| Posted: Wednesday, November 11th, 2009 | Comments (0)

Tough State Budget Times Ahead

By: Constitution Staff

Based on state revenue figures released by Oklahoma State Treasurer Scott Meacham, tough budget times are ahead. State revenues were down from the previous year in all areas. “Monthly collections in September continue to be well below the official tax commission estimates and last year’s actual collections,” Meacham said. State Finance Director Michael Clingman ordered a continuation of the five-percent cutback in allocations to each state agency that was instituted in August. The five-percent reduction in October’s allocation of annual appropriations represents a total cut of $21 million for the month. “Monthly allocations are again being reduced by five percent,” Clingman said.

Meacham said he and Gov. Brad Henry are continuing their dialogue with legislative leaders to ensure the ongoing provision of essential state services. “State leaders are committed to making sure state government continues to operate in spite of the ongoing recession and the effects of low natural gas prices on state revenue collections,” Meacham said.

House Speaker Chris Benge (R-Tulsa) and Senate President Pro Tempore Glenn Coffee (R-Oklahoma City) responded to the release of the state revenue figures.

“These figures are alarming, and we have no reason to believe the revenue trend is going to drastically change anytime soon. Because of this, I urge state agencies to not only restrain spending, but also proactively prepare for the possibility of deeper cuts in the future to bring expenditures better in line with current collections,” said Benge. “There are tough decisions ahead, and we are working closely with Senate leadership and the governor’s office to make fiscally prudent decisions in this time of global recession and depressed natural gas prices. Our state has made it through trying budget times in the past, and we will again,” Benge concluded.

“As challenging as the fiscal situation is for the State of Oklahoma at this time, I’m thankful for the conservative budgeting priorities we’ve instituted in the past that keep us from being in a worse situation than we currently are,” said Coffee. “As in previous months, the fiscal outlook isn’t optimistic, and the time for real and tough decisions may be imminent. The Speaker and I will meet with the governor as soon as we possibly can, and begin those discussions. But in light of natural gas prices that remain low and the vast amounts in storage, we have no reason for optimism in the coming months. It’s premature to say with certainty, but many options will be on the table, including possible deeper cuts in targeted programs as we carry out the appropriate and constitutionally mandated balanced budget,” said Coffee.

Preliminary reports show general revenue fund collections totaled $433.9 million for September. That amount is $186.8 million or 30.1 percent below the prior year; and $178.7 million or 29.2 percent below the estimate. Net income taxes, a combination of personal and corporate incomes tax collections, yielded $235 million to the general revenue fund in September, which is $68.3 million or 22.5 percent below the prior year and $76.2 million or 24.5 percent below the estimate. Individual income tax collections produced $198.5 million, which is $34.1 million or 14.7 percent below the prior year and $30.9 million or 13.5 percent below the estimate. Corporate returns produced $36.5 million, which is $34.2 million or 48.4 percent below the prior year and $45.3 million or 55.4 percent below the estimate. Sales taxes produced $121.8 million for general revenue, down $21 million or 14.7 percent from the prior year and $30.3 million or 19.9 percent below the estimate for the month.

Revenues from the energy sector showed the greatest drop. The gross production tax on natural gas accounted for just $16.8 million for September, which is $81.9 million or 82.9 percent below the prior year and $53.7 million or 76.1 percent below the estimate.

Motor vehicle taxes produced $16.2 million, which is $3 million or 15.6 percent below the prior year, but $0.8 million or 5 percent above the estimate. This may be attributed to the temporary blip in car sales due the “cash for clunkers” program.

Other revenue, which includes investment earnings along with taxes on insurance, inheritance, alcoholic beverages and others, produced $44 million in September. This is $12.5 million or 22.1 percent below the prior year and $19.2 million or 30.3 percent below the estimate. And, the treasurer’s investment earnings totaled $9.8 million for the month, which is $3.7 million below the prior year.

As revenues continue to drop, state agencies are considering various measures to cope with the reduced budget allocations. Furloughs of state employees and a hiring freeze are seriously being considered by many agencies. It is expected that the Legislature may need to make budget adjustments when they reconvene in February. And, hammering out a budget for the next fiscal year which begins next July, could become a challenge.

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