State revenues were down for the 10th straight month in October, but the state treasurer has tried to see the positive in the situation.
In October, revenue was 18.2 percent below state budget estimates. For the first quarter of the Oklahoma fiscal year, which began in July, revenue was 26 percent below estimates.
If, with these low numbers, revenue has bottomed out, the state might see revenue increases, Scott Meacham, Oklahoma state treasurer, said.
“This is the first sign of an uptick we’ve seen,” Meacham said. “Our corporate income tax collections were up for the first time in months. We’re hoping that the worst of this is behind us.”
Gov. Brad Henry cut state agencies’ budgets by 5 percent earlier this year – a cut that will last until June 30, 2010, the end of the fiscal year, Henry said.
The state has transferred $24.1 million from cash funds to keep the cuts at just 5 percent, and the money must be repaid by June 30, according to the state’s allocations chart.
“At this point, there’s no need to cut further than that,” Meacham said, “but we’re certainly monitoring the situation very closely.”
Despite Meacham’s positive predictions, Oklahoma House Speaker Chris Benge, R-Tulsa, warned state agencies this week in a press release about a possible billion-dollar budget shortfall.
“There is nothing to indicate a reversal in our state’s economic trend anytime soon, which means we must be realistic as we work to ensure a balanced budget for this fiscal year,” Benge stated in the release.
If the current trend continues, our state could be looking at as much as a billion-dollar shortfall to overcome, which means further cuts must be considered now, coupled with usage of funds from the state’s Rainy Day account.”
The state already will have to use some of the Rainy Day Fund, which holds about $600 million.
In order to access the fund, the State Board of Equalization must first declare a state revenue failure. The seven-member board, chaired by Henry, is likely to declare a failure at its December meeting, Meacham said.
When revenue failure is declared, the state has access to three-eighths of the Rainy Day Fund – or $225 million – to appropriate the current year’s budget gap, Meacham said.
“If this isn’t a rainy day, I’m not sure what is,” Meacham said. “This is exactly the type of situation the Rainy Day Fund was developed to address.”
Currently, the Oklahoma Legislature deposits 10 percent of the prior year’s collections into the fund, but that amount could increase to 15 percent next year if the Legislature approves a bill filed recently by Sen. Andrew Rice, D-Oklahoma City.
“Given that our economy in Oklahoma tends to run in up and down cycles, the Legislature needs more flexibility to stow away more revenue during good times in order to deal with future economic crises,” Rice stated in a press release.
For now, state agencies should save as much money as possible, Benge said.
“While there are no good options available, the current practice of transferring dollars from other funds will inevitably make for more difficult decisions in the months ahead,” Benge stated in a release.
“For now, I strongly urge all state agencies to look at ways to save every dollar possible while also looking for additional areas to cut so any further reductions are less painful down the road.”
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stixx23 2 years, 6 months ago
Just to clarify about the Rainy Day Fund: it's not correct to say lawmakers "deposit 10 percent of the prior year’s collections into the fund." Doing that would mean roughly $600-million added to the Rainy Day Fund every year which is not what happens. The state can only allocate 95% of the estimated funds collected in a year. This provides a built-in cushion in case of a small downturn. That means at the end of a year, there is often money left over. That left over money first has to go to the Rainy Day Fund until it gets to the point where it equals 10% of the prior year's spending. So the Rainy Day Fund gets "topped off" every year that revenues exceed expectations. The remaining money not spent the previous year can then go towards one-time expenses.