OKPOLICY.ORG
The state received more good revenue news last week. The Office of Management and Enterprise Services (OMES) reported on Friday that the General Revenue Fund collections for fiscal year 2025 totaled $8.7 billion — $224.7 million (2.6 percent) above the State Board of Equalization’s estimate and $279.1 million or (3.3 percent) higher than the prior fiscal year’s collections.
This came despite a $308 million loss in revenue from elimination of the 4.5 percent state sales tax on groceries — a tax cut predicted to create a revenue loss of $418 million when fully implemented during Fiscal Year 2026, which started on July 1, 2025. During the 2025 session, the legislature also approved another income tax cut estimated to cost $133.5 million in FY 2026 and $340.5 million the following year when fully phased in. The result is a permanent reduction of at least $758 million in the state’s annual revenue, all from tax cuts passed in the last two legislative sessions.
I’m wondering if the tax cutting is going to continue. I hope our state leaders are paying attention to Oklahoma history.
The tax cuts and revenue surpluses in recent years remind me of the leadup to the Oil Bust of the 1980s. At the height of that boom, a July 12, 1982 article in the Daily Oklahoman reported: “Oklahoma ranks second nationally in the amount of money left over after the bills are paid, a report by the National Governors’ Association shows. Only Texas, with a balance of $587 million, exceeds Oklahoma’s $387 million in disposable income this year, the report said.”
The article continued, “Although pointing out surplus funds are not at an all-time high, Gov. George Nigh said in comparing Oklahoma with the other states, ‘We’re in great financial shape.’ The state that sent the Okies to California now has a balance more than three times that of the more populous western state, the association’s report shows.”
Sixteen months later, the party was over.
A November 21, 1983 story in the New York Times recounted how “the tax money rolled in, and the state spent nearly $1 billion on new highways, buildings and schools. It raised teachers’ salaries, renovated veterans’ homes and hired more state police. The state budget doubled to $1.6 billion from $800 million in five years and, even so, Oklahomans enjoyed 16 tax cuts in that time as the out-of-state buyers of the state’s natural gas and oil picked up the tab.”
Gov. George Nigh, facing a revenue failure, called a special session on Nov. 28, 1983, and said he would ask legislators to raise $500 million or more in new taxes that would be needed to maintain state services over the next 18 months. The legislature declined. But over the next six years – which extended into the administration of Gov. Henry Bellmon — state leaders endured economic misery and public ire caused by multiple budget cuts and tax increases.
The result was passage of State Question 640, requiring either a 75 percent legislative supermajority approval or a vote of the people to pass tax increases. The New York Times article quoted Neil Dikeman, associate director of the Center for Economic and Management Research at the University of Oklahoma, saying, “You’d think we in Oklahoma would have learned from previous boom-busts, but people just could not believe the boom would burst again.”
Although we have diversified some, energy is still the number one industry in the state. In the past few years, the legislature has used surpluses for modest investments in some services and for tax cuts. It has also created several savings accounts that topped out at over $4 billion, ostensibly to guard against a sudden economic downturn — savings now viewed as “one time” money.
Yet the teacher shortage, limited support for public and higher education, unmet mental health needs, rising Medicaid (SoonerCare) expenses, strained human services, and reports from the highway patrol about challenges in patrolling metropolitan interstate highways all continue to persist.
In today’s volatile world, the so-called savings won’t last long. With the reduced revenue base, the ability to meet the state’s needs could be severely harmed — just as it has been in the past.
