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Saturday, February 25th, 2017Last Update: Friday, February 3rd, 2017 01:39:14 PM

Gross Receipts to the State Treasury Shrink

By: Constitution Staff

For the first time since the end of the Great Recession in 2009, Gross Receipts to the state Treasury were less than the prior calendar year. That was the report from State Treasurer Ken Miller in January upon releasing the data for 2015. Annual Gross Receipts to the state Treasury contracted by 3 percent compared to calendar year 2014, and -- at $11.65 billion -- are the lowest 12-month total since May 2014. The calendar year reduction in collections compares to annual growth rates ranging from 2.5 percent to 9.6 percent between 2010 and 2014. During 2009, collections shrank by 15.9 percent compared to 2008.

"Gross collections show all four major revenue streams were impacted by the downturn in the energy industry," Miller said. "After slowing a little last month, the downward trend of revenue collections accelerated in December." Gross Receipts to the Treasury for December are $948.9 million, down by more than $93 million, or almost 9 percent, from December 2014. It is the smallest December bottom line since 2010.

Monthly collections from oil and natural gas production taxes have been lower than the same month of the prior year for 12 consecutive months. December gross production collections are almost 48 percent lower than the previous December. Monthly receipts are based on production activity from October when the average price of benchmark West Texas Intermediate crude oil was $46.22 per barrel. It has since dropped even lower.

All major tax categories in December showed total collections less than the same month of the prior year. Across-the-board contraction has been the story for three consecutive months, with one primary exception due to non-economic factors. In November, gross income tax collections were temporarily boosted by the tax commission's PAYRight tax amnesty program.

Other indicators also indicate an economic downturn. Oklahoma's seasonally-adjusted unemployment rate was set at 4.2 percent in November, down by one-tenth of one percentage point from October. Lynn Gray, Director of Economic Research and Analysis for the Oklahoma Employment Security Commission (OESC), said the drop in the jobless rate does not signal a strengthening economy. Instead, he said the reduction is due to a declining number of continuing unemployment insurance claims as job seekers are beginning to exhaust their unemployment benefits. Over the past year, Mining & Logging -- including the energy sector -- reported the loss of 12,900 jobs in the state, while Manufacturing showed a reduction of 7,900 jobs. The Business Conditions Index for Oklahoma in December remained below growth neutral for an eighth consecutive month and fell to 35.5 from November's 37.5. Numbers below 50 indicate economic contraction is expected during the next three to six month.

Gross revenue totaled $11.65 billion during calendar year 2015. That is $361.75 million or 3 percent lower than collections from calendar year 2014. Gross income taxes generated $4.42 billion for the period, reflecting an increase of $159.37 million or 3.7 percent from the prior year.

Personal income tax collections total $3.79 billion, up by $71.54 million or 1.9 percent from the prior year. Corporate collections are $627.4 million for the period, an increase of $87.83 million or 16.3 percent over the previous period. Sales taxes for the period generated $4.38 billion, a decrease of $71.82 million or 1.6 percent from the prior year. Oil and gas gross production tax collections brought in $474.26 million during the calendar year, down by $409.56 million or 46.3 percent from 2014. Motor vehicle collections total $763.92 million for the period. This was a drop of $13.94 million or 1.8 percent from the trailing period. Other sources generated $1.61 billion, down $25.81 million or 1.6 percent from the previous year.

Since March 2011, the Treasurer's Office has issued the monthly Gross Receipts to the Treasury report, which provides a timely and broad view of the state's macro economy. It is provided in conjunction with the General Revenue Fund (GRF) allocation report from the Office of Management and Enterprise Services (OMES), which provides important information to state agencies for budgetary planning purposes. The GRF receives just less than half of the state's gross receipts with the remainder paid in rebates and refunds, remitted to cities and counties, and placed into other state funds.

The reduction in state revenues will have a major impact on the funds that the Oklahoma Legislature has available for appropriation in the coming fiscal year which begins on July 1. The Board of Equalization met on December 21 and approved an estimate of revenues available for certification for the next appropriated state budget that shows a preliminary budget hole of at least $900.8 million.

Under state law, Gov. Mary Fallin must use the estimate to build the executive budget that will be presented to the Legislature when it convenes Feb. 1. The board approved an estimate of $6,059,238,267 in available revenue for the FY 2017 executive budget proposal. That amount is $900.8 million, or 12.9 percent, less than was authorized following passage of the FY 2016 appropriated state budget during the 2015 legislative session.

The board will meet again in February to make a second estimate that will be used by the governor and legislators to determine the final FY 2017 appropriations levels for state agencies. "As always, February's number matters more than December's," said Secretary of Finance, Administration and Information Technology Preston Doerflinger. "We don't expect it to get better, so we've been fully engaged since summer with agencies and legislators to partner in rising to this challenge."

By law, Rainy Day Fund appropriations and certain revolving fund authorizations are not factored into the board's estimates. With those spending areas considered, there will be nearly $1.1 billion less to appropriate next session than was appropriated for FY 2016. "The board's number today is $900.8 million, but in reality this is a hole of over a billion dollars that probably grows in February unless there is a dramatic oil price turnaround," Doerflinger said.

The board also received an updated FY 2016 revenue estimate that projects a shortfall for the fiscal year, which began July 1 and ends June 30, 2016. The updated estimate projects FY 2016 General Revenue Fund (GRF) collections will miss the official estimate upon which the FY 2016 appropriated state budget was based by 7.7 percent, or $443.3 million.

By law, if GRF collections are projected to fall more than five percent below the estimate for the remainder of the fiscal year, the OMES director must declare a revenue failure and initiate mandatory appropriation reductions to end the shortfall and maintain a balanced budget. "Each agency receiving monthly general revenue allocations will see those allocations reduced between two and four percent," Doerflinger said. To end the projected shortfall, at least $157 million must be cut through an across-the-board reduction of monthly general revenue allocations to agencies. Most, but not all, appropriated agencies receive monthly general revenue allocations.

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