters of his FY ’11 Executive budget. The Governor’s speech likened our current fiscal storm to the severe weather the state has faced recently and so often in our past.  While the Governor stated clearly that continued budget cuts are unavoidable due to the dramatic plunge in revenues that has hit the state during the current fiscal year (FY ’10) and that will continue next year, he earned loud, bipartisan applause when he declared:

We all will be asked to sacrifice. But we cannot balance the budget at the expense of the most vulnerable among us.

continue reading A first look at the Governor’s FY ’11 budget

FY '10 budget agreement leaves questions and challenges

by | January 27th, 2010 | Posted in Blog, Budget | Comments (4)

In a press release Tuesday afternoon, Governor Brad Henry, Speaker Chris Benge and Senate Pro-Tem Glenn Coffee announced agreement on how to address the shortfalls in the FY ’10 budget that have resulted from this year’s revenues coming in sharply below the certified estimate.

Based on the revised estimates for FY ’10 certified by the Board of Equalization in December, the state is looking at a total mid-year shortfall of $809 million in FY ’10, made up of  $729 million in the General Revenue Fund and $80 million in the HB 1017 Education Reform Fund. The leadership agreement involves the following main features for bringing the FY ’10 budget into balance:

continue reading FY '10 budget agreement leaves questions and challenges

August budget cuts by agency: not quite across-the-board

by | August 20th, 2009 | Posted in Blog, Budget | Comments (0)

As a follow-up to our earlier post about the announced cuts to state agencies resulting from the shortfall in July revenue collections, we have prepared a spreadsheet that shows how much of a cut each agency will receive in dollar amounts and as a percentage of the initial FY ’10 appropriation. The spreadsheet also includes total FY ’09 and FY ’10 appropriations amounts for each agency. The August cuts, totaling $21.9 million, represent 5 percent of one month’s appropriation from the FY ’10 General Revenue Fund (GRF). This latest development continues to tighten the squeeze on agency budgets.  In June, the state implemented 5 percent across-the-board cuts to agency  allocations as a result of shortfalls in last year’s revenues collections. Most agencies also saw their initial FY ’10 funding reduced by up to 7 percent, at the same time as they are struggling to meet rising employee health care and retirement costs, and in some cases, dealing with growing demands for services as a result of the downturn.

Overall, the August cut represents 0.30 percent of total state appropriations for FY ’10. However, as not all agencies are funded entirely through the GRF, “across-the-board cuts” do not affect all agencies in exactly the same way. This is shown in the graph below, which depicts the cut that the ten largest state agencies must absorb as a share of their total annual appropriation. The Department of Transportation, which is appropriated entirely out of the State Transportation Fund, has not had its funding cut at all. The Department of Education, which receives funding in part through the 1017 Education Reform Fund, the Lottery Fund, and others, was cut by just under 0.3 percent. In addition, this year’s budget included over $600 million in federal stimulus funds from the American Recovery and Reinvestment Act, which is unaffected by the state revenue shortfall. This explains why the cut to the Oklahoma Health Care Authority, which benefits from an enhanced federal Medicaid match under the stimulus bill, was just 0.25 percent of total appropriations. In total, about 30 percent of total state appropriations in FY ’10 – some $2.1 billion – came from funds other than current year GR.augustcuts-agency2

This so-called across-the-board distribution of budget cuts is the only one that can be implemented under the state Constitution and statutes without the involvement of the Legislature. But it does not necessarily reflect the ability of agencies to avoid making cuts that threaten essential public services.  If we are going to be able to navigate these revenue shortfalls in ways that cause the least harm to the health, well-being, and security of Oklahomans, we need to make sure we understand the ways these unequal cuts impact the various agencies’ ability to provide services to the people of Oklahoma. Only then can we determine if across the board cuts will be able to be endured by all agencies or if a different approach is needed.

New Revenue Numbers: The long climb back

by | August 12th, 2009 | Posted in Blog, Budget | Comments (4)

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.

julyrev01-10

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.

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