Anticipating Board of Equalization meeting, Fallin predicts another tight budget year

Oklahoma Governor Mary Fallin anticipates a flat year for state government spending, and won’t make firmer predictions about her executive budget until some time after the December 20 meeting of the state Board of Equalization (BOE).

In an interview (Monday, November 21) with CapitolBeatOK, Gov. Fallin said that at the meeting next month, “the finance staff will give us a revenue status report, and projections – but only projections – to help us begin to look ahead on the revenue and budget issues. We won’t certify final numbers as a board until February.

“However, my staff and I will be working on the budget a lot in the weeks ahead. Certainly the December 20 BOE meeting will influence how we look at everything.”

Cabinet Finance Secretary Preston Doerflinger (who also runs the Office of State Finance) will provide revenue projections for the December 20 BOE meeting, and then for the meeting early next year that will provide final certification of tax money available for appropriations. 

While cautious in predicting outcomes, Fallin said, “I think we’re getting a good projection, a good feel, for what to expect in the budget that is emerging. I am anticipating we will likely have a flat budget year. We are having double-digit growth in various categories of revenue. But I think we still have to find ways to economize.

“The budget will be tight. Although we have more revenue, at this point it only goes a little beyond replacing the amounts spent in one-time money last year. So we have to continue to find ways to make government more efficient. That’s a good idea at any time, in any case.”

Despite monthly reports of good, even excellent, revenue surges for Oklahoma’s state government, a look at the details makes Fallin’s cautious projections easy to understand.

Government revenues across all categories are -- for the first four months of FY 2012 -- averaging about 10% higher than projected just nine months ago. (The total is roughly $1.7 billion.) However, the absence of the one-time revenue Fallin referenced will keep spending restrained.

Today, Michael McNutt of The Oklahoman distilled from state finance data the $486 million in one-time funds used to fashion the Fiscal year 2012 budget.

That included $357 million in “special cash appropriations” -- $101 million from a transportation fund, $100 million from the Constitutional Reserve (the Rainy Day Fund) and $156 million from “other revolving funds.”

Another $113 million in federal stimulus funds was designated for Medicaid in Oklahoma, and $16 million came from “delayed motor vehicle apportionment.”

Also driving the revenue picture will be anticipation of the effect of the most recent reductions in the state’s income tax rate, perhaps allowing tax payers to keep as much as $70 million more in their pockets. That rate is now 5.25 percent, reflecting steady rate reductions over several years.

The final recommendations of a task force on business incentives and tax credits will be watched closely, with potential for changes to capture some tax revenue either to finance the start of a “glide path” to lower income taxes -- or to finance government.

On a parallel path, widely supported energy industry benefits – suspended to boost state government revenue by about $150 million – will begin to be replenished unless issues of energy credits and incentives are revisited by the Legislature.

State officials hope state government revenue will grow by $501 million or more by the time the BOE certifies taxpayer money available for appropriation in the Legislature, but with all the contending factors additional cuts in state spending remain possible.

House Budget and Appropriations Chairman Earl Sears, a Bartlesville Republican, has told reporters at the Capitol for months that even with one of the healthiest tax revenue growth spurts in the United States, Oklahoma would face fresh budget austerity.

Operating under both constitutional and statutory provisions, the Board of Equalization consists of six elected and one appointed official. Chairman is the governor (Mary Fallin). Vice chairman is the lieutenant governor (Todd Lamb). Secretary is the auditor and inspector (Gary Jones).

Members of the board include the treasurer (Ken Miller), attorney general (Scott Pruitt), Superintendent of Public Instruction (Janet Barresi) and the one unelected government official on the Board, Cabinet Secretary of Agriculture (Jim Reese).

Last year, every member of the BOE was a Democrat. This year, every member of the board is a Republican. On the current BOE, only Governor Mary Fallin had prior experience in certification of revenue projections, from her three terms as lieutenant governor (1995-2007).

The Office of State Finance, how under Doerflinger, provides staffing for the Board of Equalization.