OKPOLICY.ORG
Reports of the June 15 State Equalization Board meeting remind me of a few things about state financing that we don’t often think about. The board met to adjust the Fiscal Year 2027 revenue estimate, reflecting actions taken by the Legislature during this year’s session. This is usually due to a tax cut — large or small — or some other bill that will affect the amount of revenue available to the Legislature for appropriation.
This year, the Legislature took two actions that required the meeting. Legislators passed Senate Bill 1280 by Sen. Micheal Bergstrom, R-Adair, and Rep. Gerrid Kendrix, R-Altus, which extended the earmark of a portion of the excise tax on oil and gas production for five years. It was originally due to expire on July 1, 2026.
The first $2.7 million that this tax produces annually is taken “off the top” and sent directly to the Corporation Commission and the Interstate Oil Compact Commission. The Legislature never sees it. The February board estimate had accounted for the expiration of the earmark beginning FY 2027, but SB 1280 prevented that from happening.
Earmarking revenue for purposes the Legislature wants to prioritize is a longstanding way of guaranteeing the money will be spent on those priorities, regardless of how much is available for the rest of state government. For example, there is off-the-top money for highway construction and repairs, retirement systems, and many other things. The recipients of that funding don’t have to go through the appropriations process and compete each year for their funding.
That brings us to the other legislative action that reduced the money available for appropriation session. House Bill 3705, by Speaker Kyle Hilbert, R-Bristow, and Senate President Pro Tempore Lonnie Paxton, R-Tuttle, diverted another $25 million off the top to the Oklahoma Parental Choice Tax Credit.
As a result, the program now has $275 million available for roughly 30,000 families who want to send their children to private schools. The nearly 700,000 children and youth attending public schools compete each year with law enforcement, mental health, and all the other functions of state government for their funding.
The other issue that often goes unnoticed is the more than $500 million collected this year (FY 2026) over the board’s estimate adopted last February. One might think the increased price of oil because of the Iran war created the windfall, but in the February board meeting Gov. Stitt bragged “We’ve collected $459 million more than we estimated that we were going to collect this year, and that doesn’t include the 5 percent cushion that we always keep, so we’ll have an extra close-to-$900 million worth of deposits into our savings account. I’ve already got the largest savings account we’ve ever had, and this is just good news that means we can strategically invest in things.”
But according to John Gilbert, deputy director of Oklahoma Management and Enterprise Services, the revenue increase was driven by sales and income taxes. The oil prices weren’t reflected until May. The board met on February 13, 2026, and the Iran War began on February 28, so $459 million of the $500 million missed estimate had already been collected before the war started.
Going into the FY 2027 budget, the state had well above $2 billion in savings, according to the governor’s budget. At the governor’s request, the Legislature appropriated $200 million into a new “Taxpayer Endowment Trust Fund.” Gov. Stitt, who advocates for flat budgets, said, “This is a pivotal moment for Oklahoma and our path to zero income tax.”
It turns out that so-called savings, generated at least in part by revenue underestimation, are meant to set the stage for more tax cuts. In the meantime, in many of the most important functions upon which Oklahomans depend, like education and healthcare, the state remains a bottom-feeder nationally.
