Fiscal year income, sales tax gains show growing economy
Revenues meet needs as Doerflinger urges gross production tax review
OKLAHOMA CITY — Secretary of Finance and Revenue Preston L.
Doerflinger announced Wednesday that strong income and sales tax collection
growth during the recently-ended fiscal year indicates continued economic
expansion in Oklahoma despite steep declines in gross production tax
collections.
“The sustained growth in income and sales tax
collections is a key indicator that Oklahoma’s economy had another nice year
and remains on solid footing going forward,” said Doerflinger, who is also
director of the Office of Management and Enterprise Services (OMES). “It was a
good revenue year that would have been even stronger if not for losses stemming
from gross production tax changes passed in 2010.”
During Fiscal Year 2013, the General Revenue
Fund (GRF) saw a $248.4 million gain in income and sales tax collections over FY
12 that helped offset a $208.9 million or 48.5 percent drop in oil and natural
gas collections, according to a preliminary year-end GRF report for FY 13, the
12-month fiscal year between July 1, 2012 and June 30, 2013.
Total FY 13 GRF receipts were $5.6 billion, an
increase of $10.3 million or .2 percent over FY 12 that is $26.5 million or 0.5
percent below the estimate upon which the FY 13 budget was based. Income taxes
yielded $2.6 billion, an increase of $177.1 million or 7.4 percent over last
year, while sales taxes produced $1.9 billion, an increase of $71.3 million or
3.9 percent over last year.
“This report is preliminary and, like most
years, we will likely pick up additional revenue from late deposits after final
FY 13 reconciliations are completed later this summer. All FY 13 budgetary
needs have already been met thanks to healthy growth in the key revenue areas,”
Doerflinger said.
Monthly collections for June contributed
$527.5 million to the GRF, a decrease of $54.8 million or 9.4 percent from a
year ago and $61.5 million or 10.4 percent below the estimate for the month.
“June was sluggish, but the year was solid,”
Doerflinger said. “The year’s lone large concern is the increased likelihood
that higher than anticipated gross production revenue losses may prevent a
Rainy Day Fund deposit this summer. We will know for sure in the coming weeks,
but a deposit doesn’t look likely based on recently revised Tax Commission
estimates. The Rainy Day Fund is still flush with $532 million, although it’s
always nice to make a deposit when possible.”
The reduced gross production revenue is
linked in large part to how horizontal wells are taxed under a 2010 law and
payment of deferred rebates to the oil and gas industry.
As in many states, horizontal drilling has
become the predominant drilling method in Oklahoma. In 2010, legislation was
signed into law reducing the gross production tax rate on horizontal wells from
7 percent to 1 percent for 48 months after the start of production. The
2010 law removed a stipulation in the previous rebate law that ended the tax
break once the cost of the well was recovered.
Under the 2010 law’s tax arrangement, the
state GRF gets no money from new horizontal oil or gas wells over the 48 month
period. The 1 percent tax goes entirely to counties and school programs.
For FY 13, preliminary figures indicate that gross
production tax collections to the GRF have fallen nearly $209 million or 48.5
percent since last year, with natural gas accounting for $199 million or 79.8
percent of the decrease. The figures indicate a $9.9 million loss in oil taxes,
but that figure is skewed because $92.6 million in FY 12 oil money was diverted
to a supplemental appropriation approved by the Legislature. If that money
was included, the oil revenue loss for FY 13 would be about $102 million.
According to the Oklahoma Tax Commission, rebates,
refunds and tax credits tied to oil and natural gas drilling totaled $321
million in FY 13. Rebates and refunds totaled $173 million, with $102.6 million
linked to horizontal wells, of which $72.5 million was for gas and $30.1
million was for oil. In addition, state tax credits for horizontal wells
totaled $148 million for the year, with $79 million for oil and $69 million for
gas.
“The boom in the energy industry is improving
Oklahoma’s economy in so many ways, but the general revenue fund isn’t seeing
the benefits it would have before 2010,” Doerflinger said. “The 2010 law has
led to some real revenue loss. In our estimation, policymakers should consider
revisiting this law in consultation with the energy industry to determine
whether it is fair and equitable to the industry, the state and all its
taxpayers.”
The latest Baker-Hughes rotary rig count
showed 174 rigs engaged in exploration or development in Oklahoma, with 161
involved in horizontal drilling.
“Any fiscally responsible policymaker needs
to seriously consider at what level government should incentivize something
that is now standard practice. It’s not responsible for government to give
money away as an incentive if no incentive is needed,” Doerflinger said.
In addition to gross production challenges, GRF
collections will likely be affected by two other dynamics in FY 14. The first
is $60 million in income tax revenue diversion for state Capitol building
repairs pursuant to legislation signed into law this year; the second is the
potential economic effect of a federal sequestration order requiring an
estimated 20,000 Oklahoma military installation civilian workers to take 11
forced furlough days between this week and Sept. 30.
“Time will tell if the state’s economic
strength can continue helping the general revenue fund overcome these challenges,”
Doerflinger said.
The
GRF is state government’s main operating fund and is made up of about 70
revenue sources. It is where all state taxes and fees flow, except those
earmarked or dedicated to specific programs.
Major tax categories in June contributed the
following amounts to the General Revenue Fund:
-
Income
tax – The total collected
from individual and corporate income taxes in the month of June was $256.9
million, which was $14.3 million or 5.3 percent below prior year
collections and $23 million or 8.2 percent below the estimate.
Individual income tax receipts of $187.1 million were $5.4 million or 2.8
percent less than the prior year and $21.9 million or 10.5 percent below
the estimate.
Corporate tax collections in June contributed $69.9 million to the GRF,
which was $8.9 million or 11.2 percent below collections for the same
month of 2012 and $1.2 million or 1.6 percent below the estimate.
-
Sales
tax – The Tax Commission
apportioned $163.7 million in sales tax collections to the GRF from June
collections, which was $1.6 million or 1 percent less than the prior year
and $9 million or 5.2 percent below the estimate.
-
Gross
production tax – Gross production tax
collections from June contributed $33.2 million to the GRF after rebates
and credits. This amount is $0.2 million and 0.8 percent above collections
for the same month of 2012 and $13.7 million or 29.2 percent below the
estimate. Total gross production tax collections for the 2013 fiscal year
are $221.6 million, down $208.9 million or 48.5 percent from FY 12
collections and $155.4 million or 41.2 percent from the current year
estimate.
Gross
production gas taxes in June contributed $3.8 million to the GRF, which is $4.8
million and 56.1 percent below the monthly estimate. Total fiscal year
collections from this source fell $199 million and 79.8 percent below FY 12
collections and $138 million or 73.3 percent below the estimate for the current
fiscal year.
Gross
production oil taxes in June contributed $29.4 million to the GRF, which is
$3.5 million and 10.7 percent less than collections for June of 2012 and $8.9
million or 23.2 percent less than the June estimate. Total FY 13
contributions to the GRF from this source were $9.9 million and 5.4 percent
below prior year collections and $17.4 million or 9.2 percent below estimate.
The difference from FY 12 was, in reality, a drop of $102.5 million or 37.4
percent after consideration of the $92.6 million captured for the FY 12 supplemental
appropriation.
-
Motor
vehicle taxes – Motor vehicle taxes
produced $12.7 million from June collections, which was $8.9 million or
41.1 percent less than the prior year and $10.9 million or 46.3 percent
below the estimate.
-
Other revenue –
Other revenue produced $60.9 million for the GRF in June. This amount was $30.3
million or 33.2 percent less than the prior year and $4.9 million or 7.4
percent below the estimate.
*Monthly revenue tables will be available on the OMES website shortly. An updated release will be sent at that time including a link to the tables.
Media Contact
RON JENKINS
Public Information Officer
(405) 521-3267 | ron.jenkins@omes.ok.gov
About the Office of Management and Enterprise Services
The Office of Management and Enterprise Services provides financial, property, purchasing, human resources and information technology services to all state agencies, and assists the Governor’s Office on budgetary policy matters. Our mission: To lead, support, and serve. For more information, visit OMES.OK.gov.
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