First revenue estimate certified
Initial projections would require state spending reduction
OKLAHOMA CITY — The Board of Equalization on Thursday determined $6,958,045,775 in
revenue is available for the governor to use in the FY 2015 executive budget proposal.
Due to a variety of mostly noneconomic factors reducing state
revenues, that amount is $88.8 million, or 1.3 percent, less than what the
board last December determined as available for the governor’s FY 14 executive
budget, and $170.8 million, or 2.4 percent, less than the $7.1 billion legislatively-approved
FY 14 state budget.
“Barring a big revenue increase, it looks like the next state
budget will be slightly smaller than this year’s or flat. Agencies should be
realistic and prepare now for the potential of reduced or flat budgets,” said
Secretary of Finance, Administration and Information Technology Preston L. Doerflinger.
Under state law, Gov. Mary Fallin, the seven-member board’s
chairwoman, must use the figure certified Thursday for the executive budget she
will present to the Legislature on Feb. 3.
The board will meet again in late February to make a second
estimate that will be used in negotiations between the governor and legislators
to determine appropriations levels for state agencies for FY 15, which begins
July 1, 2014.
“As always, February’s certified figure is usually larger and carries
far more weight than this December exercise. In any event, it’s time to accept that
next year will be tight and continue exercising fiscal discipline,” Doerflinger
The board on Thursday voted to adjust certified revenues to
reflect Tuesday’s ruling by the Supreme Court overturning House Bill 2032. The
court ruling resulted in a $102.7 million revenue increase that had to be added
in to the revenue estimate due to the board’s constitutional requirement to
certify funds based on current law.
“The vote wasn’t a policy decision, but a necessary step at this
time to comply with the constitutional requirement that the board certify
revenues based on current law. The board has the authority to adjust the
estimates and it exercised that authority Thursday to comply with the
Constitution,” Doerflinger said.
About 80 percent of the projected revenues
the board considered Thursday are projected collections to the General Revenue
Fund (GRF), state government’s main operating fund. The GRF is the key
indicator of state government’s fiscal status and the predominant funding
source for the annual state budget. It is where all taxes and fees flow
that are not dedicated to specific programs.
Collections to the GRF represent funds
available for discretionary spending, meaning policymakers have total control
over how the funds are spent.
While gross revenue collections have
continually increased in recent years, collections to the GRF as a percentage
of gross collections have been on a steady decline as various revenue policies
have slowly redirected collections away from the GRF
to specific purposes such as education, transportation, employee pensions and
energy industry tax provisions. Other portions of gross revenue collections are
rebated or refunded to tax filers pursuant to tax law or apportioned to counties, municipal governments and other recipients.
In FY 2007, 55.2 percent of gross
revenue collections went to the GRF. In FY 2013, 48.4 percent of gross revenue
collections went to the GRF, while 44.6 percent of FY 2014 year-to-date gross
revenue collections have gone to the GRF.
“Policymakers now control less than half the revenue collected by
government because the general revenue fund is losing ground each year. Even
though most of the redirected funds are going to necessary, noble purposes, the
trend should still cause pause,” Doerflinger said. “It’s important,
particularly when revenues are tight like they are now, to ensure that general
revenue diversions don’t choke the ability of policymakers to engage in
discretionary spending to meet the needs of the day.”
While most of the reasons
revenues are decreasing are noneconomic, multiple economists have reported a softening
in the Oklahoma economy in recent months.
“In addition to these noneconomic revenue issues, there has
certainly been a small hit to our economy from all the uncertainty Washington
D.C. created over the past year with its prolonged fiscal fights. It obviously
spooked consumers and businesses into spending less, and tax revenues decreased
some as a result,” Doerflinger said. “Oklahoma’s economy is still a national
leader and adding great jobs, but we’re also under the constant threat of
job-killing federal policies that place needless burdens on states like ours
that have worked tirelessly to restore prosperity after the recession.”
Doerflinger added: “If we didn’t have the pro-growth policy
climate we do, we would be in a far more precarious position today. Our best
defense continues to be a good offense, so we need to stay the course and
continue pursuing policies that are helping our citizens prosper.”
Doerflinger is director of the
Office of Management and Enterprise Services (OMES), which works with the
governor's office to build the annual executive budget. OMES, in conjunction
with the Oklahoma Tax Commission, prepares the revenue estimates that are
presented to the Board of Equalization.
The Board of Equalization revenue packet is available on the OMES website: http://www.ok.gov/OSF/documents/boe12192013.pdf
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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.