THE ISSUE: State revenue declining
OUR STANCE: More cuts, tapping fund may be needed
Oklahoma’s revenue outlook continues to look pretty grim. Because revenues continue to decline, even at a faster clip than some officials apparently had predicted, the governor and legislative leaders are talking about a special session.
When Gov. Brad Henry took office more than 6 1/2 years ago, he faced a $700 million shortfall, the worst in state history. Treasurer Scott Meacham has indicated the budget shortfall this fiscal year could exceed that and become a new record.
Wisely, the governor and the Legislature refrained from tapping the constitutional Rainy Day Fund as they wrote the budget for the fiscal year which began July 1.
They were able to use some federal stimulus dollars coming into the state to shore it up enough and ensure a balanced budget as required by the state Constitution.
That requirement is a blessing in disguise, preventing lawmakers from authorizing more expenditures than there is revenue to cover them.
State officials have pointed out 7 percent cuts hit many state agencies July 1 as the $7.2 billion budget took effect.
After tax revenue collections totaling nearly $337 million were reported in July, reflecting a drop of more than $120 million, or about 26 percent, from July of last year, officials responded by ordering a 5 percent across-the-board cut in state agencies’ August budgets.
The $337 million in July revenue was more than $74 million, or 18 percent, below what the state had projected.
Some agencies, obviously, have experienced double digit cuts already and the state’s new fiscal year is still a week away from being two months old.
The governor and legislative leaders may have little choice at this point to tap the Rainy Day Fund which contains about $600 million. According to an Associated Press story, they a have couple of ways to do that.
One is if the governor and two-thirds of both legislative houses declare an emergency, they could tap up to one-quarter, or $149 million.
Or, the State Board of Equalization could anticipate a budget shortfall for the entire year and declare a revenue failure. In that case, lawmakers could tap up to 3/8, or $233.7 million, of the fund.
Either way, the governor and legislative leaders should insist that agencies continue to make cuts where necessary, and access the most minimal amount possible and still keep state government afloat.
This doesn’t mean it won’t be painful. State government is experiencing what the private sector has been going through for many months already.
The national recession has caught up with Oklahoma, it’s just that state government didn’t feel the pinch as sharply quite as quickly as private business and industry have.
The state and national economy will rebound. It’s just a matter of when and how much.
In the meantime, state government is saddled with making some tough decisions just as the private sector already has been doing. Economic conditions will improve, and a leaner state government will be ready when it does.
