Oklahoma Budget Trends and Outlook (February 2011)
Content
The State Budget Outlook: A New Fiscal Reality
Updated February 23, 2011
David Blatt Oklahoma Policy Institute
[email protected] - (918) 794-3944
Oklahoma’s Path to Prosperity
OUR STARTING POINT
Government is among our means of achieving our common goals as a state --- alongside private businesses, non-profit organizations, faith groups and families.
Oklahoma’s Path to Prosperity
OUR STARTING POINT
Our families, communities and businesses depend on our state and local governments to help:
Educate our children and train our workforce; Protect our streets and investigate crimes; Maintain and upgrade our roads and bridges; Pay for the medical care provided by private doctors, nurses, therapists, home health aides, hospitals, etc. Ensure we have clean water and air; Promote our small towns, rural areas, artists and investors;
Take care of those at risk of harm and abuse.
We cannot reach our goals and thrive as a state without effective public structures and systems.
Oklahoma’s Path to Prosperity
We Already Lag Behind
Oklahoma already underfunds most of our public
structures and falls short of many of our common goals as a state. For example:
Our teacher pay is among the lowest in the nation; We have among the highest rates of heart disease, obesity, smoking, and uninsured;
Our community-based social service providers have gone years without rate increases;
Many of our roads and bridges are in disrepair; Our correctional facilities are overcrowded and understaffed.
The ongoing state budget crisis threatens a serious and long-term corrosion of our public structures that will weaken our prosperity, security and well-being.
Budget Trends: FY ‘02 – FY ‘09
Budget Trends: FY ‘02 – FY ‘09
FY ‘02 – FY ‘09: Bust and Boom
State budget suffered steep downturn, deep cuts, ‟02 - ‟04;
Strong economy led to robust revenue growth and increased state appropriations between FY „06 and FY ‟08.
Most agency appropriations frozen in FY „09
State Appropriations History, FY '00 - FY '09, in $ millions (includes supplementals, excludes one-times from Rainy Day spillover funds) $7,043 $6,760 $6,217
$5,389
$7,500 $7,000
$6,500
$7,089
$6,000 $5,500 $5,000 $4,500 $4,000 FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 $4,981 $5,491
$5,191
$5,459 $5,145
Budget Trends: FY ‘02 – FY ‘09
Where did the growth revenue go?
Increased State Appropriations, Selected Agencies, FY ’06 – FY ’08 Dept. of Education: $453M Human Services: $129M
Health Care Authority: $289M Corrections: $80M Higher Education: $271M Transportation: $72.5M*
80 percent of new dollars went to six core agencies. Covering rising costs of basic services and supporting targeted investments for shared goals.
Budget Trends: FY ‘02 – FY ‘09
Tax Cuts had a long-term impact
Most of the cuts were to the personal income tax;
Tax cuts were stretched out over several years; full impact will not be felt until FY ‟13.
Lost Revenues from Select Tax Cuts Enacted 2004 - 2006 FY'05 through FY'10 (in $ millions) $800.0 $600.0 $400.0 $200.0 $0.0 $18.7 FY'05 $144.8 $333.3 $561.8 $776.9 $651.1
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.
Source: Center on Budget and Policy Priorities
Budget Trends: FY ‘10 – FY ‘11
The Recession Hit in Late 2008
Monthly Unemployment Rate, National and Oklahoma, Dec. 2007 to Dec. 2010
10.5
9.4% 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 Dec-07 Jun-08 Dec-08 Jun-09 National Dec-09 Oklahoma Jun-10 Dec-10 6.8%
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%
10.0% 0.0% -10.0% -20.0% -30.0% -40.0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY '02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10 '11
-12.1%
-29.5%
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.
General Revenue Collections, FY '01 - FY '10 (in $millions)
$6,000 $5,500 $5,000 $4,500 $4,000 FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 $4,966 $4,717 $4,408 $4,174 $4,616 $4,600 $5,701
$5,935 $5,953 $5,545
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)
7,500 7,000 6,500 6,000
$5,389 $5,491 $5,191 $4,981 $5,145 $5,459 $7,043
$7,125 $30
ARRA
$7,231
$6,760 $6,217
$641
ARRA
$7,095
State
5,500
$6,590
State
5,000
4,500 4,000 FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 ARRA FY'07 FY'08 FY'09 FY'10 State Appropriations
Budget Trends: FY ‘10 – FY ‘11
FY ‘10 : Off to a Very Rough Start
Collections through January were $864 million – 24.9 percent - below the estimate. After seven months of significant shortfalls, collections starting in February came close to or exceeded the monthly estimate.
General Revenue Collections compared to Estimate, by Tax, FY '10 thru Jan (in $millions)
$0 -$11 -$200 -$400 -$401 -$600 -$800 -$1,000
Net Income Gross Sales Tax Tax Production Motor Vehicle Other Sources
General Revenue Collections compared to Estimate, by Tax, FY '10 thru June (in $millions)
$200 $17 $6 -$125 -$238 -$476
-$72
$0 -$200 -$400 -$600 -$800 -$864
Total Gen. Revenue
-$180
-$200
-$1,000
Net Gross Sales Tax Income Tax Production Motor Vehicle
-$816
Other Total Gen. 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 $7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000
Total= $7,124 million
$301 $30
Total= $7,231 million
$641 $371
Total= $6,959 million $224 $838 $435
$6,793
$6,220 $5,462
FY '09
State Recurring Cash
FY '10 - Initial
Stimulus (ARRA)
FY '10 - Revised
Rainy Day Fund
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget: The Challenge Escalates
2010 Session focused on which, if any, revenue measures would be adopted to bridge the budget gap.
FY „11 budget gap exceeded $800 million - assuming maintenance of FY „10 budget cuts, the use of all remaining stimulus funds, and 3/8ths of Rainy Day Fund.
Equivalent to an additional 12 percent cuts to all agencies of state government beyond the cuts already enacted. Agency scenarios of how to absorb cuts of an additional 7.5 percent to 15 percent in FY „11 left no doubt of the grave threats that would be posed to the state economy and to the health and security of Oklahomans.
Many cuts would be multiplied by loss of federal matching funds.
See OK Policy, “Bridging the Budget Gap,” : http://okpolicy.org/files/bridgingthegap_1pg.pdf
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget Agreement
Appropriated almost $1.4 billion in additional revenues on top of those certified in February. These included: Remaining $539 million from the 2009 stimulus bill; Additional $273 from the Rainy Day Fund; $580 million from assorted revenue enhancements: Suspending and deferring payment of tax credits; Issuing and refinancing bonds; Fee and permit increases; Transfers of cash balances;
Enhanced tax collections.
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget Agreement
Total appropriations for FY ‟11 = $6.714 billion. 7.2 percent decrease (-$517.5 million) from the initial FY „10 budget and 3.5 percent decrease (-$245.4 million) from the final FY „10 budget after mid-year cuts.
FIG. 1: State Appropriations History, FY '00 - FY 11
(in $millions; FY '00-FY'10 includes supplementals, excludes one-times from Rainy Day Spillover Funds )
$7,500 $7,000 $6,500
$838 $539 $30 $641
$224
$273
$6,000
$7,095
$5,500 $5,000 $4,500 $4,000 FY'00 FY'01
$75 $5,389 $4,906
$79 $269 $5,412 $4,922 $5,073 $72
$7,043
$219 $6,217
$6,760
$6,590
$5,897 $5,902
$5,240
FY'02
FY'03
FY'04
FY'05
FY'06
FY'07
FY'08
FY'09
FY'10 Initial
FY '10 Final
FY '11
State Revenues
Federal Relief
Rainy Day Fund
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget Agreement
Agency Appropriations – 10 Largest, Others, Total
Total Appropriations: $6,713.7 million Includes stimulus, Rainy Day Fund
Corrections, $462.1 , 7% DHS, $543.1 , 8% OHCA (Medicaid), $993.0 , 15% Transportation, $114.8 , 2% Mental Health, $187.7 , 3% Career Tech, $142.0 , 2% Juv. Affairs, $99.2 , 1% Public Safety, $88.4 , 1%
Total Ten Largest: $6,009.4, 89.5%
Higher Ed., $1,003.5 , 15% All Other Agencies, $704.3 , 11% Common Ed., $2,375.6 , 35%
Notes: Transportation also 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 hardpressed to accomplish their core missions with reduced staffing and resources.
See OK Policy’s FY ‘11 Budget Highlights at: http://okpolicy.org/fy-10-fy-11budgetinformation
Budget Trends: FY ‘10 – FY ‘11
Impact of Cuts
Even with all the additional revenue to reduce the size of cuts , the toll on services and programs has been significant:
Department of Mental Health and Substance Abuse Services reduced beds and closed centers for children‟s mental health and adult substance abuse, cut contracts to all providers; Department of Corrections cut contracts, eliminated programs, reduced staffing to under 75 percent of authorized levels, implemented monthly furlough days; OJA cancelled youth detention and gang prevention programs, cut providers 5 percent, authorized 22 furlough days; DHS cut funding for senior nutrition services; OHCA reduced all provider rates by 3.5 percent; Health Department eliminated 17 child guidance centers serving preschool children with developmental delays; School districts laid off teachers and staff, eliminated programs; Most agencies leaving positions unfilled, offering buy-outs; some imposing furloughs.
Looking Ahead
Looking Ahead
Budget Outlook: This Ain’t Over
Center on Budget and Policy Priorities: “2012 Could Be Worst Year Yet For States” Slow economic growth and loss of federal assistance equates to ongoing and worsening problems
Looking Ahead
We’ve Gotta Admit, It’s Gettin’ Better
Revenues are showing steady improvements
Change in Monthly General Revenue Collections, Compared to Same Month Prior Year, Jan '09 - Jan '11
19.5% 13.0% 9.9%
30.0% 20.0% 10.0%
9.3% 4.6% 6.0% 2.6%
6.0%
1.6% 2.1% -0.2%
0.0% -10.0% -20.0% -30.0%
-8.5%
-7.3% -16.7%
-19.1% -21.1% -21.5%
-23.7% -26.3% -27.7% -30.10% -30.5% -29.1% -30.1% -31.6%
-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
Looking Ahead
We’ve Gotta Admit, It’s Gettin’ Better
All major taxes are showing a healthy recovery – except the income tax
% Variance by Tax in General Revenue Collections from Prior Year, FY '11 vs. FY '10, YTD thru January (7 months)
60% 50% 40% 30% 29.2% 30.7% 53.0%
20%
10% 0% Personal Corporate Gross Income Tax Income Tax Production Tax Sales Tax Motor Vehicle Tax Other Sources Total 10.2% 2.1% 9.9%
9.4%
Looking Ahead
Budget Outlook: This Ain’t Over
FY „11 GR collections through January up 9.4 percent from FY „10 – but 23.2 percent below FY ‟09; Collections through January 3.3 percent above the estimate; Official projection for full-year collections to be 1.7 percent above the estimate.
July- Jan. General Revenue Collections, FY '01 - FY '11 (in $ Millions)
4,000 3,500 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 $2,708 $2,628 $2,742 $2,431 $2,902 $3,225 $3,410 $3,382 $3,574 $2,610 $2,855
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)
$6,000
$5,500 $5,000 $4,500 $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 (proj.) (est.) Source: FY'01 - FY '10 - Office of State Finance Monthly Revenue Collections;
FY '11 - FY '12: Board of Equalization Revenue Certification, Feb 2011 $4,717 $4,408 $4,174 $4,966 $4,616 $4,600 $5,701 $5,935 $5,953 $5,545 $4,960 $5,209
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; For many agencies, even cuts limited to 3-5 percent will mean cuts to core services and programs, loss of matching federal funds. Her budget left $100 million unspent; revised certification has made an additional $106 million available for appropriation.
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 $7,000 $7,043 $6,760 $7,125 $6,959 $6,714
$6,800
$6,600 $6,400 $6,200 $6,000 $5,800 $5,600 FY'06 $6,217
$6,325
FY'07
FY'08
FY'09
FY '10 Final
FY '11
FY '12 proposed
Looking Ahead
Budget Outlook: No End in Sight
Revenues unlikely to recover to pre-downturn nominal levels prior to FY ‟14 under current policies
General Revenue Fund Collections, FY '07 to FY '14, Actual and OK Policy Forecasts (in $ millions)
$5,938
$6,500 $6,000 $5,500 $5,000 $4,500 $4,000
$5,953
$5,518
$6,044
Actual Low Forecast Middle Forecast High Forecast
$5,643 $5,121
$4,969 $4,912 $5,380
$4,600
FY '07 (act.)
FY '08 (act.)
FY '09 (act.)
FY '10 (act.)
FY '11 (est.)
FY '12 (est.)
FY '13 (est.)
FY '14 (est.)
See: "A New Fiscal Reality for Oklahoma: The State Budget Outlook, 20112014; at:
Fiscal Year
Looking Ahead
Budget Outlook: No End in Sight
The prospect of continued slow revenue growth and budget shortfalls creates a “new fiscal reality” that calls for new perspectives and strategies. Create a revenue structure that supports public services: Defer or repeal additional tax cuts; Review and reduce tax exemptions, credits and rebates; New revenue streams for Medicaid and treatment of substance abuse; Broaden the tax base. Make smarter expenditure decisions:
Consolidate duplicative agencies and streamline services;
Prioritize prevention and surveillance; Ensure adequate funding of public pensions.
For More Information
• Updated Budget Information: okpolicy.org/current-budgetinformation • Oklahoma Policy Institute‟s Online Budget Guide www.okpolicy.org/onlinebudget-guide
Stay Connected
• E-mail [email protected] • Visit our website www.okpolicy.org and blog www.okpolicy.org/blog • Subscribe to our e-mail alerts • Follow @okpolicy on Twitter • “Like” Oklahoma Policy Institute on Facebook
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Please consider a tax-deductible contribution to support our work. We are a 501(c)(3) funded by grants and contributions from individuals, organizations and businesses. You can donate from our website or send a check to Oklahoma Policy Institute, P.O. Box 14347, Tulsa, OK 74159-1347
Updated February 23, 2011
David Blatt Oklahoma Policy Institute
[email protected] - (918) 794-3944
Oklahoma’s Path to Prosperity
OUR STARTING POINT
Government is among our means of achieving our common goals as a state --- alongside private businesses, non-profit organizations, faith groups and families.
Oklahoma’s Path to Prosperity
OUR STARTING POINT
Our families, communities and businesses depend on our state and local governments to help:
Educate our children and train our workforce; Protect our streets and investigate crimes; Maintain and upgrade our roads and bridges; Pay for the medical care provided by private doctors, nurses, therapists, home health aides, hospitals, etc. Ensure we have clean water and air; Promote our small towns, rural areas, artists and investors;
Take care of those at risk of harm and abuse.
We cannot reach our goals and thrive as a state without effective public structures and systems.
Oklahoma’s Path to Prosperity
We Already Lag Behind
Oklahoma already underfunds most of our public
structures and falls short of many of our common goals as a state. For example:
Our teacher pay is among the lowest in the nation; We have among the highest rates of heart disease, obesity, smoking, and uninsured;
Our community-based social service providers have gone years without rate increases;
Many of our roads and bridges are in disrepair; Our correctional facilities are overcrowded and understaffed.
The ongoing state budget crisis threatens a serious and long-term corrosion of our public structures that will weaken our prosperity, security and well-being.
Budget Trends: FY ‘02 – FY ‘09
Budget Trends: FY ‘02 – FY ‘09
FY ‘02 – FY ‘09: Bust and Boom
State budget suffered steep downturn, deep cuts, ‟02 - ‟04;
Strong economy led to robust revenue growth and increased state appropriations between FY „06 and FY ‟08.
Most agency appropriations frozen in FY „09
State Appropriations History, FY '00 - FY '09, in $ millions (includes supplementals, excludes one-times from Rainy Day spillover funds) $7,043 $6,760 $6,217
$5,389
$7,500 $7,000
$6,500
$7,089
$6,000 $5,500 $5,000 $4,500 $4,000 FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 $4,981 $5,491
$5,191
$5,459 $5,145
Budget Trends: FY ‘02 – FY ‘09
Where did the growth revenue go?
Increased State Appropriations, Selected Agencies, FY ’06 – FY ’08 Dept. of Education: $453M Human Services: $129M
Health Care Authority: $289M Corrections: $80M Higher Education: $271M Transportation: $72.5M*
80 percent of new dollars went to six core agencies. Covering rising costs of basic services and supporting targeted investments for shared goals.
Budget Trends: FY ‘02 – FY ‘09
Tax Cuts had a long-term impact
Most of the cuts were to the personal income tax;
Tax cuts were stretched out over several years; full impact will not be felt until FY ‟13.
Lost Revenues from Select Tax Cuts Enacted 2004 - 2006 FY'05 through FY'10 (in $ millions) $800.0 $600.0 $400.0 $200.0 $0.0 $18.7 FY'05 $144.8 $333.3 $561.8 $776.9 $651.1
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.
Source: Center on Budget and Policy Priorities
Budget Trends: FY ‘10 – FY ‘11
The Recession Hit in Late 2008
Monthly Unemployment Rate, National and Oklahoma, Dec. 2007 to Dec. 2010
10.5
9.4% 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 Dec-07 Jun-08 Dec-08 Jun-09 National Dec-09 Oklahoma Jun-10 Dec-10 6.8%
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%
10.0% 0.0% -10.0% -20.0% -30.0% -40.0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY '02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10 '11
-12.1%
-29.5%
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.
General Revenue Collections, FY '01 - FY '10 (in $millions)
$6,000 $5,500 $5,000 $4,500 $4,000 FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 $4,966 $4,717 $4,408 $4,174 $4,616 $4,600 $5,701
$5,935 $5,953 $5,545
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)
7,500 7,000 6,500 6,000
$5,389 $5,491 $5,191 $4,981 $5,145 $5,459 $7,043
$7,125 $30
ARRA
$7,231
$6,760 $6,217
$641
ARRA
$7,095
State
5,500
$6,590
State
5,000
4,500 4,000 FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 ARRA FY'07 FY'08 FY'09 FY'10 State Appropriations
Budget Trends: FY ‘10 – FY ‘11
FY ‘10 : Off to a Very Rough Start
Collections through January were $864 million – 24.9 percent - below the estimate. After seven months of significant shortfalls, collections starting in February came close to or exceeded the monthly estimate.
General Revenue Collections compared to Estimate, by Tax, FY '10 thru Jan (in $millions)
$0 -$11 -$200 -$400 -$401 -$600 -$800 -$1,000
Net Income Gross Sales Tax Tax Production Motor Vehicle Other Sources
General Revenue Collections compared to Estimate, by Tax, FY '10 thru June (in $millions)
$200 $17 $6 -$125 -$238 -$476
-$72
$0 -$200 -$400 -$600 -$800 -$864
Total Gen. Revenue
-$180
-$200
-$1,000
Net Gross Sales Tax Income Tax Production Motor Vehicle
-$816
Other Total Gen. 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 $7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000
Total= $7,124 million
$301 $30
Total= $7,231 million
$641 $371
Total= $6,959 million $224 $838 $435
$6,793
$6,220 $5,462
FY '09
State Recurring Cash
FY '10 - Initial
Stimulus (ARRA)
FY '10 - Revised
Rainy Day Fund
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget: The Challenge Escalates
2010 Session focused on which, if any, revenue measures would be adopted to bridge the budget gap.
FY „11 budget gap exceeded $800 million - assuming maintenance of FY „10 budget cuts, the use of all remaining stimulus funds, and 3/8ths of Rainy Day Fund.
Equivalent to an additional 12 percent cuts to all agencies of state government beyond the cuts already enacted. Agency scenarios of how to absorb cuts of an additional 7.5 percent to 15 percent in FY „11 left no doubt of the grave threats that would be posed to the state economy and to the health and security of Oklahomans.
Many cuts would be multiplied by loss of federal matching funds.
See OK Policy, “Bridging the Budget Gap,” : http://okpolicy.org/files/bridgingthegap_1pg.pdf
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget Agreement
Appropriated almost $1.4 billion in additional revenues on top of those certified in February. These included: Remaining $539 million from the 2009 stimulus bill; Additional $273 from the Rainy Day Fund; $580 million from assorted revenue enhancements: Suspending and deferring payment of tax credits; Issuing and refinancing bonds; Fee and permit increases; Transfers of cash balances;
Enhanced tax collections.
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget Agreement
Total appropriations for FY ‟11 = $6.714 billion. 7.2 percent decrease (-$517.5 million) from the initial FY „10 budget and 3.5 percent decrease (-$245.4 million) from the final FY „10 budget after mid-year cuts.
FIG. 1: State Appropriations History, FY '00 - FY 11
(in $millions; FY '00-FY'10 includes supplementals, excludes one-times from Rainy Day Spillover Funds )
$7,500 $7,000 $6,500
$838 $539 $30 $641
$224
$273
$6,000
$7,095
$5,500 $5,000 $4,500 $4,000 FY'00 FY'01
$75 $5,389 $4,906
$79 $269 $5,412 $4,922 $5,073 $72
$7,043
$219 $6,217
$6,760
$6,590
$5,897 $5,902
$5,240
FY'02
FY'03
FY'04
FY'05
FY'06
FY'07
FY'08
FY'09
FY'10 Initial
FY '10 Final
FY '11
State Revenues
Federal Relief
Rainy Day Fund
Budget Trends: FY ‘10 – FY ‘11
FY ’11 Budget Agreement
Agency Appropriations – 10 Largest, Others, Total
Total Appropriations: $6,713.7 million Includes stimulus, Rainy Day Fund
Corrections, $462.1 , 7% DHS, $543.1 , 8% OHCA (Medicaid), $993.0 , 15% Transportation, $114.8 , 2% Mental Health, $187.7 , 3% Career Tech, $142.0 , 2% Juv. Affairs, $99.2 , 1% Public Safety, $88.4 , 1%
Total Ten Largest: $6,009.4, 89.5%
Higher Ed., $1,003.5 , 15% All Other Agencies, $704.3 , 11% Common Ed., $2,375.6 , 35%
Notes: Transportation also 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 hardpressed to accomplish their core missions with reduced staffing and resources.
See OK Policy’s FY ‘11 Budget Highlights at: http://okpolicy.org/fy-10-fy-11budgetinformation
Budget Trends: FY ‘10 – FY ‘11
Impact of Cuts
Even with all the additional revenue to reduce the size of cuts , the toll on services and programs has been significant:
Department of Mental Health and Substance Abuse Services reduced beds and closed centers for children‟s mental health and adult substance abuse, cut contracts to all providers; Department of Corrections cut contracts, eliminated programs, reduced staffing to under 75 percent of authorized levels, implemented monthly furlough days; OJA cancelled youth detention and gang prevention programs, cut providers 5 percent, authorized 22 furlough days; DHS cut funding for senior nutrition services; OHCA reduced all provider rates by 3.5 percent; Health Department eliminated 17 child guidance centers serving preschool children with developmental delays; School districts laid off teachers and staff, eliminated programs; Most agencies leaving positions unfilled, offering buy-outs; some imposing furloughs.
Looking Ahead
Looking Ahead
Budget Outlook: This Ain’t Over
Center on Budget and Policy Priorities: “2012 Could Be Worst Year Yet For States” Slow economic growth and loss of federal assistance equates to ongoing and worsening problems
Looking Ahead
We’ve Gotta Admit, It’s Gettin’ Better
Revenues are showing steady improvements
Change in Monthly General Revenue Collections, Compared to Same Month Prior Year, Jan '09 - Jan '11
19.5% 13.0% 9.9%
30.0% 20.0% 10.0%
9.3% 4.6% 6.0% 2.6%
6.0%
1.6% 2.1% -0.2%
0.0% -10.0% -20.0% -30.0%
-8.5%
-7.3% -16.7%
-19.1% -21.1% -21.5%
-23.7% -26.3% -27.7% -30.10% -30.5% -29.1% -30.1% -31.6%
-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
Looking Ahead
We’ve Gotta Admit, It’s Gettin’ Better
All major taxes are showing a healthy recovery – except the income tax
% Variance by Tax in General Revenue Collections from Prior Year, FY '11 vs. FY '10, YTD thru January (7 months)
60% 50% 40% 30% 29.2% 30.7% 53.0%
20%
10% 0% Personal Corporate Gross Income Tax Income Tax Production Tax Sales Tax Motor Vehicle Tax Other Sources Total 10.2% 2.1% 9.9%
9.4%
Looking Ahead
Budget Outlook: This Ain’t Over
FY „11 GR collections through January up 9.4 percent from FY „10 – but 23.2 percent below FY ‟09; Collections through January 3.3 percent above the estimate; Official projection for full-year collections to be 1.7 percent above the estimate.
July- Jan. General Revenue Collections, FY '01 - FY '11 (in $ Millions)
4,000 3,500 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 $2,708 $2,628 $2,742 $2,431 $2,902 $3,225 $3,410 $3,382 $3,574 $2,610 $2,855
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)
$6,000
$5,500 $5,000 $4,500 $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 (proj.) (est.) Source: FY'01 - FY '10 - Office of State Finance Monthly Revenue Collections;
FY '11 - FY '12: Board of Equalization Revenue Certification, Feb 2011 $4,717 $4,408 $4,174 $4,966 $4,616 $4,600 $5,701 $5,935 $5,953 $5,545 $4,960 $5,209
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; For many agencies, even cuts limited to 3-5 percent will mean cuts to core services and programs, loss of matching federal funds. Her budget left $100 million unspent; revised certification has made an additional $106 million available for appropriation.
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 $7,000 $7,043 $6,760 $7,125 $6,959 $6,714
$6,800
$6,600 $6,400 $6,200 $6,000 $5,800 $5,600 FY'06 $6,217
$6,325
FY'07
FY'08
FY'09
FY '10 Final
FY '11
FY '12 proposed
Looking Ahead
Budget Outlook: No End in Sight
Revenues unlikely to recover to pre-downturn nominal levels prior to FY ‟14 under current policies
General Revenue Fund Collections, FY '07 to FY '14, Actual and OK Policy Forecasts (in $ millions)
$5,938
$6,500 $6,000 $5,500 $5,000 $4,500 $4,000
$5,953
$5,518
$6,044
Actual Low Forecast Middle Forecast High Forecast
$5,643 $5,121
$4,969 $4,912 $5,380
$4,600
FY '07 (act.)
FY '08 (act.)
FY '09 (act.)
FY '10 (act.)
FY '11 (est.)
FY '12 (est.)
FY '13 (est.)
FY '14 (est.)
See: "A New Fiscal Reality for Oklahoma: The State Budget Outlook, 20112014; at:
Fiscal Year
Looking Ahead
Budget Outlook: No End in Sight
The prospect of continued slow revenue growth and budget shortfalls creates a “new fiscal reality” that calls for new perspectives and strategies. Create a revenue structure that supports public services: Defer or repeal additional tax cuts; Review and reduce tax exemptions, credits and rebates; New revenue streams for Medicaid and treatment of substance abuse; Broaden the tax base. Make smarter expenditure decisions:
Consolidate duplicative agencies and streamline services;
Prioritize prevention and surveillance; Ensure adequate funding of public pensions.
For More Information
• Updated Budget Information: okpolicy.org/current-budgetinformation • Oklahoma Policy Institute‟s Online Budget Guide www.okpolicy.org/onlinebudget-guide
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• E-mail [email protected] • Visit our website www.okpolicy.org and blog www.okpolicy.org/blog • Subscribe to our e-mail alerts • Follow @okpolicy on Twitter • “Like” Oklahoma Policy Institute on Facebook
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