Is ‘stable revenue’ enough for Oklahoma’s future growth? (Capitol Update)

On December 19, the Oklahoma State Board of Equalization certified an estimated $8.35 billion available from the general fund for the next legislative session, marking a $271 million increase from the previous year. Overall spending authority is $10.9 billion, an increase of $338.1 million from Fiscal Year 2026.

The December board certification will be the basis for the governor’s budget proposal for Fiscal Year 2027, which starts on July 1, 2026, and the board will meet again in February for the final certification of funding available for appropriation.

The general revenue fund is the main funding source for state government operations each year. Although the legislature in the past few years has appropriated money from general revenue to various savings accounts rather than funding operations, and it has later appropriated money from the savings accounts for large capital projects.

A total of $3.7 billion remains in cash from reserves and unspent revenues, including $1.3 billion in the Constitutional Reserve Fund (Rainy Day Fund) with the remainder in other funds created by the legislature.

The increase in the general revenue fund is projected to be about 3.3 percent, slightly more than the 2.7 percent rate of inflation last year. The numbers reflect full implementation of the income tax cut and repeal of sales tax on groceries passed in the last two years.

John Gilbert, Deputy Director of Revenue and Budget for the Office of Management and Enterprise Services (OMES), told the board the General Revenue Fund collection numbers prepared by the Oklahoma Tax Commission showed a “stable revenue outlook,” giving Gov. Kevin Stitt the opening to comment that “when we cut taxes, our economy grows, and we are all better off.”

An interesting part of the OMES presentation to the board was an “Income Tax Trigger Practice Run” for training purposes only. By statute, no trigger finding will be made until the December 2026 board meeting. The practice run was to determine if the board is satisfied with the proposed procedure for the calculations.

House Bill 2764 was passed last session as part of Gov. Stitt’s so-called “Path to Zero” proposal to totally repeal the state’s personal income tax. The law triggers a mandatory rate reduction of one-quarter of one percentage point in the personal income tax each time the total revenue collections for the current year exceed the total revenue collections for FY 2023, plus the cost of the mandated income tax reduction multiplied by 1.25.

FY2023 was the banner year for state revenue, primarily because of the economic activity generated by federal stimulus funding, high prices for oil and gas, and a high rate of immigration into the state from Texas and the coasts. The practice exercise for this year showed that the automatic tax cut would not have been triggered.

The bottom line seems to be that the state’s goal is to continue with a “stable revenue outlook,” likely barely enough to keep state government viable, and eliminating the potential for funding improvements in education, healthcare, mental health, and public safety.

Moreover, if the economy is fortunate enough to produce any significant revenue growth, it will be reduced by mandatory tax cuts until the personal income tax is fully repealed, with no suggestion for what could replace it. Hardly aspirational.