Fiscal Year 2025 Budget Highlights

Aanahita Ervin // October 10, 2024 // Updated: October 10, 2024
OK Policy Articles & Research // //

Former OK Policy Budget Analyst Emma Morris provided data analysis for this article.

[Download this report as a pdf] | [See charts]

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In FY 2025, The budget’s buying power keeps decreasing

  • For the fiscal year that began on July 1, 2024 (FY 2025), Oklahoma’s state budget is $12.2 billion. In nominal dollars, this year’s budget of $12.2 billion is the largest in state history. However, in real dollar value, our budget has lost a lot of its buying power.
  • When adjusted for inflation and population growth, the FY 2025 budget has decreased by 8.8 percent compared to the FY 2000 budget ($13.4 billion). Even compared to last year’s budget (FY 2024) of $11.8 billion, the FY 2025 budget is 1.1 percent smaller when adjusted for inflation and population changes. These numbers do not include supplemental funds. (Fig 2).
  • In addition to the $12.2 billion FY 2025 budget, the budget package included $267 million in supplemental funding for FY 2024. Supplemental funding is often used to help agencies meet unanticipated needs or cover funding gaps that arise through the year. Certain aspects of this year’s budget package, such the development of new major funds for specific uses, may also be included as supplemental funding.
  • At the beginning of FY 2024, the state had $2.3 billion in savings (Fig 3). In recent years, the Legislature has increasingly left significant amounts of unspent cash in their General Revenue Fund reserves. As unspent cash has become a growing component of the state’s revenue picture, OK Policy this year has included unspent cash as part of our snapshot of state savings balances.
  • Early in the 2024 session, legislators eliminated the state portion of the grocery sales tax. This will reduce state revenue by $418 million annually and provide the largest tax break to high-income earners. Other attempts to further reduce revenue were unsuccessful during the 2024 session.

While some education agencies saw budget increases, the Legislature reduced funding for the State Department of Education

Increased funding for health and social services could mean increased access to health care

Most human services agencies received small budget increases

Some public safety agencies see significantly increased funding

  • Public safety agencies received $1 billion, or 8 percent of the FY 2025 budget.
  • The Department of Public Safety received a 20 percent ($21 million) increase in its budget, putting the agency’s budget at $126 million. It is the second highest funded agency among all the public safety agencies, second only to the Department of Corrections, which has a total budget of $544 million (an $8 million, or 1.5 percent, decrease from last year).
  • The Attorney General’s office received an increase of $25.3 million (65 percent).
  • The Oklahoma Supreme Court received an increase of 78.4 percent ($13.4 million) for a total budget of $30 million. This large increase is primarily due to an increase in the appropriation to the Family Representation and Advocacy Program Revolving Fund, as well as a change in the way the fund is classified. The reclassification moved the funds from the District Courts’ allocation in FY 2024 to the Supreme Court’s in FY 2025.

Lawmakers have created new funds dedicated to specific projects and issues

  • In recent years, the Legislature has created and appropriated money to new funds that are designed for specific uses.
  • These types of funds allocate money for agencies for specific purposes, rather than the general appropriations lawmakers have historically directed to agencies. When looking just at the state budget without accounting for these funds, it may lead to an unclear picture of the state’s total spending. Because portions of these funds can be allocated over the course of several years, it can make year-over-year budget trends more difficult to track.
  • For FY 2025, the Legislature directed $177 million to the Legacy Capital Finance Revolving (LCFR) Fund, which was created in 2023 to allow for agencies to self-finance capital projects.
    • Once appropriations are made to this fund, the Legislature allocates the funding to certain projects. This year, they appropriated $371.5 million to these projects, of which 73 percent went to just two institutions: the University of Oklahoma and Oklahoma State University.
  • Lawmakers in 2024 created another fund – the Capital Assets Maintenance and Protection Fund – that received $350 million this year, an appropriation on par with most major state agencies. Only eight state agencies received larger sums in the FY 2025 budget. (Fig. 7) This fund was created to allow for funding of certain capital projects.

Historically large state savings don’t take the place of sustained investments in shared services

  • The state has seen unprecedented savings increases over the last three years, largely due to an influx of federal COVID relief. Oklahoma currently has record levels of savings (Fig. 3), but this should not lull lawmakers into a false sense of security that public needs are currently being met.
  • Without the two major federal stimulus packages in response to the COVID-19 pandemic, Oklahoma would have brought in significantly lower levels of revenue in recent years. The COVID relief funds masked this fact. As the impacts of federal relief are reduced and fully eliminated in the next few years, Oklahoma is very likely to experience a significant fiscal strain. Thus, it is vitally important that state leaders protect our remaining revenue sources.
  • In addition to eliminating the state portion of the sales tax on groceries, some state leaders also advocated for significant cuts to the state’s personal income tax. If enacted, a 0.25 percent cut to the tax would have cost the state between $235 – $293 million in revenue, and the benefit would have overwhelmingly gone to the wealthiest Oklahomans.
  • One major missed opportunity was lawmakers’ refusal to expand the Sales Tax Relief Credit (STRC). Intended to provide tax relief to the lowest-income Oklahomans, the credit has not been increased since its creation in 1990. Currently set at $40, the credit should be raised to $200 per household member. Lawmakers can and should use this tool to provide targeted tax relief to the most vulnerable Oklahomans. At a cost of only $120 million annually, the Legislature failed to pass this common-sense measure and let the opportunity to support hard-working Oklahomans slip away.
  • It’s important for Oklahoma to have sufficient savings to be able to handle future financial downturns, which are likely to happen given the state’s over-reliance on the volatile petroleum industry. However, prioritizing savings without sustained investments in public services is not wise either. The costs for deferring investments into public services – and the discomforts for addressing them – will both be far larger tomorrow.

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ABOUT THE AUTHOR

Aanahita Ervin // aervin@okpolicy.org

Aanahita Irani Ervin joined OK Policy Institute as a Fiscal Policy Analyst in May 2024. She calls Oklahoma City and Mumbai, India home having been raised in both cities. She earned her undergraduate degree in Chemical Engineering from the University of Oklahoma in 2022 and her Master of Public Policy from the Sanford School at Duke University in 2024. She began her policy journey wanting to merge science with policy to help address climate change. She soon realized her wide array of interests in criminal justice reform to food insecurity and how they are inextricably linked to poverty. Fiscal policy undergirds all policies because without financial backing, policies have no power. Aanahita is excited to use her skills to positively transform Oklahoma’s fiscal policy landscape to better serve everyday Oklahomans. When not working, she enjoys admiring Oklahoma’s sunsets, cooking meals, and taking rejuvenating naps.