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8/14/2019 Oklahoma Budget Trends and Outlook (rev. Jan 13, 2010)
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OKLAHOMA BUDGET OVERVIEW
Trends and Outlook
REVISED January 13, 2010
David Blatt
Oklahoma Policy Institutedblatt@okpolicy.org - (918) 859-8747
mailto:dblatt@okpolicy.orgmailto:dblatt@okpolicy.org8/14/2019 Oklahoma Budget Trends and Outlook (rev. Jan 13, 2010)
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Oklahomas Path to Prosperity
OUR STARTING POINTWe invest our tax dollars in
our public structures to support
our common goals as a state
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Oklahomas Path to Prosperity
We Already Lag Behind Oklahoma already underfunds most of our publicstructures and falls short of our common goals as a state
We rank 50th among the states in per capitaexpenditures on state and local government
We need renewed investment in our public structuresto meet our common goals as a state.
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8/14/2019 Oklahoma Budget Trends and Outlook (rev. Jan 13, 2010)
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Where did the growth revenue go?
Covering rising costs of basic services and
supporting targeted investments for shared goals
Increased State Appropriations, Selected Agencies,FY 06 FY 08
Dept. of Education: $453M
Health Care Authority: $289M
Higher Education: $271M
Human Services: $129M
Corrections: $80M
Transportation: $72.5M*
Budget Trends: FY 02 FY 09
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Lost Revenues from Select Tax Cuts Enacted 2004 - 2006FY'05 through FY'10 (in $ millions)
$18.7$144.8
$333.3
$561.8$651.1
$776.9
$0.0
$200.0
$400.0
$600.0
$800.0
FY'05 FY'06 FY'07 FY'08 FY'09 FY'10source : Oklahoma Tax Commission
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 impactwill not be felt until FY 11
Budget Trends: FY 02 FY 09
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Budget Trends: FY 02 - FY 09
FY07 FY08: Revenue Slowdown
As tax cuts kicked in, General Revenue collections werealmost flat in FY 08 compared to FY 07 (+%0.9, $54million)
-6.6%-5.3%
10.6%
7.6%
14.8%
4.0%
0.9%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08
Annual % Change in General Revenue Collections, FY '03 - FY '08
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Budget Trends: FY 02 - FY 09
FY 09 Budget: Tightening the Screws Most agencies appropriations frozen from FY 08
No funding for benefit cost increases teacher salary increases, stateemployee raises
FY 09 excludes supplementals and mid-year budget cut
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Budget Trends: FY 10
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Source: Center on Budget and Policy Priorities
Budget Trends: FY 10
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 tototal more than $465 billion
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Budget Trends: FY 10
This is As Bad as Its Ever Been
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Annual General Revenue Collections, in $ millions,FY '82 - FY '11 (FY '10 & FY'11 based on Dec. 2009
certification)
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Budget Trends: FY 10
The Recession Hit Oklahoma Late
See OK Policy, Numbers You Need, at:
http://okpolicy.org/numbers-you-need-key-oklahoma-economic-and-budget-trends
7.1%
10.2%
2.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
11.5
Oct-07 Apr-08 Oct-08 Apr-09 Oct-09
UnemploymentR
ate(%)
Monthly Unemployment Rate,National and Oklahoma, Oct. 2007 to Oct. 2009
Oklahoma National
8/14/2019 Oklahoma Budget Trends and Outlook (rev. Jan 13, 2010)
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Budget Trends: FY 10
The Recession Hit Oklahoma Late
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%3.0%
4.0%
5.0%
2007.3 2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3
% Change from PriorQuarter
Quarterly Change in Personal Income,Oklahoma and National,
3rd Quarter 2007 to 3rd Quarter 2009
U.S. Oklahoma
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Budget Trends: FY 10
FY 09: A Tale of Two Half-Years FY 09 revenue collections went from $224.8 million above
estimate (July-Dec) to $672.0 million below estimate (Jan-Jun)
11.1% 10.8%
1.3%
10.4% 12.8%
7.1%
-8.5%
-21.5%-19.1%
-21.1%
-27.7%-30.1%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June
Change in Monthly General Revenue Collections,
FY '09 Compared to Same Month, FY '08
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Budget Trends: FY 10
FY 10 Budget: Revenues on the Skids
5,407.2
5,649.2
5,981.1 5,946.45,902.7
5,710.0
5,356.6
5,000
5,500
6,000
6,500
FY '06 Actual Fy '07 Actual FY '08 Actual FY '09 June FY '09
December
FY '09
February
FY '10
Feburary
General Revenue Collections,FY '06 Actual - FY '10 Estimated (in $million)
In February, FY 10 revenues estimated to come in >$600million below FY09 ;
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Budget Trends: FY 10
FY 10 Budget
NOTE: FY 09 totals do not include June budget cuts
$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
$4,981
$5,389$5,491
$5,191 $5,145
$5,459
$6,217
$6,760
$7,043
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 FY'10State Appropriations ARRA
$30ARRA
$7,125 $7,231
$641ARRA
$7,095State
$6,590State
State Appropriations History, FY '00 - FY '10 in $millions)(includes supplementals, excludes one-times from Rainy Day Spillover funds)
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FY 10 State Appropriations10 Largest Agencies: $6.3 billion (88%)
Agencies (75 agencies): $829 million (12%)
Budget Trends: FY 09 FY 10
Common Ed.,$2,572.0 , 36%
Higher Ed.,$1,070.7 , 15%
OHCA (Medicaid),$979.8 , 13%
DHS,$550.7 , 8% Corrections$503.07%Transportation,$208.7 , 3%
Mental Health,$203.3 , 3%Career Tech,$157.8 , 2%Juv. Affairs,$112.4 , 1%
Public Safety,$93.3 , 1%All OtherAgencies,$779.4 ,11%
TotalAppropriations:$7,231.2 millionIncludesAmerican
Recovery andReinvestmentAct (ARRA)
Total TenLargest: $6,451.8,89.2 %
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Budget Trends: FY 09 FY 10
FY 10 Budget Stimulus funds made it possible to minimize cuts orprovide small increases to ten largest state agencies andsome 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 orinflation (e.g. utilities, transportation, food)
Demands for some state services increase due to thedownturn
See: OK Policy FY 10 Budget Review at:
http://okpolicy.org/fy-10-budget-information
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Budget Trends: FY 09 FY 10
FY 10 : Off to a Very Rough Start July-Dec revenue collections down 28.6 percent fromFY 09
October better than previous months but November andDecember back down
Not clear when well hit bottom or how long it will taketo recover
11.1% 10.8%
1.3%
10.4%12.8%
7.1%
-8.5%
-21.5%-19.1%
-21.1%
-27.7%-30.1%
-26.3%
-31.6%-30.1%
-23.7%
-30.5%-29.1%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug S ept. Oct Nov Dec
Change in Monthly General Revenue Collections, Compared to Same Month Prior Year,
July '08 - Dec. '09
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Budget Trends: FY 09 FY 10
FY 10 : Off to a Very Rough Start Four consecutive quarters of worsening collections
Revenue drops more than twice as steep as during thelast downturn
-12.1%
9.9%
-29.5%-40.0%
-20.0%
0.0%
20.0%
40.0%
Q1
FY
'02
Q3
FY
'02
Q1
FY
'03
Q3
FY
'03
Q1
FY
'04
Q3
FY
'04
Q1
FY
'05
Q3
FY
'05
Q1
FY
'06
Q3
FY
'06
Q1
FY
'07
Q3
FY
'07
Q1
FY
'08
Q3
FY
'08
Q1
FY
'09
Q3
FY
'09
Q1
FY
'10
Quarterly Year-over-Year Change in GR Collections,Oklahoma, FY '02 - FY'10
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Budget Trends: FY 09 FY 10
FY 10 : Off to a Very Rough Start Collections through December are $756.1 million 25.6percent - below the estimate
-$319
-$173-$202
-$8-$56
-$756-$800
-$700
-$600
-$500
-$400
-$300
-$200
-$100
$0
Net Income Tax Gross Production Sales Tax Motor Vehicle Other Sources Total Gen.
Revenue
General Revenue Collections compared to Estimate, by Tax, FY '10 thru
December (in $millions)
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Budget Trends: FY 09 FY 10
FY 10 : Off to a Very Rough Start OSF cut agencies GR allocations by 5 percent throughNovember and by 10 percent in December
Cuts are across-the-board based on GR allocations
Since some agencies are partly or fully appropriated fromother funds (i.e. 1017 Fund, State Transportation Fund,Lottery, ARRA), agencies are not all affected equally
Cuts limited to less than shortfall through transfers of cashreserves ($233.8 million since start of year) that must be repaid
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Budget Trends: FY 09 FY 10
FY 10 : Off to a Very Rough Start HB 1017 collections also failing 14.9 percent shortfall($41 million) through November.
Dept. of Education cut November disbursements by 7.1percent
Agreement in December to use cash reserves to fund 1017shortfall
General
Revenue
65%Stimulus (ARRA)
6%
HB 101725%
Lottery
1%
*Other
3%
FY '10 Dept. of Education Funding by Revenue Source
Total
Appropriations=$2,572.1 million
*Other includes PriorYear GR, GrossProduction Tax, MineralLeasing Fund
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Budget Trends: FY 09 FY 10
FY 10 : How Large a Shortfall? December certification projects a $729 million (14.2percent) shortfall in FY 10 GR collections.
$80 million shortfall in HB 1017 Fund as well
Total mid-year shortfall of $809 million
$5,415
$5,145
$4,415
$4,000
$4,200
$4,400
$4,600$4,800
$5,000
$5,200
$5,400
$5,600
100% Estimate - June Appropriation (95%) December Projection
FY '10 General Revenues - Original vs.Revised Projections
$729million
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Budget Outlook: What Response?
Shortfall Options Rainy Day Fund is filled to maximum amount of $597million
Left untouched for initial FY 10 budget
$157.5
$340.9
$72.3
$0.1
$217.5
$461.3$496.7
$571.6$596.6
$0
$100
$200
$300
$400
$500
$600
$700
2001 2002 2003 2004 2005 2006 2007 2008 2009
Rainy Day Fund Balances, FY '01 - FY '09(opening balance in $ millions)
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Budget Outlook: What Response?
Shortfall Options Full RDF potentially available for shortfalls in FY 10
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 thecoming year compared to the current year ($224M);
1/4th upon declaration of an emergency and legislativeapproval ($149M)
Current Year
Revenue
Failure, 37.5% -
$224M
Forthcoming
Year Shortfall,
37.5% - $224M
Emergency,
25.0% - $149M
Uses of Constitutional
Reserve Fund
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Budget Outlook: What Response?
Shortfall Options Projected shortfall of $809 million shortfall could be filledby:
RDF shortfall funds (3/8ths) - $224 million +
RDF emergency funds (1/4) - $149 million +
Full year across-the-board cuts of 7.5 percent
Forecast Appropriated
Amount
(GR+1017)
FY 10
Projected
Revenue
General
Revenue +
1017Shortfall
% Shortfall
with no
Rainy DayFund
% Shortfall
with 3/8ths
of RDF($224M)
% Shortfall
with 5/8ths
of RDF($373M)
% Shortfall
with 3/4 of
RDF($448M)
% Shortfall
with all of
RDF($597M)
December
projections
$ 5,777 $4,968 $ 809 14.0% 10.1% 7.5% 6.2% 3.7%
FY 10 Forecast Shortfalls and Rainy Day Fund Impacts ($ in millions)
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Budget Outlook: What Response?
FY 11: More of the Same? FY 11 revenue collections projected to remainalmost unchanged from FY 10 and over 25 percentbelow pre-downturn (FY 08) levels
$5,714
$5,928 $5,981
$5,519$5,415
$ 4,415 $4,449
$4,000
$4,500
$5,000
$5,500
$6,000
FY '06 ActualFY '07 ActualFY '08 ActualFY '09 Actual FY '10 June
(estimated)
FY '10 Dec
(projected)
FY '11 Dec
(estimated)
General Revenue Collections,FY '06 Actual - FY '11 Estimated (in $ millions)
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Budget Outlook: What Response?
Budget Outlook Whats the plan for FY 10?
Seems to involve:
Continue across-the-board agency budgets cuts everymonth
Keep borrowing from any and all available reserves to makeup the difference
Tap the Rainy Day Fund to fill part of the gap
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Budget Outlook: What Response?
Budget Outlook Gov. Henry: Unfortunately, the cuts we have been forcedto implement to date are already taking their toll on stateprograms and services (Nov. 10, 2009)
Even at 5-10 percent monthly cut level, the toll is growing:
DHS has cut senior nutrition services by $7.2 million;
OJA has cancelled youth detention program, cut providers 5 percent,authorized 22 furlough days;
Corrections has cut private contractors; 10-12 furloughs daysbetween March - June (staffing already at historic low of 77 percentof authorized FTEs);
Department of Mental Health and Substance Abuse Services hasannounced closure of childrens behavioral health center in Norman,cuts in contracts to providers;
School districts, eliminating programs, some going to 4-day weeks
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Budget Outlook: What Response?
Budget Outlook: Other Revenues Stimulus Round II
About half of the State Fiscal Stabilization Fund and enhancedMedicaid funds remains available
Other Revenues?
SQ 640 requires a 3/4th vote of both legislative chambers orvote of the people at time of next general election to raise taxes;
Continuing search for one-time or ongoing revenueenhancements
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Budget Outlook: Beyond FY 10
Budget Outlook Time-released tax cuts still kicking in
Top rate will fall from 5.5% to 5.25% as soon asrevenues are projected to grow 4%... Even if revenuesremain below pre-downturn levels
Additional revenues automatically allocated for ROADSand OHLAP
Use of one-time funds in FY 10 and FY 11 createssignificant problems for FY 12
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Budget Outlook: Beyond FY 10
Budget Outlook: No Quick Recovery Revenues unlikely to recover to pre-downturn nominallevels prior to FY 13
$5,928 $5,981
$5,544
$4,439
$4,735
$5,275
$5,945
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
FY 07 (act.)FY 08 (act.)FY 09 (act.)FY 10 (est.)FY 11 (est.)FY 12 (est.)FY 13 (est.)
R
n$mio
Fiscal Year
Historical and Projected Revenue, FY'07-FY'13General Revenue Fund
Estimates by OKPolicy - not based onDec. 2009certification
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Budget Outlook : Beyond FY 10
Short-Term Recommendations1. Develop and share greater information about impact ofactual and potential cuts, possible solutions
2. Use the RDF to minimize the magnitude of budget cuts
3. Defer additional tax cuts until revenues fully recover
4. Suspend and cap some tax breaks and incentives
5. Change the RDF rules to allow reserve funds to be used anytime revenues remain below their pre-downturn peak and to
allow for larger reserves
6. Consider new revenue streams for the Medicaid program
7. Expand and improve forecasting capacities
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Structural deficit: Asituation that occurswhen a states normal
growth of revenues isinsufficient to financethe normal growth ofexpenditures year afteryear
(CBPP, Faulty Foundations: State Structural
Budget Problems)
Long-Term Fiscal Outlook
Oklahoma like most states and the federal government faces a looming structural budget deficit
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Long-Term Fiscal Outlook
Projected Annual Budget Surpluses and Deficits
Before and After 2004-2006 Tax Cuts (2007 to 2035)
(2,500)
(2,000)
(1,500)
(1,000)
(500)
0
500
1,000
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035Y e a r
Mion$2005
B e f o r e T a x C u t s
A f t e r T a x C u t s
Oklahomas Structural Deficit
Source: Projections conducted in 2007 by Dr. Kent Olson, Professor ofEconomics, Oklahoma State University
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Long-Term Recommendations1. Modernize the Tax System
2. Preserve a Balanced Tax Structure
3. Scrutinize our programs and spendingcommitments
4. Make the tax system fairer
Long-Term Fiscal Outlook
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For More Information
Updated Budget Information:okpolicy.org/fy-10-fy-
11budget-information
Oklahoma Policy Institutes OnlineBudget Guide
www.okpolicy.org/online-
budget-guide
http://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-informationhttp://okpolicy.org/fy-10-fy-11budget-information8/14/2019 Oklahoma Budget Trends and Outlook (rev. Jan 13, 2010)
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Contact Information
Oklahoma Policy Institute228 Robert S. Kerr, Suite 750Oklahoma City, OK 73102
ph: (405) 601-7692
info@okpolicy.org
Better Information, Better PolicyOklahoma Policy Institute provides timely and credible analysis of state policy issues
www.okpolicy.org
mailto:info@okpolicy.orgmailto:info@okpolicy.orgRecommended