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David Blatt
Oklahoma Policy Institute
dblatt@okpolicy.org - (918) 794-3944
Oklahoma’s Path to Prosperity
$8,000
Oklahoma
$6,000
US Average
$4,000
$2,000
$0
$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 ‘10 – FY ‘11
Budget Trends: FY ‘10 – FY ‘11
Things Are Tough All Over
All but four states are facing shortfalls in FY „11.
Combined state budget gaps for FY ‟09 – FY „12 estimated to
exceed $600 billion.
8.5 8.9%
7.5
6.5
6.5%
5.5
4.5
3.5
2.5
Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11
National Oklahoma
Budget Trends: FY ‘10 – FY ‘11
It’s a Revenue Problem
Five consecutive quarters of worsening collections;
Revenue drops more than twice as steep as during the
last downturn.
Quarterly Year-over-Year Change in General Revenue Collections, FY '02 - FY
'11
30.0%
20.0% 13.9%
10.0%
0.0%
-10.0%
-12.1%
-20.0%
-30.0% -29.5%
-40.0%
Q1 Q3 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 FY FY 11
'02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10 '11
Budget Trends: FY ‘10 – FY ‘11
It’s a Revenue Problem
FY „10 General Revenue 23 percent below pre-downturn (FY
„08) levels;
FY „10 GR collections less than FY ‟01 – without adjusting for
inflation or population growth.
$4,966
$5,000
$4,717
$4,616 $4,600
$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
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);
Stimulus funds made it possible to minimize cuts or provide
small increases to ten largest state agencies and some smaller
ones.
State Appropriations History, FY '00 - FY '10 in $millions)
(includes supplementals, excludes one-times from Rainy Day Spillover funds)
$0 $200
-$11 $17 $6
-$200 -$72 $0
-$180 -$200
-$200 -$125
-$400
-$401 -$238
-$400
-$600
-$600 -$476
-$800 -$800
-$864 -$816
-$1,000 -$1,000
Net Income Gross Sales Tax Motor Other Total Gen. Net Gross Sales Tax Motor Other Total Gen.
Tax Production Vehicle Sources Revenue Income Tax Production Vehicle Sources Revenue
Budget Trends: FY ‘10 – FY ‘11
FY ‘10 Shortfalls: What Response?
OSF cut agencies‟ GR allocations by 5 percent beginning in
August and by 10 percent beginning in December;
Borrowing from cash reserves of various funds;
Agreements announced by Governor, Speaker and
President Pro Tem in January and February:
Continued 10 percent monthly cuts to GR for rest of year;
Averaged out to 7.5 percent of GR for full year.
Supplemental funding to various agencies to offset part of GR
and HB 1017 shortfalls;
Additional revenues needed to balance from Rainy Day Fund,
stimulus funds, 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 $1.5 billion (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
$30
$7,000 $641 $224
$273
$6,500
$838
$539
$6,000
$7,095
$5,500 $79 $7,043
$219 $6,760
$6,590
$269 $72 $6,217
$5,000 $75 $5,897
$5,902
$5,412
$5,389
$5,240
$4,500 $5,073
$4,906 $4,922
$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
Initial Final
State Revenues Federal Relief Rainy Day Fund
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%
Common Ed.,
Notes: Transportation also $2,375.6 , 35%
received $65 from bond issue;
OHCA includes $30m transfer
from Insure Oklahoma Fund;
excludes Health Carrier Access
Payment revenue
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;
For most agencies and school districts, no additional funding to
cover increased employee health care costs, general inflation or
rising caseloads for 2 or 3 consecutive years;
Most state agencies and school districts will continue to be hard-
pressed to accomplish their core missions with reduced staffing
and resources.
30.0%
20%
20.0%
13% 12%
10% 9% 9%
10.0% 6% 6%
5%
3%
1.6% 2%
0.0% 0%
-17%
-20.0%
-19%
-22% -21%
-24%
-30.0% -28%
-26%
-30% -31% -29%
-30%
-32%
-40.0%
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11
Looking Ahead
We’ve Gotta Admit, It’s Gettin’ Better
All major taxes are showing a healthy recovery – except the
income tax
80%
70% 66.8%
60% 53.7%
50%
41.2%
40%
30%
20%
10.3% 9.6%
10% 6.0%
2.0%
0%
Personal Corporate Gross Sales Tax Motor Other Total
Income Tax Income Tax Production Vehicle Tax Sources
Tax
Looking Ahead
Budget Outlook: This Ain’t Over
FY „11 GR collections through March up 9.5 percent from FY „10 –
but 15.8 percent below FY ‟09;
Collections through March 4.2 percent above the estimate;
Official projection for full-year collections to be 1.7 percent above
the estimate.
July- Mar. General Revenue Collections,
FY '01 - FY '11 (in Millions)
4,500 4,234 4,173 4,206
3,993
4,000 3,546 3,541
3,351 3,340 3,232
3,500 3,156
2,953
3,000
2,500
2,000
1,500
1,000
500
0
FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11
Looking Ahead
Budget Outlook: Hard Times Continue
FY „12 General Revenue projected to be:
5.0 percent higher than FY „11
12.8 percent higher than FY „10
12.5 percent lower than FY „08
Lower than six years ago
General Revenue Collections,
FY '01 - FY '12 (in $millions)
$5,935 $5,953
$6,000 $5,701
$5,545
$5,500 $5,209
$4,966 $4,960
$5,000 $4,717 $4,616 $4,600
$4,408
$4,500 $4,174
$4,000
FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12
Source: FY'01 - FY '10 - Office of State Finance Monthly Revenue Collections; (proj.) (est.)
FY '11 - FY '12: Board of Equalization Revenue Certification, Feb 2011
Looking Ahead
Budget Outlook: Hard Times Continue
Modest revenue growth in FY „12 a result of:
Forecasts of an uncertain economic recovery, and
Policy decisions made in prior years, including:
Time-released tax cuts that will lower the top income
tax rate from 5.5 to 5.25 percent in 2012;
Revenue impact of $38M FY „12, ~$120M FY „13
Allocation of additional $37.5M to ROADS Fund for
transportation and $6.2 million additional to OHLAP
scholarship program;
Federal tax cut decisions will also impact state
revenue collections.
Looking Ahead
Budget Outlook: Hard Times Continue
BUDGET PROJECTIONS
Revised, binding appropriations authority for FY „12 is for $6.211
billion
About $500 million less than the FY „11 budget;
Increase of $106 million from initial December certification.
Several state agencies will require significant funding increases
just to maintain basic operations.
Many agencies need additional funding to restore cuts to core
services and to address the cumulative impact of several years
of rising costs.
Looking Ahead
Budget Outlook: Hard Times Continue
Governor Fallin‟s Budget
$225 Million in Additional Revenue:
$100M in remaining stimulus money;
$105M from 2-year Car Tags.
$273 Million in savings from government modernization
initiatives
$192 million from Information technology savings and IT
bonding;
$70 million from hiring freezes and unfilled vacancies;
Shared services, electronic payments, other measures.
Looking Ahead
Budget Outlook: Hard Times Continue
Governor Fallin‟s Budget (cont.)
$201M in agency cuts:
3 percent or less to education, health, human service, public
safety agencies;
5 percent to most administrative, regulatory and economic
development agencies;
Larger cuts for agencies slated for consolidation or for those
able to assess regulatory fees;
Her budget left $100 million unspent; revised certification
made an additional $106 million available for appropriation;
For many agencies, even cuts limited to 3-5 percent will mean
cuts to core services and programs, loss of matching federal
funds.
Legislative leaders have warned of possible cuts of 5 – 10
percent.
Looking Ahead
Budget Outlook: Hard Times Continue
FY „12 budget would be 11.2 percent smaller than
FY „09
State Appropriations, FY '06 - FY '12 (in $Millions)
$7,200 $7,125
$7,043
$6,959
$7,000
$6,760
$6,800 $6,714
$6,600
$6,400 $6,325
$6,217
$6,200
$6,000
$5,800
$5,600
FY'06 FY'07 FY'08 FY'09 FY '10 - FY '11 FY '12 -
Final proposed
Looking Ahead
Budget Outlook: Hard Times Continue
State appropriated spending has reached its lowest
level in at least 30 years – and is likely to fall even
further next year
Oklahoma State Appropriated Budget as Share of
7.0%
State Personal Income, FY '81 - FY '11
6.5%
6.0%
5.7%
5.5%
5.2%
5.0%
4.8%
4.5%
1996
1998
2000
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1997
1999
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Sources U.S. Bureau of Economic Affairs, State Quarterly Personal Income (estimated 1.0% growth 2nd-4th Qtr SFY 2011);
Appropriations history from annual Executive Budget, other sources
Looking Ahead
Budget Outlook: No End in Sight
Revenues unlikely to recover to pre-downturn nominal
levels prior to FY ‟14 under current policies