Revenue Estimate Shows $692 Million Hole
By: Constitution Staff
On December 21, the Board of Equalization approved an estimate of revenues available for the next appropriated state budget that shows a preliminary budget hole of at least $692 million. Gov. Mary Fallin will use the estimate to build the executive budget that will be presented to the Legislature when it convenes on February 6.
The board approved an estimate of $6,038,893,121 in available revenue for the Fiscal Year 2018 executive budget proposal. That amount is $692 million, or 10.3 percent, less than was authorized following passage of the FY 2017 appropriated state budget during the 2016 legislative session.
The Legislature is in session during the first half of the calendar year and prepares a budget for the coming fiscal year which begins on July 1and runs through June 30 of the next calendar year. So, the upcoming legislative session will be approving a budget for FY 2018 which begins on July 1 of this year.
Many major tax categories are estimated to continue trending down for FY 2018 as the energy industry sector struggles to recover. Sales tax also is expected to continue lagging well into FY 2018.
The board will meet again in February to make another estimate that will be used by the governor and legislators to determine FY 2018 appropriations levels for state agencies. If revenue projections continue to fall, the Legislature may have to trim the governor’s budget proposals in order to stay within the new estimate.
Secretary of Finance, Administration and Information Technology Preston L. Doerflinger is the director of the Office of Management and Enterprise Services (OMES), which works with the Oklahoma Tax Commission to prepare the revenue estimates that are presented to the Board of Equalization.
“I think it is important for everyone to realize we are not cutting our way out of this budget hole,” he said. “We have to have a serious conversation about revenue in this state, and I think you will see that in the governor’s executive budget.”
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 about $868 million less to appropriate next session than was appropriated for FY 2017.
“$868 million more accurately reflects what the need is,” Doerflinger said. “The Legislature has a job to do, and I think this Legislature has a real interest in looking at solutions.”
The board also received an updated revenue estimate for the current fiscal year that projects the General Revenue Fund (GRF) collections will miss the official projection upon which the FY 2017 appropriated state budget was based by 4.4 percent, or $231.4 million.
By law, if total GRF collections are expected to fall more than 5 percent below the estimate for the entire fiscal year, the OMES director must declare a revenue failure and initiate mandatory appropriation reductions to end the shortfall and maintain a balanced budget.
The board also made a preliminary finding that the amount of available growth for the up-coming fiscal year is less than the cost of implementing a 0.15 percent reduction of the top personal income tax rate, and therefore an income tax rate reduction is not expected to be authorized.
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