OKPOLICY.ORG
Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1991. He currently practices law in Tulsa and represents clients at the Capitol. You can sign up on his website to receive the Capitol Updates newsletter by email.
Rep. Jon Echols (R-OKC) has said he plans to propose a constitutional amendment to remove the cap on how much of current revenues can be deposited into the Constitutional Reserve Fund which is sometimes called the state savings account or “Rainy Day Fund.”
The rainy day fund was set up by constitutional amendment in 1985 so in times of a negative economy the state would have savings to draw on for needed public services. I was on the conference committee that wrote that provision which became Article 10 Section 23 of the constitution. The scheme set up then remains substantially intact today.
The constitution defines “surplus funds” as any amount accruing to the General Revenue Fund over and above the estimate made by the State Board of Equalization. It provides that all such surplus funds shall be placed in a Constitutional Reserve Fund by the State Treasurer until such time that the amount of said Fund equals 15 percent of the General Revenue Fund certification for the preceding fiscal year. Rep. Echols’ proposal is to allow unlimited deposits into the reserve fund.
When we established the reserve fund thirty years ago the cap was set at 10 percent. Our feeling in 1985 was that the state should not be in the business of collecting tax money from citizens just to deposit large amounts into a savings account. If we actually needed the tax money it should be spent. If not, taxes should be cut so as not to produce excessive surpluses. We thought 10 percent of the previous year’s certification was adequate to safeguard against the ups and downs of the economy. The cap has since been amended to 15 percent.
But Rep. Echols has a good idea. An important difference between 1985 and now is that the legislature could raise taxes then. Since then the constitution has been amended to make tax increases unavailable except by a 75 percent vote of the legislature or a vote of the people. This makes it difficult to deal with a negative economy when taxes have been cut during good times. I hope the people agree with Rep. Echols that the need now exists for a bigger cushion. He’s right to point out that our economy is volatile due to our dependence on the energy sector. Because of that we should build an adequate savings account before cutting our revenues.
