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GRF receipts miss estimate by 9.1% in March

-- MEDIA RELEASE --

For Immediate Release

PRESTON L. DOERFLINGER
Director and Secretary
of Finance, Administration and Information Technology

MARY FALLIN
Governor

State of Oklahoma
Office of Management and Enterprise Services

April 15, 2014

GRF receipts miss estimate by 9.1% in March

YTD collections now 5.2% behind estimate

OKLAHOMA CITY — General Revenue Fund (GRF) collections tumbled 9.1 percent below the official estimate in March after another month of unusually low corporate income tax revenue, this time following a major increase in tax credit claims.

As 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. Made up of nearly 70 revenue sources, the GRF is where all taxes flow except those dedicated to specific programs.

March collections to the GRF totaled $412.8 million, which is $1.1 million, or 0.3 percent, less than collections for March 2013 and $41.4 million, or 9.1 percent, below the official revenue estimate upon which the Fiscal Year 2014 appropriated state budget is based.

March’s weak GRF collections rekindled the possibility of mandatory appropriation reductions for all state agencies in FY 14, the current state budget year that began July 1, 2013 and ends June 30, 2014.

“Oklahoma’s economy still shows growth and momentum that has total tax collections continuing to hit historic all-time highs. The catch is a variety of totally noneconomic government policy factors are preventing those collections from being used for state budget purposes,” said Secretary of Finance, Administration and Information Technology Preston L. Doerflinger. “These revenue issues are the creation of government, not the economy. Off-the-top apportionments, corporate income tax declines, tax credits and other tax and budgeting choices that in some cases date back decades are the reason this situation exists.”

For the first three quarters of FY 14, GRF collections totaled $3.9 billion, which is $7.2 million, or 0.2 percent, above prior year collections and $215.4 million, or 5.2 percent, below the official estimate.

The official estimate certified annually by the Board of Equalization is important because it is used by the Legislature to determine spending authority and sets the framework for the state’s constitutionally-required balanced budget. If revenues fall too far below the official estimate, the state cannot operate within its balanced budget requirements, which leads to mandatory appropriation reductions.

“I said in January that a string of abnormally weak months could cause issues, and we’ve had two tough months in a row now,” Doerflinger said. “Unless April GRF collections exceed the estimate, minor appropriation reductions to agencies may be necessary for the remainder of the year. Cash flows remain sufficient at this point, but we’ll need a strong finish to the year because we’re about out of options after two weak months and a weak start to the year.”

State law requires mandatory appropriation reductions for all agencies if revenues are not sufficient to fully provide monthly allocations to all agencies for the entire fiscal year. Such a scenario is called a “revenue failure.” Under state law, a five percent cushion is built in to the appropriated state budget to prevent revenue failures from occurring if revenues dip slightly below the official estimate. Sustained periods in which collections dip more than five percent below the official estimate put the state at risk of revenue failure.

FY 14 GRF collections ran more than five percent below the estimate throughout the first half of the fiscal year before the holiday season boosted collections back within the five percent cushion.

At the end of February, YTD collections to the GRF were 4.8 below the official estimate after February collections missed the estimate by 8.1 percent. In March, the Tax Commission reported a major increase in claimed tax credits, which caused further significant decreases in corporate income collections to the GRF that left YTD GRF collections 5.2 percent below the official estimate by month’s end.

“I know I sound like a broken record, but it bears repeating that agencies need to keep their belts tight and watch every penny,” Doerflinger said.

Among the factors driving the GRF’s FY 14 decline are:                      

  • ongoing increases in off-the-top apportionments away from the GRF to other sources;
  • major decreases in corporate income tax collections;
  • recent increases in tax credits claimed by businesses; and
  • gross production tax revenue losses related to horizontal drilling incentive provisions and deferred rebates.

“Policymakers should continue serious assessments of our fiscal trajectory or the GRF may continue shrinking like this for the foreseeable future,” Doerflinger said.

Doerflinger is director of the Office of Management and Enterprise Services, which issues the monthly GRF reports.

Major tax categories in March contributed the following amounts to the GRF:

  • Total income tax collections of $146.6 million were $18.7 million, or 11.3 percent, less than prior year collections and $28.4 million, or 16.2 percent, below the estimate.

    Individual income tax collections of $86.4 million were $9.2 million, or 11.9 percent, more than prior year collections and $1.7 million, or 2 percent, below the estimate.

    Corporate income tax collections of $60.2 million were $27.9 million, or 31.7 percent, below prior year collections and $26.6 million, or 30.7 percent, below the estimate.

  • Sales tax collections of $153.6 million were $7.6 million, or 5.2 percent, more than prior year collections and $6.1 million, or 3.8 percent, below the estimate.
  • Gross production tax collections of $39.2 million were $1.1 million, or 2.8 percent, more than prior year collections and $1.3 million, or 3.5 percent, above the estimate.

    Natural gas collections of $6.6 million were $1.8 million, or 21.2 percent, less than prior year collections and $8.2 million, or 55.3 percent, below the estimate.

    Oil collections of $32.5 million were $2.9 million, or 9.7 percent, more than prior year collections and $9.6 million, or 41.7 percent, above the estimate.
  • Motor vehicle tax collections of $14.7 million were $2 million, or 16.1 percent, more than prior year collections and $1.3 million, or 7.9 percent, below the estimate.
  • Other revenue collections of $58.8 million were $6.9 million, or 13.3 percent, more than prior year collections and $7 million, or 10.6 percent, below the estimate.

Monthly revenue tables are available on the OMES website: http://www.ok.gov/OSF/News/March_2014_Financial_Report_Data_Tables.html


Media Contact

JOHN ESTUS
Director of Public Affairs
(405) 521-3097 | john.estus@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.