OK Policy comments on revenue numbers estimated during December 2025 Board of Equalization meeting

The Oklahoma Board of Equalization estimated $8.35 billion of funds available for the Governor’s budget proposal for Fiscal Year 2027, which starts on July 1, 2026. These early estimates indicate how much lawmakers may have available to appropriate next session but are not a guarantee. While the overall revenue projections indicated a modest increase next year, in reality this suggests Oklahoma lawmakers will face a nearly flat budget when inflation and population growth are taken into consideration.

Statement from OK Policy’s Fiscal Policy Analyst Aanahita Ervin:

Lawmakers and the governor need to be especially cautious this session, given the federal fiscal landscape that has slashed funding for essential services and shifted unprecedented costs to states. We are at a fork in the road. While there is always an amount of uncertainty every year during budget planning, fiscal uncertainty is far more salient this budget cycle.

Oklahoma state agencies have requested budgets totaling $1.65 billion more than FY 2026 appropriations. The federal government has dramatically cut its support for essential services and shifted many costs back to states, most notably in food assistance (SNAP) and healthcare (Medicaid/SoonerCare). The ability for lawmakers to meet state needs is further at risk if lawmakers don’t address the state’s conformity to the federal tax code. All the while, poorly designed tax cuts have reduced state revenue when we account for rising inflation and a growing population. The end result is that state lawmakers – through more than two decades of their own actions – have fewer resources to address the state’s many unmet needs.

Notes and background

• The December Board of Equalization meeting ensures that the current fiscal year’s (FY 2026) expenditure is on track and releases estimates of the maximum available revenue for the Governor’s budget proposal for the next fiscal year (FY 2027).
• The Board of Equalization on Friday estimated $8.79 billion available in General Revenue Fund collections in Fiscal Year 2027, which starts on July 1, 2026.
• The state Constitution allows the Legislature to appropriate 95 percent of the General Revenue estimate for appropriations for the next fiscal year. This means $8.35 billion is estimated to be available for the FY 2027 governor’s budget proposal and Legislative appropriations.
• Total recurring revenue collections for FY 2027, which include estimated certified funds and authorized funds, are $10.9 billion. This total recurring revenue estimate is about $338.1 million higher than last year’s December estimate. Officials said the increase is largely driven by sales tax revenue increases, indicating the state’s increased reliance on a volatile revenue source.
• Although recurring revenue did increase, the $338.1 million increase from FY 2026 to FY 2027 barely accounts for a 2.7 percent rate of inflation during the past 12 months. This means lawmakers will face an essentially flat budget next year. Our state is not generating enough revenue to meet Oklahoman’s needs or mitigate federal funding cuts.
• The state’s restricted cash reserves stand at $3.7 billion, down about $1 billion compared to last year due to expenditures made during session 2025.
• Board members briefly mentioned implications from the federal budget bill (H.R. 1) and its impact on the state’s budget in FY 2028. However, members did not have a detailed discussion on what lawmakers would need to do in order to mitigate the coming federal impacts or plan ahead for the anticipated decline in federal funds.
• The Board of Equalization will meet again in February to provide more accurate estimates and certify the maximum amount the Legislature can appropriate for the coming fiscal year. The December and February estimates are usually different, as February’s estimates account for revenue changes from December to February.
• The individual income tax has historically been the largest single source of revenue for state services. The corporate income tax is a smaller share of the general revenue due to years’ of cuts, but still an important revenue source. These two income taxes combined have represented about 40 percent of the General Revenue collections in recent years.
• New this year was a presentation by the Oklahoma Office of Management and Enterprise Services (OMES) on the methodology to determine whether automatic income tax cuts – passed by lawmakers in session 2025 – would take effect. Its test modeling indicated that projected revenue this upcoming fiscal year would not have been sufficient to initiate an automatic triggered cut.
• Given the current fiscal landscape, the state should consider revenue raising strategies to ensure critical programs and services are not cut and agency budgets are appropriately funded. Any additional income tax cuts would further limit the state’s resources in a time of federal austerity measures.
• OK Policy encourages the Governor and leaders to make the budget process more transparent and accessible. We urge the legislature to start the public budget meetings earlier in the session and release the final budget a week or more in advance for lawmakers and the public to review before any votes take place.
• The December 2025 Board of Equalization meeting is available to watch online via Gov. Stitt’s YouTube channel.