OKPOLICY.ORG
Treasurer Scott Meacham today announced that General Revenue (GR) collections for the first month of the new state fiscal year, FY ’11, came in 9.9 percent above the prior year and 11.9 percent above the official certified estimate. The sales tax and corporate income tax saw the strongest growth compared to July 2009, while personal income tax collections were off by 0.1 percent from a year ago, likely reflecting the persistence of weak employment numbers.
Although one must be careful of drawing conclusions based on a single month, July’s collections confirm that revenues are continuing the upswing seen in recent months and should further dispel fears that the state will face a third consecutive year of revenue shortfalls requiring mid-year cuts. It now seems far likelier that the economic projections made in February that formed the basis of this year’s budget underestimated the speed and strength of the economic recovery. If GR continues to come in above 100 percent of the estimate over the course of the full year, the surplus will go to replenishing the Rainy Day Fund.
At the same time, it’s important to recognize that revenues are far from having fully rebounded from the downturn. Here’s a look at July GR over the past 11 years:
This year’s collections remain 19 percent below the pre-downturn peak and slightly below collections of five years ago. This situation contrasts with the recession of 2002-03, when revenues were able to surpass pre-downturn levels within one year. We still expect that it will be FY ’13 before state revenues return to where they were prior to the recession, without adjusting for inflation or population growth. Given the heavy reliance on non-recurring revenues from the federal stimulus bill, Rainy Day Fund and other sources, the challenges the next Legislature and Governor will face in developing a budget that avoids further cuts and begins to restore services to pre-downturn levels are still likely to be substantial.
