Through the first four months of the current fiscal year, General Revenue collections have come in 1.8 percent below the estimate and 8.7 percent below last year. Sales tax collections have missed the estimate each month. If revenues continue to miss projections, a revenue failure could be declared, triggering mid-year budget cuts
The State Equalization Board will meet in late December to certify initial revenue estimates for FY 2018. This year’s budget relied on $550-$700 million in one-time revenues that will be unavailable next year. Even with this year’s revenue shortfall, a trigger could be met causing a further income tax cut to take effect in 2018, adding $50 million more to the budget hole.
State funding has been cut deeply and repeatedly in recent years
The FY 2017 budget is $360 million (5.0 percent) less than the initial FY 2016 budget and $253 million (3.6 percent) less than the final FY 2016 budget after mid-year budget cuts and supplemental appropriations. This year’s budget is $896 million, or 15.1 percent, below FY 2009, adjusted for inflation.
Over half of all appropriated agencies (39 of 73) have now been cut by 20 percent or more since FY 2009.
State formula funding for public schools remains $179 million below FY 2008 levels, while enrollment has increased by over 50,000 students.
The state Medicaid agency has cut $445 million from provider rates and health care benefits since 2010.
There are over 7,400 Oklahomans with developmental disabilities on a waiting list for home- and community-based services
State government (excluding higher education) employs 8 percent fewer people than seven years ago and fewer people than in 2001—despite population growth, heavier caseloads, and new mandates and responsibilities.
Budget shortfalls are a result of both economic factors and policy choices
Gross production tax revenues to the General Revenue Fund are projected to be just $128M in FY 2017, compared to an average of $455M from FY 2010-12. Low energy prices are also affecting income and sales tax collections
Since 2004, the top income tax rate has been cut from 6.65 to 5.0 percent, resulting in annual lost revenues of $1.022 billion. When all tax cuts are considered, the annual revenue loss approaches $1.5 billion.
The cost of tax incentives more than doubled between 2010 and 2014, according to Oklahoma Watch. The 1 percent tax rate on horizontal drilling cost the state over $400 million in lost revenue in FY 2014, while a tax credit for the wind industry cost over $100 million that year.
The budget is also affected by the growing share of tax revenues allocated off-the-top for earmarked purposes. In particular, the ROADS Fund has grown over $500 million this year and is scheduled to receive another $59.7 million increase in FY 2018.
Over the longer-term, Oklahoma faces a structural budget deficit associated with an aging population and decaying infrastructure, along with an outdated tax system.
Former Executive Director David Blatt joined OK Policy in 2008 and served as its Executive Director from 2010 to 2019. He previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers.