Coming up short – understanding the revenue shortfall

Source: Tulsa World, June 5, 2009
Source: Tulsa World, June 5, 2009

On Thursday, Treasurer Scott Meacham declared a revenue shortfall for the current budget year, FY ’09, and announced that state agencies would be required to take an across-the-board cut in their allocations for June, the final month of the fiscal year. After five straight months of steeply declining revenues, General Revenue Fund (GRF) collections in May reached the point where they had fallen below 95 percent of the certified estimate upon which FY ’09 appropriations had been allocated.  Through May, GRF collections were at 94.9 percent of the estimate. This translates to a shortfall of $6.8 million.

The constitutional language related to revenue shortfalls is found in Article 10, Section 23.10; the relevant section states:

(T)he Legislature shall provide that all appropriations shall be reduced to bring them within revenues actually collected, but all such reductions shall apply to each department, institution, board, commission or special appropriation made by the State Legislature in the ratio that its total appropriation for that fiscal year bears to the total of all appropriations from that fund for that fiscal year.

The FY ’09 revenue shortfall announced yesterday applies only to the General Revenue Fund, and not to the other funds from which certain agencies receive funding. (However, other funds, especially the HB 1017 Fund, which is made up of a similar mix of taxes as the GRF, apparently may also face a shortfall that could lead to end-of-year funding cuts to the Department of Education).

The Office of State Finance has not yet released details on how GRF cuts will be allocated; the official numbers will be provided to agencies by early next week. However, OK Policy calculates that agencies that are fully funded from the GRF will take a cut of 0.12 percent in their total FY ’09 appropriations.  Agencies that are appropriated in whole or in part from other funds will be cut by a smaller percentage. These include (with the non-GRF funds in parentheses):

  • Department of Common Education (1017 Fund and Lottery Fund): -0.08 percent;
  • Regents for Higher Education (Lottery Fund): – 0.10 percent;
  • Commissioner of Land Office (Mineral Leasing Fund): no cut;
  • Department of Transportation (State Transportation Fund): no cut;
  • Oklahoma Health Care Authority (Tobacco Settlement Fund): -0.10 percent cut;
  • Department of Labor (OHSA Fund): -0.05 percent cut;
  • Council on Law Enforcement Education and Training (CLEET Fund): -0.03 percent cut; and
  • District Courts (State Judicial Revolving Fund): – 0.04 percent cut

(UPDATE: This spreadsheet from the Office of State Finance shows the allocation of the $6,825,314 shortfall across agencies).

Given that the funding cut is quite small and has been somewhat anticipated in recent months, it is likely that most agencies will be able to absorb the reduction without major disruptions. However, when tacked on to the steep cuts and funding gaps many agencies face in the year ahead, it will further complicate the efforts that agencies face in averting serious disruptions to their core programs and services in the year ahead.

It’s worth noting that the shortfall in FY ’09 revenue collections does not shed any light specifically on the outlook for the upcoming budget year. The FY ’10 budget was built based on revenue projections that were made in February, after the onset of the economic downturn. As Treasurer Meacham noted yesterday, the budget incorporated a $612 million drop in revenues compared to the initial projections for FY ’09. However, the May revenue numbers do include some ominous signs suggesting that actual revenue collections in the new fiscal year that begins July 1st may struggle to meet projections. In particular, natural gas collections in May were a paltry $16.5 million and have averaged just $26.1 million over the past five months. The FY ’10 certification projects monthly natural gas collections of $35.6 million.

We will continue to monitor these developments and keep you informed.


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.

One thought on “Coming up short – understanding the revenue shortfall

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.