Limits on the Budget

Limits on the Budget

Oklahoma has a strict system of constitutional tax and spending limits. The Oklahoma Constitution (Article X) attempts to protect taxpayers from unwise budgeting in several ways.

Article X, Section 23 requires that the budget be balanced. This is accomplished by limiting appropriations for seven funds, of which the General Revenue Fund is far and away the largest, to less than the projected revenue as certified by the Board of Equalization. The Legislature cannot appropriate more than 95 percent of certified funds for the upcoming year. This allows for a 5 percent cushion in case of a revenue shortfall. If General Revenue Fund (GRF) revenue exceeds the 95 percent level it flows into the Cash Flow Reserve Fund and can be appropriated in the future. GRF revenue that exceeds 100 percent of the certified amount flows into the Constitutional Reserve Fund (also known as the Rainy Day Fund).

If GRF revenue falls below the 95 percent level during the year, a revenue failure is declared and across-the-board cuts to state agency’s appropriation become necessary, proportional to each agency’s share of the General Revenue Fund. This ensures that spending remains within available revenue throughout the year. The Office of Management and Enterprise Services, led by the Secretary of Finance, has the authority to determine when a revenue failure is declared and by how much agency budgets will be cut. Most recently, two revenue failures were declared in FY 2016, leading to total cuts of 7 percent to each agency’s allocation from the General Revenue Fund. When collections ended up exceeding the revised revenue targets, agencies were rebated a portion of what was cut.

The Constitution and laws of Oklahoma also divide state money between a number of funds. Funds are described below the graph.


There are 11 certified funds. Only 95 percent of certified revenue may be appropriated each year from each certified fund (all dollar amounts reflect FY 2020 appropriations).

  • Revenue that is not restricted legally flows into the General Revenue Fund, which can be used for any legal purpose of the state. As shown in the chart, GRF accounts for approximately eight out of every ten state appropriated dollars in FY ’20, or $6.4 billion.
  • The Lottery Trust Fund collects the share of Oklahoma Lottery sales that is reserved for education and distributes them according to legal requirements ($63 million).
  • Several smaller certified funds collect money for various specific purposes. These include C.L.E.E.T., which collects a $9 fee assessed in court cases and reserves them for use of the Commission on Law Enforcement Education and Training ($2.9 million in FY 2020); Commissioners of the Land Office Fund, which collects earnings from lands that are held for education purposes and reserves them for financing education ($8.7 million); the Mineral Leasing Fund, which collects royalties from minerals on federal lands and reserves them for financing education ($3.8 million); the Public Building Fund, which collects lease and royalty income on lands reserved for public buildings and reserves them for improving those buildings ($3.6 million); and the Special Occupational Health and Safety Fund, which collects from insurers and employers for the Department of Labor to administer workplace safety regulations ($1.1 million).

There are several funds that are not limited by the 95 percent rule and technically are not appropriated, but authorized for specific purposes by law.

  • The Special Cash Fund collects monies in excess of the 95 percent estimate and other unused cash amounts. The Legislature will often transfer money from various agency revolving funds to the Special Cash Fund for appropriation. It may be appropriated for any legal purpose of the state ($ 112 million in FY 2020).
  • The Education Reform Fund implements the House Bill 1017 education reforms of 1991 by collecting a portion of the income taxes, sales and use tax, tribal gaming fees, and other taxes. Money from the 1017 Fund may only be allocated to the State Department of Education ($854million).
  • Three funds collect the first $150 million in annual collections from the gross production tax on oil and reserve them for education technology, college student aid, and higher education capital improvements. Any excess gross production tax revenue flows to the GRF ($141 million).
  • The State Transportation Fund collects motor fuel taxes and other restricted funds and reserves them for road and other transportation purposes. It may be allocated only to the Oklahoma Department of Transportation ($141 million).
  • The Health Care Enhancement Fund, created in 2018, is funded with revenue from a $1 per-pack increase in the cigarette tax ($131 million).
  • The Tobacco Settlement Fund uses a portion of the funds paid by major tobacco companies from a lawsuit to recover costs of treating tobacco-related disease and restricts funds to certain health-related purposes. It may only be allocated to agencies providing health services ($14 million). The bulk of the tobacco settlement funds are allocated to the Tobacco Settlement Endowment Trust and are not available for appropriation
  • The Alcoholic Beverage Control Fund, created in 2016 and funded with license and registration fees and fines and penalties resulting from alcoholic beverage control and enforcement ($13.9 million). 

The Constitution includes two other important taxpayer protections. First, appropriation growth from one year to the next cannot exceed 12 percent plus the rate of inflation (Article X, Section 23). Second, tax increases cannot be adopted unless they are approved by a three-fourths vote of the Legislature or a vote of the people (Article V, Section 33, commonly known as State Question 640).

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