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Oklahoma's revenue takes hit from recession

Oklahoma's revenue takes hit from recession


LINK TO TREASURER'S PRESS RELEASE ON REVENUE COLLECTIONS

 

Agencies asked to review budgets


BY MICHAEL MCNUTT AND JULIE BISBEE

Published: July 15, 2009

State agencies, many of them already dealing with 7 percent budget cuts, are being told to look for further reductions because of the likelihood of a revenue shortfall this fiscal year.


"It appears very likely at this point that fiscal year 2010 revenues will be less than originally estimated by the Tax Commission,” state Treasurer Scott Meacham said Tuesday. "That means a revenue shortfall is probable.”

Gov. Brad Henry said he directed all state agency directors to begin reviewing their budgets "with the expectation that more cuts may be necessary.”

"We certainly hope revenue trends improve and we are able to meet budget obligations, but it is important for agencies to prepare for the worst-case scenario in the event that revenue collections continue to fall below projections,” the governor said.

Meacham, who also serves as Henry’s chief economic adviser, said it’s too early to predict whether employee layoffs or furloughs will be necessary. It’s also premature to consider dipping into the state’s savings account, the Rainy Day Fund, which has about $600 million, he said.

"But that would certainly be an option if things got bad down the road,” he said.

Legislators and the governor used about $630 million in federal economic stimulus funds to make up for declining state revenues as they crafted this fiscal year’s $7.2 billion budget. They avoided using money from the Rainy Day Fund, saying those funds might be necessary for the 2011 fiscal year.

They also set aside about $600 million in stimulus money for the 2011 fiscal year.

Low energy prices are a main factor why state revenue collected in June, the last month of the 2009 fiscal year, fell 30 percent below the previous year, according to revenue reports released Tuesday.

While total fiscal year gross production collections were 5.5 percent below the estimate, in the month of June they were off the estimate by 81.7 percent "reflecting the current low prices of these commodities,” Meacham said.

Two weeks into the 2010 fiscal year, a rebound of energy prices doesn’t appear to be on the horizon. Natural gas prices remain well below $4 per 1,000 cubic feet. The budget for this fiscal year is based on gas prices averaging $5.22 per 1,000 cubic feet.

Sterling Zearley, executive director of the Oklahoma Public Employees Association, urged state agencies to make deeper cuts to travel budgets and contracts with the private sector to save state employees’ jobs.

House Speaker Chris Benge, R-Tulsa, said any adjustments made to this year’s budget should be done with the same criteria implemented in crafting the 2010 fiscal year budget — minimizing the use of federal stimulus dollars, not increasing taxes and maintaining as full a savings account as possible for future fiscal needs.

The recession started significantly affecting Oklahoma during the past six months, or the last half of the 2009 fiscal year, Meacham said. During the first half of the fiscal year, July through December, collections exceeded the estimate by $189.5 million, or 6.6 percent. During the final six months, January through June, collections were below the estimate by $617.3 million, or 20.1 percent.

"We are seeing a slowdown in every revenue source,” Meacham said. "Only sales-tax collections were higher than collections in the prior fiscal year, but they failed to meet the estimate.”

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