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8/14/2019 2009 Oklahoma Budget Overview
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OKLAHOMA BUDGET OVERVIEW
David Blatt
Oklahoma Polic Institute
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Oklahomas Path to Prosperity
OUR STARTING POINTWe investinvestour tax dollars in
our public structurespublic structures to support
our common goalscommon goals as a state
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Bud et Trends: FY 02 FY 08
Annual Appropriations Totals, FY 00FY 08(Includes Supplementals thru FY 08 and Rainy Day spillover Funds
for
FY 02 FY 08: Bust and BoomState budget suffered steep downturn, deep cuts, 02 - 04Strong economy led to robust revenue growth andincreased state appropriations between FY 06 and FY 08
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Where did the money go?
Budget Trends: FY 02 FY 08
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Continuing Impact of Tax Cuts Deep and permanent tax enacted between 2004 and2006
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 11
Budget Trends: FY 02 FY 08
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Budget Trends: FY 02 - FY 08
FY07 FY08: RevenueSlowdown
General Revenue collections began to slow in FY 07 andwere almost flat in FY 08 (+%0.9, $54 million)
Increased gross production tax (+$205.7 million) and
sales tax (+$80.6 million) revenues helped make up forfallin ersonal and cor orate income tax collections -
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Bud et Trends: FY 09 FY 10
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Source: CBPP, State Budget Troubles Worsen,
updated May 18, 2009 at: http://www.cbpp.org/9-8-08sfp.htm
Bud et Trends: FY 09 FY 10
ThingsAre Tough All Over
Combined state budget gaps for FY 09, FY10 and FY 11 estimated to total more than
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Budget Trends: FY 09 FY 10
FY 09 Budget: Tightening theScrews
FY 09 initial appropriations of $7.089 billion increase of $47million (0.7%)
Most agencies appropriations frozen from FY 08
No funding for teacher salary increases, state employee raises
FY 09 excludes supplementals and mid-year budget cut
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Budget Trends: FY 09 FY 10
Revenues on the Skids FY 09 revenue: from $224.8 million above estimate (Dec.)
to $271 million below estimate (May)
Every major tax below estimate and prior year in recentmonths
When revenues dipped below 95 percent of estimates in
May, a revenue shortfall was declared, leading to cuts in
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Budget Trends: FY 09 FY 10
Revenues on the Skids By mid-year, FY 09 projections dropped $236 million
compared to the June certified estimate (red bars,below)
FY 10 revenues estimated to come in >$600 million
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Budget Trends: FY 09 FY 10
Revenues on the Skids The FY 10 forecast is bad - - but far from a worst-case
scenario
Still assumes growth of sales tax and corporate
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Budget Trends: FY 09 FY 10
Building the FY 10 Budget
-$309.6
$612.5 million (8.7 percent) lessavailable
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Budget Trends: FY 09 FY 10
Stimulus Dollars to the RescueBudget agreement reached on using $641 millionfrom the American Recovery and Reinvestment Act(ARRA, or the stimulus) in FY 10 $236.3 million from the State Fiscal Stabilization
Fund for common education and higher education;
$10 million from the State Fiscal StabilizationFund for Oklahoma Health Care Authority $394 of enhanced federal Medicaid matching
funds for 8 agencies $306.5 million to OHCA $71.4 million to DHS
Stimulus dollars allocated for FY 10 representroughly half of total available stimulus amount
See: OK Policy FY 10 Budget Review at:http://okpolicy.org/fy-10-budget-information
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Budget Trends: FY 09 FY 10
FY 10 Budget
NOTE: FY 09 totals do not include June budget
$7,231.2 million total, including $641 millionARRAIncrease in total appropriations of $106 million(1.5 percent) compared to FY 09State dollars only: 7.1 percent less than FY 09
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Fundin Public Services
FY 10 Appropriations bySubcommittee
Education
53.4%
GovernmentOperations
5.2%
HumanServices
9.6%
Health andSocial Services
18.6%
NaturalResources
2.1%
Public Safety10.9%
Other0.2%
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FY 10 State Appropriations10 Largest Agencies: $6.3 billion (88%)
Agencies (75 agencies): $829 million (12%)
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Budget Trends: FY 09 FY 10
FY 10 BudgetStimulus funds made it possible to minimize cuts orprovide small increases to ten largest state agenciesand some smaller ones Funding for 10 largest agencies up $161 million,
2.6 percentOHCA, +$107.7 million (+12.3%)
Common Education, +$40.3 million (+1.6%)Higher Education, +$30.9 million (+3.0%)DHS, -$8.4 million (-1.5%)
Most smaller agencies took cuts of 5 to 7 percent Funding for 68 smaller agencies down $54
million, 6.5 percent
See: OK Policy FY 10 Budget Review at:http://okpolicy.org/fy-10-budget-information
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Budget Trends: FY 09 FY 10
FY 10 Budget: The ImpactFor most agencies, FY 10 appropriations will lead tofunding gaps and possible cuts in staffing, programsand servicesNo funding to address rising employee benefit costs orinflation (e.g. utilities, transportation, food)Demands for some state services increase due to the
downturn
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Budget Trends: FY 09 FY 10
FY 10 Budget: The ImpactAt this point, little is known about how agencies willrespond to budget cuts and funding gaps.
Most agencies will be forced to try to perform their corework with fewer staff (unfilled vacancies). This could lead to:
Closing offices , reducing hours, and limiting staff servingthe public;
Reducing the frequency of inspections of facilities andbusinesses;
Increasing staff caseloads;
Some agencies may be required to fill budget gaps by:
Cutting reimbursement rates to private providers;
Waiting lists and freezes on programs.
Fee increases;
Furloughs and involuntary lay-offs
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Budget Outlook: Beyond FY 10
A Slow ReboundAssuming the economy begins to recover in late2009, we project that revenues will rebound slightlyin FY 11
Revenue growth could be hindered by automatic cut intop income tax rate if GR is projected to increase >4percent
It may take until FY 13 for revenues to return to FY 08levels
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Budget Outlook : Beyond FY 10
Rainy Day FundRainy Day Fund is filled to maximum amount of $597millionLeft untouched for initial FY 10 budget
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Budget Outlook : Beyond FY 10
Rainy Day Fund: Off- Limits?Rainy Day Fund can be accessed as follows:
3/8th for a mid-year shortfall in GR collections;
3/8th for a projected decline in GR collections for thecoming year compared to the current year;
1/4th upon declaration of an emergency and legislative
approval
RDF designed for use at the onset of a downturnIf revenues do begin to recover, most of the RDF willbe unavailable for appropriations in FY 11 and FY 12.However, if FY 10 or FY 11 revenue collections fallshort of the estimate, RDF could be used
See: OK Policy, Nows the Time: Using Stimulus and RainyDay Funds Can reduce the Impact of State Budget Cuts,at:http://okpolicy.org/nows-time-use-rainy-day-funds
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Budget Outlook : Beyond FY 10
Filling the Revenue GapStimulus Round II
About half of the State Fiscal Stabilization Fund andenhanced Medicaid funds will be available for use in FY11
$236.5 million of SFSF education dollars;
Up to $95 million of SFSF general purpose dollars;
$365 to $500 million of enhanced Medicaid
Other Revenues?
SQ 640 requires a 3/4th vote of both legislativechambers or vote of the people at time of next
general election to raise taxes;
Continuing search for one-time revenues;
Other proposals could include selling off publicassets, securitizing the tobacco settlement or statelottery
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Budget Outlook : Beyond FY 10
The Post-Stimulus Budget Gap?The FY 12 dilemma
State Fiscal Stabilization Fund and enhanced FMAP areintended for states to avoid cuts, layoffs, and taxincreases but what happens when the money runs out?
>$600 million of one-time federal stimulus dollars
being used to support the ongoing expenditures of stateagencies and schools in the FY 10 budget (and FY 11?).
Other stimulus funding streams may also end up beingused in part to fund ongoing expenditures (e.g. Dept ofRehabilitation Services clearing off its waiting list).
Hole will be especially huge for Medicaid agencies, which
could see their federal share plunge by over 15percentage points.
Will Congress help out?
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Budget Outlook : Beyond FY 10
The Sky is Slowly Descending!Oklahoma already underfunds most of our publicstructures and falls short of our common goals as astateThe relentless underfunding of public structuresleads to : threats to public safety and well-being;
decline in performance; decline in public confidence and growing cynicism; your on your own attitude
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Budget Outlook : Beyond FY 10
Short-Term Recommendations
2.Change the rules for the Rainy Day Fund
Introduce legislation next year for a 2010 ballotproposal to allow RDF money to be used anytime revenues remain below their pre-downturnpeak.
3.Defer additional tax cuts until revenues recover
4.Consider new revenue streams for the Medicaidprogram
4.Develop meaningful multi-year forecasting
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Structural deficit: A
situation that occurs
when a states normal
growth of revenues is
insufficient to finance
the normal growth of
expenditures year after
year
(CBPP, Faulty Foundations: State
Structural Budget Problems)
Lon -Term Fiscal Outlook
Oklahoma like most states and the federalgovernment faces a looming structural budget
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Oklahomas Structural DeficitDemographic changes, rising health care andretirement costs, an outdated tax system and taxcuts all lead to revenues failing to keep pace with
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Long-Term Recommendations
4. Modernize the Tax System
6. Preserve a Balanced Tax Structure
8. Make the tax system fairer
Long-Term Fiscal Outlook
People want justtaxes more than they want
lowertaxes. They want to know that everyman is paying his proportionate shareaccording to his wealth.
-Will Rogers
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Contact Information
David Blatt, Director of PolicyOklahoma Policy Institute4606 South Garnett, Suite 100 |
Tulsa, Oklahoma 74146
ph: (918) 859-8747
BetterInformation,
BetterPolicyOklahoma Policy Institute provides timely and credible analysis of
state policy issues