Oklahoma slowdown shows prudence of 2019 deposit
Gov. Kevin Stitt’s call in 2019 to place $200 million in the state’s savings account during a flush budget year was criticized by many Democrats and even some Republicans, who preferred spending all $8.3 billion at the Legislature’s disposal. New budget estimates bolster Stitt’s push, which was successful.
The state Board of Equalization says lawmakers will have $85.5 million less to appropriate this year than they did for the current fiscal year. The state budget will be roughly $8.2 billion, or 1% less than this year’s budget.
But the trend line is not encouraging — just two months ago, the Board of Equalization estimated that the Legislature would have $9.4 million more to spend than it did a year ago. That would have been essentially a flat budget, as the FY 2021 budget will be.
However, Stitt, who serves as chairman of the equalization board, noted that a further slide is possible — projections for FY 2022 have the state budget at $7.9 billion — and warned agency heads to take note.
He said it would be a “fool’s errand” to appropriate $8.2 billion for recurring costs next year.
“I’m nervous about spending and increasing the base-level expenses” over the existing budget figures, Stitt told board members. “Even though we have $8.2 (billion) to spend, we have to be very, very careful.” He’s right.
The culprits for the smaller total available this year are low oil and natural gas prices and economic uncertainties related to the COVID-19 coronavirus outbreak in China. The energy prices have been in an extended slide — in December, Shelly Paulk, deputy budget director for the Office of Management and Enterprise Services, said a nearly 50% projected decrease in natural gas production taxes were a major reason for the lower estimated revenues. “We’re seeing oil and natural gas prices continue to struggle,” Paulk said last week.
Collections from corporate income taxes and sales taxes are projected to dip as well.
Revenue concerns aren’t simply at the state level. Oklahoma City leaders were told recently that an economic contraction was possible during the next 18 months that could be similar to a downturn in 2016 that produced a hiring freeze. The Police Department’s proposed budget for FY 2021 would, among other things, cut funding for five officer positions that now are vacant.
Legislators will have $310 million in one-time cash carried over from FY 2019 because, per the state constitution, appropriations can’t exceed 95% of projected revenues. The governor proposes saving some of that money or using it for one-time expenses in order not to exceed $7.9 billion in recurring expenses next year.
And, in part because of the prudent $200 million deposit made last year, the state’s Rainy Day Fund holds more than $1 billion — bolstering the state’s ability to absorb the sort of dip that’s underway today.