OKLAHOMA CITY, OK – The Board of Equalization on Monday 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 will use the estimate approved Monday to build the executive budget that will be presented to the Legislature when it convenes Feb. 1.
The board on Monday 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.
All major tax categories are trending down for FY 2017 following an oil price drop of 70 percent in the past 18 months that has caused Oklahoma to shed 11,600 energy jobs and shutter 59 percent of its oil and gas rigs.
The board will meet again in February to make a second estimate that will be used by the governor and legislators to determine 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 L. 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 on Monday 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. When the precise amount is determined later this month, my office will formally declare revenue failure and cause allocations to be reduced accordingly beginning in January,” Doerflinger said.
To end the projected shortfall, at least $157 million will need to 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.
Doerflinger is director of OMES, which works with the Oklahoma Tax Commission to prepare the revenue estimates that are presented to the Board of Equalization.
Fallin says she will encourage lawmakers to consider scaling back hundreds of millions of dollars’ worth of tax breaks and incentives, as well as off-the-top money that’s diverted directly to areas such as education and transportation.