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OKLAHOMA BUDGET OVERVIEW

Trends and Outlook

FULLY UPDATED June 17, 2010

David Blatt
Oklahoma Policy Institute
dblatt@okpolicy.org - (918) 794-3944
Oklahomas Path to Prosperity

OUR STARTING POINT


Government is among our means of
achieving our common goals as a
state --- alongside private businesses,
non-profit organizations, faith groups
and families.
Oklahomas Path to Prosperity

OUR STARTING POINT


Without a strong and effective public sector, our
families, communities and businesses cannot thrive
We depend on our state and local governments to
help:
Educate our children and train our workforce;
Protect our streets and investigate crimes;
Maintain and upgrade our roads and bridges;
Pay for much of the medical care provided by private doctors,
nurses, therapists, home health aides, etc.
Inspect our water supply;
Support our farmers, investors, and manufacturers;
Take care of those at risk of harm and abuse.
Oklahomas Path to Prosperity
We Already Lag Behind
Oklahoma already underfunds most of our public
structures and falls short of many of our common goals as
a state. For example:
Our teacher pay is among the lowest in the nation;
We have among the highest rates of heart disease, obesity,
smoking, and uninsured;
Our community-based social service providers have gone years
without rate increases;
Our correctional facilities are overcrowded and understaffed.
The ongoing state budget crisis risks a serious and
long-term corrosion of our public structures that will
weaken our prosperity, security and well-being.
Budget Trends: FY 02 FY 09

FY 02 FY 08: Bust and Boom


State budget suffered steep downturn, deep cuts, 02 - 04
Strong economy led to robust revenue growth and increased state
appropriations between FY 06 and FY 08
Annual Appropriations Totals,FY 00FY 08
(Includes Supplementals thru FY 08 and Rainy Day spillover Funds for
Recurring Agency Expenditures) - in $millions

$7,500
$7,043
$7,000 $6,760

$6,500 $6,217

$6,000
$5,389 $5,491 $5,459
$5,500 $5,191 $5,145
$4,981
$5,000
$4,500
$4,000
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08
Budget Trends: FY 02 FY 09

Where did the growth revenue go?


Covering rising costs of basic services and supporting
targeted investments for shared goals;
80 percent of new dollars went to six core agencies.

Increased State Appropriations, Selected Agencies,


FY 06 FY 08
Dept. of Education: $453M Human Services: $129M

Health Care Authority: $289M Corrections: $80M

Higher Education: $271M Transportation: $72.5M*


Budget Trends: FY 02 FY 09

Tax Cuts had a long-term impact


Most of the cuts were to the personal income tax
Tax cuts were stretched out over several years; full impact
will not be felt until FY 11

Lost Revenues from Select Tax Cuts Enacted 2004 - 2006


FY'05 through FY'10 (in $ millions)

$776.9
$800.0 $651.1
$561.8
$600.0
$400.0 $333.3

$200.0 $144.8
$18.7
$0.0
FY'05 FY'06 FY'07 FY'08 FY'09 FY'10
sour c e : Ok l a homa Ta x C ommi ssi on
Budget Trends: FY 02 - FY 09
FY07 FY08: Revenue Slowdown
As tax cuts kicked in and tax breaks multiplied, General
Revenue collections were almost flat in FY 08 compared
to FY 07 (+%0.9, $54 million)
Annual % Change in General Revenue Collections, FY '03 - FY '08
20.0%
14.8%
15.0%
10.6%
10.0% 7.6%

5.0% 4.0%
0.9%
0.0%

-5.0%
-5.3%
-6.6%
-10.0%
FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08
Budget Trends: FY 02 - FY 09
FY 09 Budget: Tightening the Screws
Most agencies appropriations frozen for FY 09
No funding for benefit cost increases teacher salary increases, state
employee raises

FY 09 excludes supplementals and mid-year budget cut


Budget Trends: FY 10 FY 11
Budget Trends: FY 10 FY 11
Things Are Tough All Over
All but two states are experiencing the state fiscal crisis
Combined state budget gaps for FY 09 FY 12 estimated to
reach $600 billion

Source: Center on Budget and Policy Priorities


Budget Trends: FY 10 FY 11
The Recession Hit Oklahoma Late 2008
Monthly Oil and Gas Prices, 1986 - 2010
$12.00 $160.00
$140.00
$10.00
$120.00
$8.00
$100.00
$6.00 $80.00
$60.00
$4.00
$40.00
$2.00
$20.00
$- $-
Jan-1986
Jan-1987
Jan-1988
Jan-1989
Jan-1990
Jan-1991
Jan-1992
Jan-1993
Jan-1994
Jan-1995
Jan-1996
Jan-1997
Jan-1998
Jan-1999
Jan-2000
Jan-2001
Jan-2002
Jan-2003
Jan-2004
Jan-2005
Jan-2006
Jan-2007
Jan-2008
Jan-2009
Jan-2010
U.S. Natural Gas Wellhead Price (Dollars per Thousand Cubic Feet)

Cushing, OK WTI Spot Price FOB (Dollars per Barrel)


Budget Trends: FY 10 FY 11

The Recession Hit Oklahoma Late 2008


Oklahoma Monthly Unemployment Rate
(Seasonally-Adjusted), 1980-2010
10.0
9.0 Apr 2010:
8.0 6.6%
% Unemployed

7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
May-82
Jul-83

May-89
Jul-90

Mar-95
May-96
Jul-97
Sep-98

May-03
Jul-04
Mar-81

Sep-84

Mar-88

Sep-91

Mar-02

Sep-05

Mar-09
Nov-85

Nov-92

Nov-99

Nov-06
Jan-80

Jan-87

Jan-94

Jan-01

Jan-08
See OK Policy, Numbers You Need, at:
http://okpolicy.org/numbers-you-need-key-oklahoma-
economic-and-budget-trends
Budget Trends: FY 10 FY 11

The Recession Hit Oklahoma Late 2008


Quarterly Change in Personal Income,
% Change from Prior
Oklahoma and National,
Quarter
4th Quarter 2007 to 4th Quarter 2009
5.0%

3.0%

1.0%

-1.0%

-3.0%

-5.0%
2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4

U.S. Oklahoma
Budget Trends: FY 10 FY 11
Its A Revenue Problem
Jan 2009 Feb 2010: Revenues fell by a monthly
average of 23.1 percent compared to the same month for
the prior year
Finally seeing clear signs that the downturn has hit
bottom and revenues are starting to climb back

Change in Monthly General Revenue Collections, Compared to Same Month Prior Year,
July '08 - May '10
20.0%
11.1% 10.8% 12.8%
10.4%
10.0% 7.1% 6.0%
1.3% 1.6%
0.0%
-0.2%
-10.0% -7.3%
-8.5%
-20.0% -19.1% -16.7%
-21.5% -21.1% -23.7%
-30.0% -27.7% -26.3%
-29.1%
-30.1% -30.1%
-30.5%
-31.6%
-40.0%
July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept. Oct Nov Dec Jan Feb Mar Apr May
Budget Trends: FY 10 FY 11
Its a Revenue Problem
For most of FY 10, monthly revenue collections have been 15
to 25 percent their 5-year historical average for the same month
Collections are recovering but remain below their pre-
downturn levels

Monthly Total General Revenue Collections as % of Prior Five-Year Same-Month


Average, July 2008 - May 2010
130%
120%
110%
100%
92.0%
90%
80%
70%
60%

Feb '10
Dec '08

Dec '09
Sep '08

Feb '09

Sep '09

May-10
Oct '08

Oct '09
Jan '09

Mar '09

Jan '10
Jun '09

Mar '10
Jul '08

Aug '08

Apr '09

May '09

Aug '09

Apr '10
Nov '08

Nov '09
Jul '09
Budget Trends: FY 10 FY 11
Its a Revenue Problem
Four consecutive quarters of worsening collections
Revenue drops more than twice as steep as during the
last downturn

Quarterly Year-over-Year Change in GR Collections,


Oklahoma, FY '02 - FY'10 (Q3)
40.0%

20.0% 9.9%

0.0% -8.3%

-20.0% -12.1%

-29.5%
-40.0%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY
'02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10
Budget Trends: FY 10 FY 11
Its a Revenue Problem
FY 10 General Revenue projected to be 25 percent below pre-
downturn (FY 08) levels;
FY 10 GR collections less than FY 01 without adjusting for
inflation or population growth
General Revenue Collections,
FY '01 - FY '10 (in $millions)
$5,935 $5,953
$6,000
$5,701
$5,518
$5,500

$4,966
$5,000
$4,717
$4,616
$4,475
$4,500 $4,408
$4,174

$4,000
FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10
(proj.)
Budget Trends: FY 10 FY 11
Its a Revenue Problem
Between FY 08 and FY 10, GR Collections expected to fall by:
Gross production tax : -53 percent
Corporate income tax : -45 percent
Personal income tax : -26 percent
Sales tax : -8 percent
Oklahoma General Revenue Collections by Major Tax,
$2,500 FY '06 - FY '11 (in $ millions)
$2,000

$1,500

$1,000

$500

$-
FY'06 FY'07 FY'08 FY'09 FY'10(Proj.) FY'11(Est.)
Personal Income Tax Corporate Income Tax Gross Production
Sales Tax Motor Vehicle
Budget Trends: FY 10 FY 11
This is As Bad as Its Ever Been
Annual General Revenue Collections, in $ millions,
FY '82 - FY '11 (FY '10 & FY'11 based on Feb. 2010 certification)
7,000

6,000

5,000

4,000

3,000

2,000

1,000

-
1990

2007
1982
1983
1984
1985
1986
1987
1988
1989

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

2008
2009
2010
2011
Budget Trends: FY 10 FY 11
FY 10 Budget: Revenues on the Skids
In February, FY 10 revenues estimated to come in >$600
million below FY 09 ;

6,500
General Revenue Collections,
FY '06 Actual - FY '10 Estimated (in $million)

5,981.1 5,946.4
6,000 5,902.7

5,710.0
5,649.2

5,500 5,407.2
5,356.6

5,000
FY '06 Actual Fy '07 Actual FY '08 Actual FY '09 June FY '09 FY '09 FY '10
December February Feburary
Budget Trends: FY 10 FY 11
FY 10 Initial Budget
$7,231.2 million total, including $641 million ARRA (stimulus)
Increase in total appropriations of $106 million (1.5 percent)
compared to FY 09
State dollars only: $500 million less than in FY 09

State Appropriations History, FY '00 - FY '10 in $millions)


(includes supplementals, excludes one-times from Rainy Day Spillover funds)
7,500
$7,043 $7,125 $7,231
7,000 $6,760
$30
6,500 $6,217
ARRA
$641
6,000 ARRA
$7,095
$5,389 $5,491 $5,459 State
5,500 $5,191 $6,590
$5,145
$4,981 State
5,000

4,500

4,000
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 FY'10
State Appropriations ARRA

NOTE: FY 09 totals do not include June budget cuts


Budget Trends: FY 10 FY 11
FY 10 Initial Budget
Stimulus funds made it possible to minimize cuts or
provide small increases to ten largest state agencies and
some smaller ones
Funding for 10 largest agencies up $161 million, 2.6
percent
Most smaller agencies took cuts of 5 to 7 percent
No funding to address rising employee benefit costs or
inflation (e.g. utilities, transportation, food)
Demands for some state services increase due to the
downturn

See: OK Policy FY 10 Budget Review at:


http://okpolicy.org/fy-10-budget-information
Budget Trends: FY 10 FY 11
FY 10 : Off to a Very Rough Start
Collections through January were $864 million 24.9 percent -
below the estimate.
After seven months of significant shortfalls, collections starting
in February have come close to or exceeded the estimate.

General Revenue Collections compared to


Estimate, by Tax, FY '10 thru Jan (in $millions) General Revenue Collections compared to
Estimate, by Tax, FY '10 thru May (in $millions)
$0
-$11 $0
-$72 -$26 -$2
-$200
-$180 -$200 -$98
-$200
-$400 -$236
-$400
-$401
-$420
-$600 -$600

-$800 -$800
-$781
-$864
-$1,000 -$1,000
Net Income Gross Sales Tax Motor Other Total Gen. Net Income Gross Sales Tax Motor Other Total Gen.
Tax Production Vehicle Sources Revenue Tax Production Vehicle Sources Revenue
Budget Trends: FY 10 FY 11
FY 10 : How Large a Shortfall?
February certification projected a $669 million (13.0
percent) shortfall in FY 10 GR collections.
$109 million projected shortfall in HB 1017 Fund as well
Total mid-year shortfall of $778 million

FY '10 General Revenues - Original vs.


Revised Projections
$5,500 $5,415
$5,145
$669
$5,000 million

$4,476
$4,500

$4,000
100% Estimate - June Appropriation (95%) February Projection
Budget Trends: FY 10 FY 11
FY 10 : What Response?
OSF cut agencies GR allocations by 5 percent beginning in
August and by 10 percent beginning in December
Cuts were across-the-board based on GR allocations
Since some agencies are partly or fully appropriated from
other funds (i.e. 1017 Fund, State Transportation Fund,
ARRA), agencies are not all affected equally
Cuts limited to less than shortfall through by borrowing from
cash reserves of various funds that must be repaid
$320.9 million borrowed in first 7 months of the year
Fully repaid by May
Budget Trends: FY 10 FY 11
FY 10 : What Response?
Rainy Day Fund was filled to maximum amount of $597
million
Left untouched for initial FY 10 budget
Rainy Day Fund Balances, FY '01 - FY '09
(opening balance in $ millions)
$700
$596.6
$600 $571.6
$496.7
$500 $461.3
$400 $340.9
$300
$217.5
$200 $157.5
$100 $72.3
$0.1
$0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Budget Trends: FY 10 FY 11
FY 10 : What Response?
Rainy Day Fund can be accessed as follows:
3/8th for a mid-year shortfall in GR collections; ($224M)
3/8th for a projected decline in GR collections for the coming
year compared to the current year ($224M);
1/4th upon declaration of an emergency and legislative approval
($149M)
Uses of Constitutional
Reserve Fund

Emergency,
25.0% - $149M Current Year
Revenue
Failure, 37.5% -
$224M

Forthcoming
Year Shortfall,
37.5% - $224M
Budget Trends: FY 10 FY 11
FY 10 Mid-Year Budget Agreement
Agreements announced by Governor, Speaker and
President Pro Tem in January and February
Continued 10 percent monthly cuts to GR for rest of year
Averages out to 7.5 percent of GR for full year
Supplemental funding to various agencies to offset part of GR
and HB 1017 shortfalls (Common Ed, Higher Ed, OHCA,
Corrections, others)
After supplementals, mid-year cuts equaled $272 million (3.8
percent)
Additional revenues needed to balance:
$223.7 million of Rainy Day Fund (3/8th), $151 million more
stimulus money, plus additional gross production tax
revenues and other sources
Budget Trends: FY 10 FY 11
FY 10 Mid-Year Budget Agreement
Total revised budget was $272 million (3.8%) less than
initial; $165 million (2.4%) less than FY 09;
Almost $1.5billion (21%) of revised FY 10 budget made
up of non-recurring money
State Appropriations, FY '09 - FY '10,
Total and by Funding Source (in $millions)
$7,500 Total= $7,124 million Total= $7,231 million
Total= $6,959 million
$7,000 $30
$301 $641 $224
$6,500
$371 $838
$6,000
$435
$5,500
$6,793
$5,000 $6,220
$5,462
$4,500

$4,000
FY '09 FY '10 - Initial FY '10 - Revised
State Recurring Cash Stimulus (ARRA) Rainy Day Fund
Budget Trends: FY 10 FY 11
FY 10 Mid-Year Budget Agreement
Agencies funded in whole or in part with non-GR funds
and those receiving supplementals absorbed less than full 7.5
percent cut

FY '10 Budget Cuts: 12 Largest Agencies, Total Budget


FY '09 (Final) - FY '10 (Initial) -
Agency FY '10 (Final) FY '10 (Final)
Mental Health -10.0% -7.2%
District Courts -9.6% -2.8%
Health Department -8.2% -7.4%
Public Safety -8.1% -4.3%
Career Tech -7.6% -7.3%
Juvenile Affairs -7.2% -7.3%
Transportation -7.0% -7.5%
Human Services -6.6% -5.7%
Corrections -5.3% -5.3%
Common Education -3.4% -4.9%
ALL AGENCIES -2.8% -4.2%
Higher Education -0.2% -3.1%
Health Care Authority 12.4% 0.1%
Budget Trends: FY 10 FY 11
FY 10: Impact of Cuts
Even with all the additional revenue to reduce the size of
cuts , the toll on services and programs has been significant:

Department of Mental Health and Substance Abuse Services reduced


beds and closed centers for childrens mental health and adult
substance abuse, cut contracts to all providers;
OJA cancelled youth detention and gang prevention programs, cut
providers 5 percent, authorized 22 furlough days;
OHCA cut some Medicaid benefits and reduced all provider rates by
3.5 percent;
Health Department eliminated 17 child guidance centers serving pre-
school children with developmental delays
Department of Corrections cut contracts, eliminated programs,
reduced staffing to under 75 percent of authorized levels;
School districts eliminating programs, some going to 4-day weeks;
DA offices prosecuting fewer criminals;
Most agencies leaving positions unfilled, offering buy-outs; many
imposing furloughs.
Budget Trends: FY 10 FY 11
FY 11 Budget: The Challenge Escalates
FY 11 revenue collections projected to grow only
slightly from FY 10 and to remain almost 25 percent
below pre-downturn (FY 08) levels

General Revenue Collections,


FY '06 Actual - FY '11 Estimated (in $ millions)
$5,928 $5,981
$6,000
$5,714
$5,519
$5,500 $5,415

$5,000

$4,579
$ 4,475
$4,500

$4,000
FY '06 Actual FY '07 Actual FY '08 Actual FY '09 Actual FY '10 (June FY '10 (Feb FY '11 (Feb
estimated) projected) estimated)
Budget Trends: FY 10 FY 11
FY 11 Budget: The Challenge Escalates
Final FY 11 certification provided $1.8 billion less
revenue for next year than FY 10 initial budget , $1.5
billion less than final FY 10 budget
State Appropriations, FY'08-FY '11
(includes all revenues and supplementals;
$8,000 in $ millions)
$7,124 $7,231
$7,043 $6,959
$7,000 $6,797
$6,452

$6,000
$5,294 $5,415

$5,000

$4,000
FY'08 FY'09 FY'10 - FY '10 - FY '10 - FY '11 - FY '11 - FY '11 -
initial projected Revised Certified Certified Gov
budget revenues State $ State $ Budget
(Feb) (Dec) (Feb)
Budget Trends: FY 10 FY 11
FY 11 Budget: The Challenge Escalates
To budget the balance, Gov. Henry proposed:
Annualizing and increasing FY10 cuts by an additional 0.5
percent to 3 percent for all agencies.
Using remaining stimulus funds and a portion of remaining
Rainy Day Funds.
Savings from consolidating agencies and IT services.
New bond issues.
Enhanced tax collection proposals, particularly increased sales
tax collections on Internet sales and automated enforcement of
vehicle insurance;
Eliminating and suspending various tax credits;
Increases in fees and permits.
Budget Trends: FY 10 FY 11
FY 11 Budget: The Challenge Escalates
2010 Session focused on which, if any, revenue measures would
be adopted to bridge the budget gap.
Assuming maintenance of FY 10 budget cuts, the use of all
remaining stimulus funds and 3/8ths of Rainy Day Fund, FY 11
budget gap exceeded $800 million.
Equivalent to an additional 12 percent cuts to all agencies of
state government beyond the cuts already enacted.
Agency scenarios of how to absorb cuts of an additional 7.5
percent to 15 percent in FY 11 left no doubt of the grave threats
that would be posed to the state economy and to the health and
security of Oklahomans.
Many cuts would be multiplied by loss of federal matching
funds.
See OK Policy, Bridging the Budget Gap, :
http://okpolicy.org/files/bridgingthegap_1pg.pdf
Budget Trends: FY 10 FY 11
FY 11 Budget Agreement
Total appropriations for FY 11 = $6.714 billion.
7.2 percent decrease (-$517.5 million) from the initial FY 10
budget and 3.5 percent decrease (-$245.4 million) from the
final FY 10 budget after mid-year cuts
FIG. 1: State Appropriations History, FY '00 - FY 11
$7,500 (in $millions; FY '00-FY'10 includes supplementals, excludes one-times from
Rainy Day Spillover Funds )
$30
$7,000
$641 $224

$6,500 $373
$838

$6,000 $539

$7,095
$5,500 $79 $7,043
$219 $6,760
$6,590
$269 $72 $6,217
$5,000 $75 $5,897
$5,412 $5,802
$5,389
$5,240
$4,500 $4,906 $4,922
$5,073

$4,000
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 FY'10 - FY '10 FY '11
State Revenues Federal Relief Rainy Day Fund Initial - Final
Budget Trends: FY 10 FY 11
FY 11 Budget Agreement
Appropriated over $1.35 billion in additional revenues on
top of those certified in February. These included:
$539 million from the 2009 stimulus bill
Remaining $373 from the Rainy Day Fund
$450 million from assorted revenue enhancements
Suspending and deferring payment of tax credits
Issuing and refinancing bonds
Fee and permit increases
Transfers of cash balances
About $225 million of the total $1.35 billion in additional
revenue is recurring; the rest is one-time
Budget Trends: FY 10 FY 11
FY 11 Budget Agreement
Agency Appropriations 10 Largest, Others, Total
Total Corrections, $462.1
Appropriations: , 7%
$6,713.7 million DHS, $543.1 , 8% Transportation,
Includes stimulus, $114.8 , 2%
OHCA (Medicaid),
Rainy Day Fund
$993.0 , 15% Mental Health,
$187.7 , 3%

Career Tech, $142.0


Total Ten Higher Ed., , 2%
Largest: $1,003.5 , 15% Juv. Affairs, $99.2 ,
$6,009.4, 1%
89.5% All Other Agencies, Public Safety, $88.4
$704.3 , 11% , 1%

Common Ed.,
Notes: $2,375.6 , 35%
Transportation also received
$65 from bond issue;
OHCA includes $30m transfer
from Insure Oklahoma Fund;
excludes Health Carrier Access
Budget Trends: FY 10 FY 11
FY 11 Budget Agreement
Funding cuts limited to under 10 percent for most of the largest
state agencies;
However, over half of all appropriated agencies will absorb cuts
of at least 15 percent for FY 11 compared to FY 09.
In some cases, appropriations cuts have been partly offset by
fee increases. In addition, the Legislature has approved measures
to promote savings and efficiencies and give agencies and school
districts greater flexibility
For most agencies and school districts, no additional funding to
cover increased employee health care costs, general inflation or
rising caseloads.
Cuts, furloughs, hiring freezes, layoffs will continue in FY 11

See OK Policys FY 11 Budget Highlights at:


http://okpolicy.org/fy-10-fy-11budget-
information
Budget Outlook: Looking Ahead
Budget Outlook: No Quick Recovery
Revenues unlikely to recover to pre-downturn nominal
levels prior to FY 13

Historical and Projected Revenue, FY'07-FY'13


General Revenue Fund
$6,500
Revenue in $millions

$5,928 $5,981
$6,000
$5,945
$5,500 $5,544
Estimates by OK $5,275
$5,000 Policy - not based on
Feb 2010
$4,500 certification $4,735
$4,439
$4,000
FY 07 (act.)FY 08 (act.)FY 09 (act.)FY 10 (est.)FY 11 (est.)FY 12 (est.)FY 13 (est.)

Fiscal Year
Budget Outlook: Looking Ahead
Budget Outlook: No Quick Recovery
Substantial reliance in FY10 11 on non-recurring
revenue creates significant problems for FY 12 and FY 13
Time-released tax cuts still kicking in
Top rate will fall from 5.5% to 5.25% as soon as
revenues are projected to grow 4%... even if revenues
remain below pre-downturn levels
Additional revenues automatically allocated for ROADS
and OHLAP
Possible passage of SQ 744 (mandatory K-12 education
funding increases) could throw everything into chaos
Budget Outlook: Looking Ahead
Short-Term Recommendations
1. Defer additional tax cuts until revenues fully recover

2. Serious review of tax credits and exemptions to determine


which are needed and effective

3. Consider new revenue streams for the Medicaid program

4. Consolidation of functions and agencies where duplicative


or unnecessary

5. Prioritize prevention, diversion and surveillance over


detention

6. Prepare for next downturn by strengthening our reserve


funds and improving our forecasting capacities
Long-Term Fiscal Outlook
Oklahoma like most states and the federal government
faces a looming structural budget deficit

Structural deficit: A
situation that occurs
when a states normal
growth of revenues is
insufficient to finance
the normal growth of
expenditures year after
year
(CBPP, Faulty Foundations: State Structural
Budget Problems)
Long-Term Fiscal Outlook
Oklahomas Structural Deficit
Projected Annual Budget Surpluses and Deficits
Before and After 2004-2006 Tax Cuts (2007 to 2035)
1,000

500

0
M i l l i o n $2005

(500) Before Tax Cuts

(1,000)
After Tax Cuts
(1,500)

(2,000)

(2,500)
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
Year
Source: Projections conducted in 2007 by Dr. Kent Olson, Professor of
Economics, Oklahoma State University
Long-Term Fiscal Outlook
Long-Term Recommendations

1. Serious review of our tax system

2. Scrutinize our programs and spending


commitments

3. Give control for making decisions about revenues


and spending back to our elected representatives
For More Information

Updated Budget Information:


okpolicy.org/fy-10-fy-
11budget-information
Oklahoma Policy Institutes Online
Budget Guide
www.okpolicy.org/online-
budget-guide
Contact Information
Oklahoma Policy Institute
P.O. Box 14347
Tulsa, OK 74159-1437
(918) 794-3944
info@okpolicy.org

Better Information, Better Policy


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