Weak GRF receipts to cause revenue failure this fiscal year
$900.8 million budget hole likely for next year
OKLAHOMA CITY — With sustained low oil prices
further weakening General Revenue Fund (GRF) collections, the state will enact midyear
budget reductions for appropriated state agencies this year and likely face a $900.8
million appropriated budget hole next year.
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 appropriated state
budget. GRF collections are revenues that remain for the appropriated state
budget after rebates, refunds and mandatory apportionments. Gross collections,
reported by the State Treasurer, are all revenues collected by the state before
rebates, refunds and mandatory apportionments.
November GRF collections of $354.1
million were $50.1 million, or 12.4 percent, below the official estimate upon
which the FY 2016 appropriated state budget was based, and $28.4 million, or 7.4
percent, below prior year collections.
Total GRF collections for the
first five months of FY 2016 were $2.1 billion, which is $101.9 million, or 4.6
percent, below the official estimate and $97.3 million, or 4.4 percent, below
prior year collections.
REVENUE FAILURE
Oklahoma state government builds a five percent cushion into
every appropriated state budget to prevent mandatory budget reductions if
revenues fall below the official estimate. If revenues are projected to fall
more than five percent below the estimate for the remainder of the fiscal year,
a revenue failure is declared and mandatory appropriation reductions must occur
to maintain a balanced budget.
While the five percent threshold was
not reached through November, the Board of Equalization next Monday, Dec. 21,
will consider an updated FY 2016 revenue forecast that projects GRF collections
falling 7.7 percent, or $444.3 million, below the initial estimate the board
approved in June. If the board approves the updated forecast, a revenue failure
declaration will be necessary.
Agencies on Tuesday were informed
of the likely revenue failure by Secretary of Finance, Administration and
Information Technology Preston L. Doerflinger, who is statutorily assigned the revenue
failure declaration responsibility in his role as OMES director.
“A shortfall is all but certain
after 18 months with the oil price as it is, so agencies have been formally
advised to prepare for a midyear reduction if they have not already,”
Doerflinger said. “It’s going to be the biggest fiscal challenge since the
years following the 2008 recession, and we’ll need to meet it head on with all
hands on deck.”
Following a revenue failure
declaration, monthly general revenue allocations to agencies are reduced across
the board by a percentage sufficient to cover the dollar amount of the
shortfall projected for the remainder of the fiscal year. Most, but not all, appropriated
state agencies receive monthly general revenue allocations.
The reductions each agency will
receive will be determined following the Board of Equalization meeting. The
state last declared revenue failure in 2009 during the most recent national
recession.
FY 2017 BUDGET HOLE
The board on Monday will also make
the first projection of revenues available for the next appropriated state
budget.
Preliminary information shows the
board will consider a revenue projection that would result in $900.8 million,
or 12.9 percent, less revenue for the FY 2017 appropriated state budget than
was appropriated for FY 2016.
The appropriated state budget
comprises about one third of all state spending.
With the Organization of the Petroleum
Exporting Countries refusing to adjust production levels to account for the
global oil supply glut, West Texas Intermediate crude has dropped below $37 a
barrel in recent days – the lowest prices seen since the last U.S. recession in
2008. The oil price has fallen 70 percent since June 2014.
As a result, Oklahoma during that
time has lost 11,600 energy jobs and 59 percent of its active oil and gas rigs,
which has caused significant tax revenue declines. Other major energy-producing
states, such as Alaska, Wyoming, Louisiana, North Dakota and West Virginia, are
experiencing similar tax revenue declines.
“Tax revenues in energy states are
collateral damage in the market warfare OPEC is waging on U.S. energy
producers,” Doerflinger said. “As tempting as it may be to send OPEC and Saudi
princes a $900 million bill, we can’t do that and have to manage this hole realistically
and responsibly with the tools at our disposal.”
The Board of Equalization will
make a second revenue estimate in February that will be used by Gov. Mary
Fallin and the Legislature to develop the FY 2017 appropriated state budget.
“The universal truth of Oklahoma
state finance – as oil goes, so goes state revenue – is playing out once again,”
said Doerflinger, who is Fallin’s lead budget negotiator with the Legislature.
“To panic is not productive, and neither is forgetting history. Oklahoma is
resilient and will emerge from this boom-bust cycle as we have many times
before.”
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Major tax categories in November
contributed the following amounts to the GRF:
-
Total income tax
collections of $110.4 million were $16.9 million, or 13.3 percent, below the
estimate and $10.5 million, or 8.7 percent, below the prior year.
Individual
income tax collections of $110.4 million were $16.6 million, or 13.1 percent, below
the estimate and $10.5 million, or 8.7 percent, below the prior year.
Corporate
income tax collections were entirely consumed by refunds and contributed
nothing to the GRF.
- Sales tax
collections of $160.5 million were $19.9 million, or 11.1 percent, below the
estimate and $13.6 million, or 7.8 percent, below the prior year.
-
Gross production
tax collections of $8.9 million were $16.9 million, or 65.6 percent, below the
estimate and $14.7 million, or 62.4 percent, below the prior year.
Natural
gas collections of $8.6 million were $10.5 million, or 54.9 percent, below the
estimate and $615,900, or 7.7 percent, above the prior year.
Oil
collections of $287,306 were $6.4 million, or 95.7 percent, below the estimate
and $15.3 million, or 98.2 percent, below the prior year.
- Motor vehicle
tax collections of $14.4 million were $83,473, or 0.6 percent, below the
estimate and $10.7 million, or 290.5 percent, above the prior year.
- Other revenue
collections of $59.9 million were $3.7 million, or 6.6 percent, above the
estimate and $307,859, or 0.5 percent, below the prior year.
Monthly revenue tables are
available on the OMES website: https://www.ok.gov/OSF/News/November_2015_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: Supporting our partners through unified business services. For more information, visit OMES.OK.gov.
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