Free fall

This being the second Tuesday of the month, the Office of State Finance released the monthly revenue figures today. Unless you were the one who picked “down 21 percent” in the office betting pool, there was little to be happy about in the new set of numbers. For the fourth straight month, April’s General Revenue (GR) collections came in well below the certified estimaterev-vs-py-apr09 and the totals for the same month last year. As the economic downturn deepened, every major tax fell short in April, with gross production taxes off a whopping 64.9 percent from last year and 54.1 percent from the estimate.  Individual income taxes (21.8 percent below prior year and 17.7 percent below the estimate) and corporate income taxes (20.7 percent below prior year and 47.4 percent below estimate) also fared poorly. Sales tax collections were a relative bright spot, coming in 5.3 percent below the estimate but up 13.2 percent compared to a year ago.

As can be seen from the chart, Oklahoma’s tax collections held up through the first half of the current fiscal year before tumbling down the hill beginning in January. For the year, GR is now down 2.2 percent compared to FY ’08.

What is especially worrisome is that for the year, GR is now at only 96.5 percent of the certified estimate. The Legislature is limited by the Constitution to appropriating GR and other certified funds at only 95 percent of estimated collections, leaving a 5 percent cushion in the case of shortfalls. As Treasurer Scott Meacham noted today, “the margin to avoid a revenue shortfall in the final month of the fiscal year has become very thin.”  Over the past three months, GR has been coming in at an average of $108 million below estimate.  If  this trend continues through May and June, the state would fall some $80 million below the 95 percent mark in GR.

In the event of revenue shortfalls, the Constitution (Article 10, Section 23.6) requires across-the-board cuts to agency budgets, but is largely silent as to when and how the determination of a shortfall is made. Even if a potential $80 million shortfall is small as a share of the total budget, making up the shortfall in the final month of the fiscal year could require substantial cuts to agency appropriations for the month of June. At a Tuesday afternoon press conference, Treasurer Meacham was hesitant to speculate on how this process might be managed. Responding to a reporter’s question, he indicated agencies could face across-the-board budget cuts of equal percentages and would have to manage at those levels. He did acknowledge the governor could call a special session to make supplemental appropriations to some agencies from the Rainy Day Fund.

We will be working to learn more about the decisions that are being considered to address the situation and will keep our readers posted.


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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