OKPOLICY.ORG
The state Board of Equalization met last week to certify the amount of funds that will be available for appropriation in the next legislative session. The amount of the certification is based on an econometric model used by the Oklahoma Tax Commission, which has proven remarkably accurate through the years. Before 1985, the figure was arrived at, roughly, by using an average of the previous three years’ revenue. The old formula did not work well because the swings in Oklahoma’s energy-dependent economy allowed for too much spending when the economy was on its way down and not enough when the state was working its way back from a downturn.
The Board of Equalization certified $8.7 billion available for appropriation from the General Revenue Fund for Fiscal Year 2024 (beginning July 1, 2023) — an 18.5 percent increase over this year’s certification. One of the questions legislators will be asked to resolve, as Rep. Kevin Wallace, R-Wellston, Chairman of the House Appropriations and Budget Committee, put it is, “How much savings is enough?”
Over the past four years, by spending less than the amount certified as available, the state has accumulated a whopping $3.2 billion in the Constitutional Reserve Fund (Rainy Day) plus various legislatively created “savings” accounts: $1.1 billion, in the Rainy Day Fund; $396.9 million in the Revenue Stabilization Fund; $381.2 million unspent from the FY2021 General Revenue Fund; $945.5 million, unspent from the FY2022 General Revenue Fund; $193.0 million, unspent from the FY2023 projected General Revenue; and $249.5 million in the FMAP Rate Preservation Fund. This does not include the $698 million sitting in the LEAD Act account, which was to be used to attract Panasonic to Oklahoma, which didn’t materialize.
It’s hard to blame anyone who wants to have savings to stave off the effects of a “rainy day.” There’s some comfort in knowing we have $3.2 billion “in the bank.” No one looks forward to going back to the days of scraping by when the economy turns downward, which it no doubt will. But one must wonder if putting huge amounts of available funding in various “holding” accounts just to keep from spending it is wise public policy, especially for a state that ranks near the bottom in funding most of the metrics that measure quality of life and state services.
I think I would ask Rep. Wallace’s question in a slightly different way: “Why are we scraping by now to keep from scraping by later?” A huge savings account will not prevent a downturn in the economy. A severe downturn could produce a revenue failure — a failure to realize the revenue that was certified. Yes, we may avoid budget cuts in a downturn, but what’s the point when we have artificially cut budgets for years ahead of time?
The state constitution provides the Rainy Day Account should be limited to 15 percent of the previous year’s certification of general revenue funds, which the board last week said is $9.1 billion. So, the constitution suggests about $1.3 billion should be sufficient savings. We know it has not been enough to prevent budget cuts in lengthy downturns. There’s certainly room for reasonable people to differ as to how much cash should be stashed away in state coffers. For me, I’d rather have a state government that serves its people with the funds available and shares in the pain during a downturn than to have one that fails to serve its people. It’s up to legislators to find the proper balance.
