Falling short?

Oklahoma’s Constitution includes several fiscally prudent budgeting measures aimed at averting or minimizing budget shortfalls.  One of these is the 95 percent appropriations rule: the Legislature may only appropriate up to 95 percent of the certified estimate for the upcoming year to the General Revenue fund, as well as several smaller funds. This creates a 5 percent cushion in case revenues fall short of the estimate. However, if revenues do come in below 95 percent, the Office of State Finance is required to implement proportional across-the-board cuts to keep the budget in balance (Article X-23 of the Constitution, Section 10). This occurred in both 2002 and 2003 during the last economic downturn.

While we have known since December that the state would be facing shortfalls in constructing next year’s balance, until last month, our situation for this year looked safe. But look at what harev-vs-est-mar09s happened to revenue collections in the past two months. General revenues have come in some $155 million below the estimate (the blue bars for January and February). A $202 million surplus that had built up over the first six months of FY ’09 has now dwindled to $47.6 million, with four months remaining in the fiscal year (red bars).  In addition to this amount, the 5 percent funds – approximately $250 million – remain as a cushion.

Will the current $297 million cushion hold out? State Treasurer Scott Meacham and House Appropriations Chair Ken Miller have expressed confidence that the state will not face an official mid-year revenue shortfall. Senate leaders seem less certain. The dilemma they all face is that the longer they wait to enact cuts, the deeper those cuts might need to be since there will be fewer budget months over which to spread the shortfall. It’s one thing to absorb a 1 percent cut spread out over 12 months, but a 1 percent annual cut applied to just one month is a lot more than that (12 percent, actually). The task is especially difficult in the final months of the fiscal year, when most expenditures have already been obligated.

If a shortfall is deemed inevitable, the Legislature could dip into the Rainy Day Fund to bring the budget into balance. Up to 3/8ths of the total Rainy Day balance, or $225 million, can be used for current-year shortfalls. Nowhere near that amount would be needed in FY ’09. But the Legislature and Governor seem to be treating the Rainy Day Fund as sacrosanct, at least for this year and next.

March revenue figures will be released next Tuesday, at which point it should be clearer if revenues in January and February hit a ditch or dove off a cliff.


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.

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