Oklahoma Budget Trends and Outlook (September 2011)

8/4/2019 Oklahoma Budget Trends and Outlook (September 2011)

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The State Budget Outlook:An Incomplete Recovery

Updated September, 2011

David Blatt

Oklahoma Policy [email protected] - (918) 794-3944
mailto:[email protected]:[email protected]


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Oklahomas Path to Prosperity

OUR STARTING POINTGovernment is among our means of

achieving our common goals as astate --- alongside private businesses,non-profit organizations, faith groups

and families.


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Were In This Together State and local governments help us meet ourgoals:

Educate our children and train our workforce;

Protect our streets and investigate crimes;

Maintain and upgrade our roads and bridges;

Pay for medical care provided by private doctors, nurses,therapists, home health aides, hospitals, etc.

Ensure our water is clean and safe;

Promote our small towns, rural areas, artists, and investors; Support those at risk of harm and abuse.

Our families, communities and businesses cannotthrive without effective public structures & systems.


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Oklahoma Is A Low Tax State Oklahomans pay among the lowest state and local

taxes in the nation, either as a share of state personalincome (40th) or per capita (41st);

Just under a dime of every dollar earned by

Oklahomans goes to pay for state and local services.

Source: Source: Center on Budget and Policy Priorities tabulations based ondata from the Bureau of the Census.


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We Already Lag Behind Oklahoma invests less than most states in our publicstructures:

Total per capital state and local spending is $1,627 (18percent) less than the national average;

We spend below the national average in just about everycategory of expenditure.

-$1,000

$1,000$3,000

$5,000

$7,000

$9,000

Spending

perPerson

State and Local Spending per Person by Function, 2007-08

Oklahoma

US Average

Source: U.S. Bureauof the Census


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We Already Lag BehindWe already fall short in many of our commongoals as a state:

Our average teacher pay is 42nd in the nation (2007);

We rank in the bottom 10 states in smoking, obesity, job-related

deaths, access to health insurance and doctors, and days lost tomental and physical illness (2007);

We are 4th in total prisoners per capita and 1st in femaleincarceration rates (2009);

We rank 9th worst among the states in road condition, with29.5% of roads in mediocre or poor condition (2005).

The ongoing state budget crisis threatens a serious and long-term corrosion of our public structures that will weaken ourprosperity, security and well-being.


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Budget Trends: FY 02 FY 09


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Budget Trends: FY 02 FY 09FY 02 FY 09: Bust and Boom

State budget suffered steep downturn, deep cuts, 02 - 04;

Strong economy led to robust revenue growth and increased stateappropriations between FY 06 and FY 08.

Most agency appropriations frozen in FY 09

$4,981

$5,389 $5,491

$5,191 $5,145

$5,459

$6,217

$6,760$7,043 $7,089

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09

State Appropriations History, FY '00 - FY '09, in $ millions(includes supplementals, excludes one-times from Rainy Day spillover funds)


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Where did the growth revenue go?

Increased State Appropriations, Selected Agencies,

FY 06 FY 08

Dept. of Education: $453M

Health Care Authority: $289M

Higher Education: $271M

Human Services: $129M

Corrections: $80M

Transportation: $72.5M


80 percent of new dollars went to six core agencies.

Covering rising costs of basic services and supportingtargeted investments for shared goals.


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Lost Revenues from Select Tax Cuts Enacted 2004 - 2006

FY'05 through FY'10 (in $ millions)

$18.7$144.8

$333.3

$561.8$651.1

$776.9

$0.0

$200.0

$400.0

$600.0

$800.0

FY'05 FY'06 FY'07 FY'08 FY'09 FY'10

sourc e: Okla homa Tax Commission

Tax Cuts Had a Long-Term Impact Tax cuts were large, permanent, and back-loaded;

Tax cuts were stretched out over several years; full impactwill not be felt until FY13;

Major cuts were almost all to the personal income tax.



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The Recession Hit in Late 2008 Oklahomas unemployment rate rose quickly from under 4 percent to

around 7 percent between Sept 2008 and June 2009;

Unemployment less severe, recovered more quickly than the nation.

10.1%9.8%

9.1%

7.0%

5.6%

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

Monthly Unemployment Rate, National and Oklahoma,

January 2008 to August 2011 (seasonally adjusted)

United States Oklahoma


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The Recession Hit in Late 2008 Oklahoma experienced three straight quarters of negative growth

(declining state personal income) in late 2008 early 2009;

Economy growing faster than the nations since start of 2010.

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4 2010.1 2010.2 2010.3 2010.4 2011.1

% Change from Prior

QuarterQuarterly Change in Personal Income,

Oklahoma and National,

3rd Quarter 2007 to 1st Quarter 2011

U.S. Oklahoma


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State Budgets Hammered States facing cumulative budget shortfalls close to $600 billion.


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State Budgets Hammered

All but four states faced budget shortfalls in FY 11.


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State Budgets Hammered

All but four states faced budget shortfalls in FY 11.


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Its a Revenue Problem Five consecutive quarters of worsening collections;

Revenue drops more than twice as steep as during thelast downturn;

Revenues recovering over past five quarters.

-12.1%

-29.5%

12.9%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Q1

FY

'02

Q3

FY

'02

Q1

FY

'03

Q3

FY

'03

Q1

FY

'04

Q3

FY

'04

Q1

FY

'05

Q3

FY

'05

Q1

FY

'06

Q3

FY

'06

Q1

FY

'07

Q3

FY

'07

Q1

FY

'08

Q3

FY

'08

Q1

FY

'09

Q3

FY

'09

Q1

FY

'10

Q3

FY

'10

Q1

FY

'11

Q3

FY 11

Quarterly Year-over-Year Change in Oklahoma General

Revenue Collections, FY '02 - FY '11


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Its a Revenue Problem FY 10 General Revenue 23 percent below pre-downturn (FY

08) levels;

Between 2001 2010, state population grew 6 percent, inflationincreased costs of good and services by about 30 percent yetstate collected less revenue in FY 10;

Revenues increased by 10.5 percent in FY 11 but remained 16.5percent below FY08.

4,7174,408

4,1744,616

4,966

5,7015,935 5,953

5,544

4,6215,138

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11

Annual General Revenue Collections,

FY '01 - FY '11 (in Millions)


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Its a Revenue Problem All major taxes fell sharply in FY 09 and FY 10 personal

income tax and gross production tax most steeply;

Only sales tax has fully recovered to pre-downturn levels.

$2,380 $2,338 $2,239 $2,014 $1,708 $1,832

$265 $435 $279$266

$168 $275

$730 $640 $825$724

$445$489

$1,455 $1,531 $1,612$1,647

$1,516$1,668

$234 $259 $252$176

$147

$199

$638$732 $746

$716

$637

$676

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

FY'06 FY'07 FY'08 FY'09 FY'10 FY'11

Oklahoma General Revenue Collections, FY '06 - FY '11 (in $ millions)

Personal Income Tax Corporate Income Tax Gross Production Sales Tax Motor Vehicle Other Sources

Total=

$5,935

Total=

$5,953

Total=

$4,621

Total=

$5,138

Total=

$5,541

Total =

$5,701


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Its a Revenue Problem Monthly collections down by over 15 percent for 12straight months (Feb 2009 Jan 2010);

Collections now showing solid recovery;

FY 12 year-to-date up 19 percent from FY 10 but still 16

percent below FY 09.

-8%

-22%-19%

-21%

-28%-30%

-26%

-32%-30%

-24%

-31%-29%

-17%

-7%

1.6%

0%

6%

2%

10%

5% 6%3%

9%13%

20%

12%9%

13%10%

22%

4%

19%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Jan-09 Mar-09May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11May-11 Jul-11

Change in Monthly General Revenue Collections,

Compared to Same Month Prior Year, Jan '09 - Aug '11


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Budgeting Through the Crisis Budgets for each of the past three years (FY 10, FY 11 & FY12) have been repeated variations of a similar theme:

Large shortfalls in projected revenues;

Fear of deep and devastating budget cuts;

Use of non-recurring revenues to partly bridge the budget gap;

Budget cuts across state government but less severe for coreeducation, health, human service, public safety agencies.


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Budgeting Through the Crisis FY 12 appropriations of $6.511 billion:

Three consecutive years of declining appropriations;

$254.8 million, 3.8 percent, below FY 11;

$613.5 million, 8.6 percent, below FY 09;

$249 million, 3.7 percent below FY 07.

See FY 12 Budget Highlights at:http://okpolicy.org/fy-2012-budget-highlights

$6,217$6,760

$7,043 $7,095$6,590

$5,897 $5,938$6,312

$30$641

$838 $554 $99

$224$273 $100

$4,000

$4,500

$5,000$5,500

$6,000

$6,500

$7,000

$7,500

FY'06 FY'07 FY'08 FY'09 FY'10 -

Initial

FY '10 -

Final

FY '11 FY '12

State Appropriations, FY '06- FY '11(in $ Millions, includes supplementals, excludes Rainy Day "spillover" funds)

State Revenues Federal Relief Rainy Day Fund

Total=

$6,511


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Budgeting Through the Crisis Governors Henry and Fallin and the Legislature used variousrevenue enhancements to help bridge budget shortfalls and reducethe severity of cuts;

Most new revenues have been one-time/non-recurring

Totaled close to $3 billion over 3 years, including:

Federalstimulus

funds,

$1,491

Rainy Day

Funds, $597 Transfers

from State

Funds, $525

Suspension

and deferral

of tax credits,

$129

Tax

compliance

efforts, $154Fee

increases,

$34Other

measures,

$59

Revenue Enhancements, FY '10 - FY 12 (in $millions)

Total:

$2,988

Federal funds from thestimulus bill (~$1.5billion);

State Rainy Day Fund($597 million);

Cash transfers from

various funds ($525million);

Enhanced taxcompliance ($154million);

Suspending anddeferral of tax credits

($129 million).


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Budgeting Through the Crisis Federal Stimulus bills (American Recovery and Reinvestment Act)provided single largest source of assistance for state budget);

Funds divided between support for education and health care.

American Recovery and Reinvestment Funds Authorized in FY '10, FY '11 & FY '12 Budgets by Agency

Total FY '10 FY' 11 FY '12 Total

1. State Fiscal Stabilization Fund*

Education, State Department of $ 219,711,616 $ 139,521,635 - $ 359,233,251

Higher Education, Regents for $ 68,792,477 $ 59,794,986 - $ 128,587,463

sub-total State Fiscal Stabilization Fund $ 288,504,093 $ 199,316,621 $ - $ 487,820,714

2. Enhanced FMAP

Health Care Authority (OHCA)** $ 431,111,338 $ 278,139,950 $ 70,866,174 $ 780,117,462

Human Services, Department of $ 101,355,640 $ 43,000,000 $ 22,618,363 $ 166,974,003

University Hospital Authority $ 10,316,683 $ 24,407,120 $ 34,723,803

Other agencies $ 2,816,784 $ 9,196,768 $ 5,297,146 $ 17,310,698

sub-total enhanced FMAP $ 545,600,445 $ 354,743,838 $ 98,781,683 $ 999,125,966

Total of All Agencies $ 837,850,680 $ 554,060,459 $ 98,781,683 $ 1,490,692,822

*Common Education received $114 million in extra stimulus money for FY '11 that was not appropriated*OHCA includes $10 million from State Fiscal Stabilization Fund (General Purpose) in initial FY '10 budget. Excludes $30million enhanced FMAP for FY '09


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Budgeting Through the Crisis 90 percent of appropriations consistently goes to 10 agenciesthat provide core services;

Over 65 agencies share remaining 11 percent of funding

Common Ed.; $2,278 ;35.0%

Higher Ed.; $945 ;14.5%

OHCA (Medicaid);$983 ; 15.1%

DHS; $537 ; 8.3% Corrections; $460 ;7.1%Transportation; $107 ;1.6%

Mental Health; $187 ;2.9%Career Tech; $134 ;2.1%

Juv. Affairs; $96 ; 1.5%Public Safety; $85 ;1.3%ll Other Agencies;

$699 ; 10.7%

FY '12 Appropriations: Total and 10 Largest Agencies

TotalAppropriations:

$6,510.5 million

Total Ten Largest:

$5,811.9; 89.2%

Notes:

Transportation also received $70 from

bond issue;

OHCA excludes revenue from hospital

provider assessmber (SHOPP)


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Budgeting Through the Crisis Almost every agency has absorbed successive and significant cutsover past three years;

Some 40 agencies more than half of all appropriated agencieshave absorbed cuts of greater than 20 percent since FY 09;

Cuts to some key health, human service, and public safety

agencies have been minimized:

Mental Health -12.7%; DPS 12.6%; Common Education10.0%; Higher Ed 9.1 percent; Corrections -8.6%; DHS -3.9%; OHCA +12.7%

No agencies have been funded to cover rising operating andemployee benefit costs over the past three years;

Budget cuts and funding shortfalls will continue to impactOklahoma students, teachers, families, public employees, non-profitorganizations and private sector businesses.


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Looking Ahead


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Looking Ahead

Budget Outlook: An Incomplete RecoveryTAX COLLECTIONS AT HISTORIC LOWS

Tax collections in FY 10 equal to just 5.2 percent of

state personal income ;

Declined from 6.7 percent in FY 06 due to tax cuts and

economic downturn.

5.0%5.5%

6.0%

6.5%

7.0%

7.5%

$0$2,000

$4,000

$6,000

$8,000

$10,000

State Tax Collections, FY '82 - FY '10Total and as % of State Personal Income

State Tax Collections (in $millions)

Tax Collections as % of State Personal Income

Sources: State personal income from Bureau of Economic Analysis; Taxcollections from Annual Executive Budget


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Looking Ahead

Budget Outlook: An Incomplete Recovery

5.7%

5.2%

4.8%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Oklahoma State Appropriated Budget as Share of

State Personal Income, FY '81 - FY '11

Sources U.S. Bureau of Economic Affairs, State Quarterly Personal Income (estimated 1.0% growth 2nd-4th Qtr SFY 2011);

A ro riations histor rom annual Executive Bud et other sources

State appropriated spending has reached its lowestlevel in at least 30 years and will fall even further inFY 12


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Looking Ahead

Budget Outlook: An Incomplete Recovery Revenues unlikely to recover to pre-downturn nominallevels prior to FY14 under current policies

$5,938 $5,953

$5,518

$4,600

$4,912

$4,969

$5,121 $5,380

$5,643

$6,044

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

FY '07

(act.)

FY '08

(act.)

FY '09

(act.)

FY '10

(act.)

FY '11

(est.)

FY '12

(est.)

FY '13

(est.)

FY '14

(est.)

Fiscal Year

General Revenue Fund Collections, FY '07 to FY '14,Actual and OK Policy Forecasts (Oct. 2010) (in $ millions)

Actual

Low

Forecast

Middle

Forecast

High

Forecast

See: "A NewFiscal Reality forOklahoma: TheState BudgetOutlook, 2011-2014; at:


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Looking Ahead

Budget Outlook: An Incomplete Recovery Make smarter expenditure decisions:

Consolidate duplicative agencies and streamline services;

Prioritize prevention and surveillance;

Ensure adequate funding of public pensions.

Improve our forecasting capacities and budget reserves;

Give control for making decisions about revenues and spendingback to our elected representatives.


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For More Information

Updated Budget Information:okpolicy.org/current-budget-

information

Oklahoma Policy Institutes OnlineBudget Guide

www.okpolicy.org/online-

budget-guide
http://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guide


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Oklahoma Budget Trends and Outlook (September 2011)

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