Once bitten, twice shy. Or is it twice bitten, thrice shy? Oklahoma’s budgeting laws try to protect against mid-year budget shortfalls by allowing the Legislature to appropriate only 95 percent of the certified estimate of General Revenue (GR) fund collections for the upcoming year. However, in each of the past two years, revenue collections have failed to reach the amounts appropriated by the Legislature. In FY’09, things started off well, but then revenues plunged to such an extent that the final monthly GR allocation to each agency was cut by 5 percent (those cuts were later restored) . This fiscal year, which began last July 1, revenues immediately came in far below appropriated levels. Budgets were cut 5 percent a month beginning in August and then 10 percent each month since November; only large-scale borrowing, followed by an agreement to supplement collections with hundreds of millions from the Rainy Day Fund, additional stimulus dollars, and some available cash prevented mid-year budget cuts being even more drastic.
It is not surprising, then, that the funding levels announced in the FY ’11 budget agreement have been greeted with a certain amount of skepticism by some state agencies and school districts. A Tulsa World article on funding for common education, for example, included these reactions from Tulsa-area Superintendents:
“It will be good news if, when you get the details, if it is that type of cut,” Broken Arrow Superintendent Gary Gerber said, referring to the 2.9 percent budget cut. “But we have to take it with a grain of salt because we had a budget agreement last year and they proceeded to cut us every month of the entire school year…”
Union Superintendent Cathy Burden said that while she was pleased the district now has a number to work with, their budget will require careful scrutinizing before any major decision on staffing or plans for next year can be made.
Burden said her “cautiousness is based on the history of what happened this year” of promised 3 percent cuts almost doubling by year’s end.
Yet if this skepticism – which seems to be broadly shared, based on conversations I’ve had in recent days – is understandable, it is also likely unwarranted. At least a decade of history suggests that the state’s forecasters tend to underestimate both how bad things will be in bad times and how good they’ll be in good times. Specifically, the revenue projections on which annual appropriations are based tend to consistently underestimate how much revenues will fall when the economy turns bad, but also underestimate how quickly and strongly revenues will recover once the economy improves.
continue reading Not to worry? Next year's budget projections likely to be met