OKLAHOMA BUDGET OVERVIEW

Trends and Outlook

Revised: August 16, 2010

David Blatt
Oklahoma Policy Institute
dblatt@okpolicy.org - (918) 794-3944
Oklahoma‟s Path to Prosperity

OUR STARTING POINT

Government is among our means of
achieving our common goals as a
state --- alongside private businesses,
non-profit organizations, faith groups
and families.
Oklahoma‟s Path to Prosperity

OUR STARTING POINT

 Our families, communities and businesses depend
on our state and local governments to help:
 Educate our children and train our workforce;
 Protect our streets and investigate crimes;
 Maintain and upgrade our roads and bridges;
 Pay for the medical care provided by private doctors, nurses,
therapists, home health aides, etc.
 Ensure we have clean water and air;
 Promote our small towns, rural areas, artists and investors;
 Take care of those at risk of harm and abuse.

 We cannot reach our goals and thrive as a state

without effective public structures and systems.
Oklahoma‟s Path to Prosperity
We Already Lag Behind
 Oklahoma already underfunds most of our public
structures and falls short of many of our common goals as
a state. For example:
 Our teacher pay is among the lowest in the nation;
 We have among the highest rates of heart disease, obesity,
smoking, and uninsured;
 Our community-based social service providers have gone years
without rate increases;
 Many of our roads and bridges are in disrepair;
 Our correctional facilities are overcrowded and understaffed.

 The ongoing state budget crisis threatens a serious and

long-term corrosion of our public structures that will
weaken our prosperity, security and well-being.
 Budget Trends: FY „02 – FY „09

FY ‘02 – FY ‘08: Bust and Boom

 State budget suffered steep downturn, deep cuts, ’02 - ’04;
 Strong economy led to robust revenue growth and increased state
appropriations between FY ‘06 and FY ’08.
Annual Appropriations Totals,FY ‘00—FY ‘08
(Includes Supplementals thru FY ‘08 and Rainy Day spillover Funds for
Recurring Agency Expenditures) - in $millions

$7,500
$7,043
$7,000 $6,760

$6,500 $6,217

$6,000
$5,389 $5,491 $5,459
$5,500 $5,191 $5,145
$4,981
$5,000
$4,500
$4,000
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08
 Budget Trends: FY „02 – FY „09

Where did the growth revenue go?

 Covering rising costs of basic services and supporting
targeted investments for shared goals;
 80 percent of new dollars went to six core agencies.

Increased State Appropriations, Selected Agencies,

FY ’06 – FY ’08
Dept. of Education: $453M Human Services: $129M

Health Care Authority: $289M Corrections: $80M

Higher Education: $271M Transportation: $72.5M*

 Budget Trends: FY „02 – FY „09

Tax Cuts had a long-term impact

 Most of the cuts were to the personal income tax;
 Tax cuts were stretched out over several years; full impact
will not be felt until FY ’11.

Lost Revenues from Select Tax Cuts Enacted 2004 - 2006

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

$776.9
$800.0 $651.1
$561.8
$600.0
$400.0 $333.3

$200.0 $144.8
$18.7
$0.0
FY'05 FY'06 FY'07 FY'08 FY'09 FY'10
sour c e : Ok l a homa Ta x C ommi ssi on
Budget Trends: FY ‟02 - FY ‟09
FY ’09 Budget: Tightening the Screws
 Most agencies appropriations frozen for FY ’09;
 No funding for benefit cost increases teacher salary increases, state
employee raises.

FY „09 excludes supplementals and mid-year budget cut

Budget Trends: FY „10 – FY „11
Budget Trends: FY „10 – FY „11
Things Are Tough All Over
 All but two states are experiencing the state fiscal crisis.
 Combined state budget gaps for FY ’09 – FY ‘12 estimated to
exceed $600 billion.

Source: Center on Budget and Policy Priorities

Budget Trends: FY „10 – FY „11

The Recession Hit Oklahoma Late 2008

Oklahoma Monthly Unemployment Rate
(Seasonally-Adjusted), Jan. 1980- June 2010
10.0
June
9.0 2010:
8.0 6.8%

7.0
% Unemployed

6.0
5.0
4.0
3.0
2.0
1.0
0.0
Apr-81

Apr-86

Apr-91

Apr-96

Apr-01

Apr-06
Oct-83

Oct-88

Oct-93

Oct-98

Oct-03

Oct-08
Jan-80

Jul-87

Jan-95

Jul-02

Jan-10
Jul-82

Jan-85

Jan-90

Jul-92

Jul-97

Jan-00

Jan-05

Jul-07
Budget Trends: FY „10 – FY „11

The Recession Hit Oklahoma Late 2008

Quarterly Change in Personal Income,
% Change from Prior
Oklahoma and National,
Quarter
4th Quarter 2007 to 1st Quarter 2010
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
-4.0%
-5.0%
2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4 2010.1

U.S. Oklahoma

See OK Policy, “Numbers You Need”, at:

http://okpolicy.org/numbers-you-need-key-oklahoma-
economic-and-budget-trends
Budget Trends: FY „10 – FY „11
It’s A Revenue Problem
 Jan 2009 – Feb 2010: Revenues fell by a monthly
average of 23.1 percent compared to the same month for
the prior year.
 Finally seeing clear signs that the downturn has hit
bottom and revenues are starting to climb back.
Change in Monthly General Revenue Collections, Compared to Same Month Prior
Year, July '08 - July '10
20.0% 12.8%
11.1%10.8% 10.4% 9.9%
7.1% 6.0%
10.0% 2.1%
1.3% 1.6%
0.0%
-0.2%
-10.0% -7.3%
-8.5%
-20.0% -19.1% -16.7%
-21.5% -21.1% -23.7%
-30.0% -27.7% -26.3%
-30.1% -30.1% -30.5% -29.1%
-40.0% -31.6%

July Sept Nov Jan Mar May July Sept. Nov Jan Mar May July
Budget Trends: FY „10 – FY „11
It’s a Revenue Problem
 Five consecutive quarters of worsening collections;
 Revenue drops more than twice as steep as during the
last downturn.
Quarterly Year-over-Year Change in General Revenue
Collections, FY '02 - FY '10
30.0%

20.0%

10.0%
2.3%
0.0%

-10.0%
-12.1%
-20.0%

-30.0% -29.5%

-40.0%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY
'02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10
 Budget Trends: FY „10 – FY „11
It’s a Revenue Problem
 FY ‘10 General Revenue 23 percent below pre-downturn (FY
‘08) levels;
 FY ‘10 GR collections less than FY ’01 – without adjusting for
inflation or population growth.

General Revenue Collections,

FY '01 - FY '10 (in $millions)
$5,935 $5,953
$6,000
$5,701
$5,545
$5,500

$4,966
$5,000
$4,717
$4,616 $4,600
$4,500 $4,408
$4,174

$4,000
FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10
 Budget Trends: FY „10 – FY „11
It’s a Revenue Problem
 Between FY ‘08 and FY ‘10, GR fell by:
 Gross production tax : -46 percent;
 Corporate income tax : -40 percent;
 Personal income tax : -31 percent;
 Sales tax : -8 percent.
Oklahoma General Revenue Collections, FY '06 - FY '11 (in $ millions)
$7,000 Total= Total=
$5,935 $5,953 Total=
$6,000 $5,518
$732 $746 Total= Total=
$638
$259 $252 $716 $4,600 $4,888
$5,000 $234
$176
$766
$1,531 $1,612 $617
$4,000 $1,455 $145
$1,647 $147

$640 $1,516 $1,583

$3,000 $730 $825
$265 $435 $724
$279
$2,000 $266 $445 $519
$168 $172

$2,380 $2,338 $2,239

$1,000 $2,014
$1,708 $1,703

$-
FY'06 FY'07 FY'08 FY'09 FY'10 FY'11(Est.)

Personal Income Tax Corporate Income Tax Gross Production Sales Tax Motor Vehicle Other Sources
Budget Trends: FY „10 – FY „11
FY ’10 Budget: Revenues on the Skids
 In February, FY ‘10 revenues estimated to come in >$600
million below FY ’09.

6,500
General Revenue Collections,
FY '06 Actual - FY '10 Estimated (in $million)

5,981.1 5,946.4
6,000 5,902.7

5,710.0
5,649.2

5,500 5,407.2
5,356.6

5,000
FY '06 Actual Fy '07 Actual FY '08 Actual FY '09 June FY '09 FY '09 FY '10
December February Feburary
 Budget Trends: FY „10 – FY „11
FY ‘10 Initial Budget
 $7,231.2 million total, including $641 million ARRA (stimulus);
 Increase in total appropriations of $106 million (1.5 percent)
compared to FY ’09;
 State dollars only: $500 million less than in FY ’09.

State Appropriations History, FY '00 - FY '10 in $millions)

(includes supplementals, excludes one-times from Rainy Day Spillover funds)
7,500
$7,043 $7,125 $7,231
7,000 $6,760
$30
6,500 $6,217
ARRA
$641
6,000 ARRA
$7,095
$5,389 $5,491 $5,459 State
5,500 $5,191 $6,590
$5,145
$4,981 State
5,000

4,500

4,000
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 FY'10
State Appropriations ARRA
 Budget Trends: FY „10 – FY „11
FY ‘10 Initial Budget
 Stimulus funds made it possible to minimize cuts or
provide small increases to ten largest state agencies and
some smaller ones;
 Funding for 10 largest agencies up $161 million, 2.6
percent.
 Most smaller agencies took cuts of 5 to 7 percent;
 No funding to address rising employee benefit costs or
inflation (e.g. utilities, transportation, food);
 Demands for some state services increase due to the
downturn.

See: OK Policy FY ‟10 Budget Review at:

http://okpolicy.org/fy-10-budget-information
Budget Trends: FY „10 – FY „11
FY ‘10 : Off to a Very Rough Start
 Collections through January were $864 million – 24.9 percent -
below the estimate.
 After seven months of significant shortfalls, collections starting
in February came close to or exceeded the monthly estimate.

General Revenue Collections compared to General Revenue Collections compared to

Estimate, by Tax, FY '10 thru Jan (in $millions) Estimate, by Tax, FY '10 thru June (in $millions)

$0 $200
$17 $6
-$11
-$72 $0
-$200
-$180 -$200 -$200 -$125
-$400 -$238
-$401 -$400
-$600 -$600 -$476
-$800
-$800
-$816
-$1,000
-$864
-$1,000 Net Gross Sales Tax Motor Other Total Gen.
Net Income Gross Sales Tax Motor Other Total Gen. Income Production Vehicle Sources Revenue
Tax Production Vehicle Sources Revenue Tax
 Budget Trends: FY „10 – FY „11
FY ‘10 : How Large a Shortfall?
 February certification projected a $669 million (13.0
percent) shortfall in FY ’10 GR collections;
 $109 million projected shortfall in HB 1017 Fund as well;
 Total mid-year shortfall of $778 million.

FY '10 General Revenues - Original vs.

Revised Projections
$5,500 $5,415
$5,145
$669
$5,000 million

$4,476
$4,500

$4,000
100% Estimate - June Appropriation (95%) February Projection
Budget Trends: FY „10 – FY „11
FY ‘10 : What Response?
 OSF cut agencies’ GR allocations by 5 percent beginning in
August and by 10 percent beginning in December;
 Cuts were across-the-board based on GR allocations;
 Since some agencies are partly or fully appropriated from
other funds (i.e. 1017 Fund, State Transportation Fund,
ARRA), agencies were not all affected equally.
 Cuts limited to less than shortfall through by borrowing from
cash reserves of various funds;
 $320.9 million borrowed in first 7 months of the year;
 Fully repaid by May.
 Budget Trends: FY „10 – FY „11
FY ‘10 Mid-Year Budget Agreement
 Agreements announced by Governor, Speaker and
President Pro Tem in January and February:
 Continued 10 percent monthly cuts to GR for rest of year;
 Averaged out to 7.5 percent of GR for full year.
 Supplemental funding to various agencies to offset part of GR
and HB 1017 shortfalls (Common Ed, Higher Ed, OHCA,
Corrections, others);
 After supplementals, mid-year cuts equaled $272 million (3.8
percent);
 Additional revenues needed to balance:
 $223.7 million of Rainy Day Fund (3/8th), $151 million more
stimulus money, plus additional gross production tax
revenues and other sources.
 Budget Trends: FY „10 – FY „11
FY ‘10 Mid-Year Budget Agreement
 Total revised budget was $272 million (3.8%) less than
initial; $165 million (2.4%) less than FY ’09;
 Almost $1.5 billion (21%) of revised FY ‘10 budget made
up of non-recurring money.
State Appropriations, FY '09 - FY '10,
Total and by Funding Source (in $millions)
$7,500 Total= $7,124 million Total= $7,231 million
Total= $6,959 million
$7,000 $30
$301 $641 $224
$6,500
$371 $838
$6,000
$435
$5,500
$6,793
$5,000 $6,220
$5,462
$4,500

$4,000
FY '09 FY '10 - Initial FY '10 - Revised
State Recurring Cash Stimulus (ARRA) Rainy Day Fund
 Budget Trends: FY „10 – FY „11
FY ‘10: Impact of Cuts
 Even with all the additional revenue to reduce the size of
cuts , the toll on services and programs has been significant:

 Department of Mental Health and Substance Abuse Services reduced

beds and closed centers for children’s mental health and adult
substance abuse, cut contracts to all providers;
 OJA cancelled youth detention and gang prevention programs, cut
providers 5 percent, authorized 22 furlough days;
 OHCA cut some Medicaid benefits and reduced all provider rates by
3.5 percent;
 Health Department eliminated 17 child guidance centers serving pre-
school children with developmental delays;
 Department of Corrections cut contracts, eliminated programs,
reduced staffing to under 75 percent of authorized levels;
 School districts eliminating programs, some going to 4-day weeks;
 DA offices prosecuting fewer criminals;
 Most agencies leaving positions unfilled, offering buy-outs; many
imposing furloughs.
 Budget Trends: FY „10 – FY „11
FY ’11 Budget: The Challenge Escalates
 FY ‘11 revenue collections projected to grow only
slightly from FY ’10 and to remain almost 25 percent
below pre-downturn (FY ‘08) levels

General Revenue Collections,

FY '06 Actual - FY '11 Estimated (in $ millions)
$5,928 $5,981
$6,000
$5,714
$5,519
$5,500 $5,415

$5,000

$4,579
$ 4,475
$4,500

$4,000
FY '06 Actual FY '07 Actual FY '08 Actual FY '09 Actual FY '10 (June FY '10 (Feb FY '11 (Feb
estimated) projected) estimated)
Budget Trends: FY „10 – FY „11
FY ’11 Budget: The Challenge Escalates
 Final FY ‘11 certification provided $1.8 billion less
revenue for next year than FY ‘10 initial budget , $1.5
billion less than final FY ‘10 budget
State Appropriations, FY'08-FY '11
(includes all revenues and supplementals;
$8,000 in $ millions)
$7,124 $7,231
$7,043 $6,959
$7,000 $6,797
$6,452

$6,000
$5,294 $5,415

$5,000

$4,000
FY'08 FY'09 FY'10 - FY '10 - FY '10 - FY '11 - FY '11 - FY '11 -
initial projected Revised Certified Certified Gov
budget revenues State $ State $ Budget
(Feb) (Dec) (Feb)
Budget Trends: FY „10 – FY „11
FY ’11 Budget: The Challenge Escalates
 To budget the balance, Gov. Henry proposed:
 Annualizing and increasing FY„10 cuts by an additional 0.5
percent to 3 percent for all agencies.
 Using remaining stimulus funds and a portion of remaining
Rainy Day Funds.
 Savings from consolidating agencies and IT services.
 Close to $500 million various “revenue enhancements”
 New bond issues;
 Enhanced tax collection proposals, particularly increased sales tax
collections on Internet sales and automated enforcement of vehicle
insurance;
 Eliminating and suspending various tax credits;
 Increases in fees and permits.
 Budget Trends: FY „10 – FY „11
FY ’11 Budget: The Challenge Escalates
 2010 Session focused on which, if any, revenue measures would
be adopted to bridge the budget gap.
 FY „11 budget gap exceeded $800 million - assuming
maintenance of FY „10 budget cuts, the use of all remaining
stimulus funds, and 3/8ths of Rainy Day Fund.
 Equivalent to an additional 12 percent cuts to all agencies of
state government beyond the cuts already enacted.
 Agency scenarios of how to absorb cuts of an additional 7.5
percent to 15 percent in FY „11 left no doubt of the grave threats
that would be posed to the state economy and to the health and
security of Oklahomans.
 Many cuts would be multiplied by loss of federal matching
funds.
See OK Policy, “Bridging the Budget Gap,” :
http://okpolicy.org/files/bridgingthegap_1pg.pdf
 Budget Trends: FY „10 – FY „11
FY ’11 Budget Agreement
 Total appropriations for FY ’11 = $6.714 billion.
 7.2 percent decrease (-$517.5 million) from the initial FY ‘10
budget and 3.5 percent decrease (-$245.4 million) from the
final FY ‘10 budget after mid-year cuts
FIG. 1: State Appropriations History, FY '00 - FY 11
$7,500 (in $millions; FY '00-FY'10 includes supplementals, excludes one-times from
Rainy Day Spillover Funds )
$30
$7,000
$641 $224

$6,500 $373
$838

$6,000 $539

$7,095
$5,500 $79 $7,043
$219 $6,760
$6,590
$269 $72 $6,217
$5,000 $75 $5,897
$5,412 $5,802
$5,389
$5,240
$4,500 $4,906 $4,922
$5,073

$4,000
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 FY'10 - FY '10 FY '11
State Revenues Federal Relief Rainy Day Fund Initial - Final
 Budget Trends: FY „10 – FY „11
FY ’11 Budget Agreement
 Appropriated over $1.35 billion in additional revenues on top
of those certified in February. These included:
 Remaining $539 million from the 2009 stimulus bill;
 Remaining $373 from the Rainy Day Fund;
 $450 million from assorted revenue enhancements:
 Suspending and deferring payment of tax credits;
 Issuing and refinancing bonds;
 Fee and permit increases;
 Transfers of cash balances;
 Enhanced tax collections.
 Budget Trends: FY „10 – FY „11
FY ’11 Budget Agreement
FY ‘11 Appropriations by Revenue Source

ARRA--Education, ARRA--Medicaid, Rainy Day Fund,

$199.3 , 3% $339.7 , 5% $372.9 , 6%

Other State Funds, Total

$118.2 , 2% Appropropriations:
State
$6,713.7
Transportation
Fund, $215.6 , 3%

Lottery, $61.6 , 1%

Gross Production
Tax - Oil, $144.9 ,
General Revenue -
2%
Current Year,
HB 1017 Fund, $4,634.8 , 69%
$599.6 , 9%

General Revenue -
Prior Year, $27.2 ,
0%
Budget Trends: FY „10 – FY „11
FY ’11 Budget Agreement
Agency Appropriations – 10 Largest, Others, Total
Total Corrections, $462.1
Appropriations: , 7%
$6,713.7 million DHS, $543.1 , 8% Transportation,
Includes stimulus, $114.8 , 2%
OHCA (Medicaid),
Rainy Day Fund
$993.0 , 15% Mental Health,
$187.7 , 3%

Career Tech, $142.0

Total Ten Higher Ed., , 2%
Largest: $1,003.5 , 15% Juv. Affairs, $99.2 ,
$6,009.4, 1%
89.5% All Other Agencies, Public Safety, $88.4
$704.3 , 11% , 1%

Common Ed.,
Notes: $2,375.6 , 35%
Transportation also received
$65 from bond issue;
OHCA includes $30m transfer
from Insure Oklahoma Fund;
excludes Health Carrier Access
Budget Trends: FY „10 – FY „11
FY ’11 Budget Agreement
 Funding cuts limited to under 10 percent for most of the largest
state agencies;
 However, over half of all appropriated agencies will absorb cuts
of at least 15 percent for FY „11 compared to FY ‟09.
 In some cases, appropriations cuts have been partly offset by
fee increases. In addition, the Legislature has approved measures
to promote savings and efficiencies and give agencies and school
districts greater spending flexibility;
 For most agencies and school districts, no additional funding to
cover increased employee health care costs, general inflation or
rising caseloads;
 Cuts, furloughs, hiring freezes, layoffs will continue in FY ‟11.

See OK Policy‟s FY „11 Budget Highlights at:

http://okpolicy.org/fy-10-fy-11budget-
information
Budget Outlook: Looking Ahead
Budget Outlook: This Ain’t Over Yet
 Revenues unlikely to recover to pre-downturn nominal
levels prior to FY ’13.

Historical and Projected Revenue, FY'07-FY'13

General Revenue Fund
$6,500
Revenue in $millions

$5,928 $5,981
$6,000
$5,945
$5,500 $5,544
Estimates by OK $5,275
$5,000 Policy - not based on
certification
$4,500 $4,735
$4,439
$4,000
FY 07 (act.)FY 08 (act.)FY 09 (act.)FY 10 (est.)FY 11 (est.)FY 12 (est.)FY 13 (est.)

Fiscal Year
 Budget Outlook: Looking Ahead
Budget Outlook: This Ain’t Over Yet
 FY ‘11 GR collections up 9.9 percent from FY ‘10 – but 19
percent below FY ’09;
 July collections 11.9 percent above the estimate.

July General Revenue Collections,

FY '01 - FY '11 (in Millions)
$500.0
$457.1
$450.0
$407.0 $411.3
$400.0 $378.7 $370.1
$359.8
$339.8 $343.2 $336.8
$350.0 $329.6

$300.0 $289.2

$250.0
FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11
Budget Outlook: Looking Ahead
Budget Outlook: This Ain’t Over Yet
 Substantial reliance in FY’10 –’11 on non-recurring revenue
creates significant problems for FY ’12 and FY ’13:
 Over $1.1 billion in non-recurring revenues in FY ‘11 budget;
 However, $167 million surplus in FY ‘10 collections,
likelihood of add’l cash balances building up;
 Extension of federal stimulus should be able to help
Medicaid and common education in FY ’12.
Non-Recurring Revenue in FY '11 Budget
Total Budget = $6,714 million; Total Non -Recurring
Revenues= $1,145 million)

Federal
stimulus funds,
$539
Other one-time
revenue, $36

Moratorium of
tax credits, $44

Deferral of tax Rainy Day

rebate Funds, $373
payments, $81
Revolving fund
transfers, $73
Budget Outlook: Looking Ahead
Budget Outlook: This Ain’t Over Yet
 Time-released tax cuts still kicking in:
 Top rate will fall from 5.5% to 5.25% as soon as
revenues are projected to grow 4%... even if revenues
remain below pre-downturn levels;
 Revenue impact of $120 - $170 million in FY ‘12 & FY ’13;
 Effective January 1, 2012 – unless Legislature acts.
 Additional revenues automatically allocated for ROADS and
OHLAP.
Budget Outlook: Looking Ahead
Budget Outlook: This Ain’t Over Yet
 Possible passage of SQ 744 (mandatory K-12 education
funding increases) could throw everything into chaos.

Annual Mandatory Increase in K-12 Funding vs. Increased

Revenues, FY '12 - FY '14 (in $ millions) under SQ 744 Formula
$2,200 $1,901
$1,696
$1,800
$1,400
$889
$1,000 $698
$572 $632
$600 $392 $415
$179 $217 $206
$200 $(191)

$(200)
Yr 1 (FY '12) Yr 2 (FY '13) Yr 3 (FY '14) Total

Increased K-12 Spending Rest of Government Increased Revenue

Assumes 10.5% annual revenue growth; 5% increase in Regional Per Pupil Expenditure
in FY '13 and FY '14

See: “SQ 744 is the Wrong Solution for Oklahoma, Issue brief and fact
sheet at: http://okpolicy.org/sq-744
Budget Outlook: Looking Ahead
Short-Term Recommendations:
Need for a Balanced Approach
1. Defer additional tax cuts until revenues fully recover;

2. Serious review of tax credits and exemptions to determine

which are needed and effective;

3. Consider new revenue streams for the Medicaid program;

4. Consolidation of functions and agencies where duplicative

or unnecessary;

5. Prioritize prevention, diversion and surveillance over

detention;

6. Prepare for next downturn by strengthening our reserve

funds and improving our forecasting capacities.
 Long-Term Fiscal Outlook
Oklahoma – like most states and the federal government
– faces a structural budget deficit

• Structural deficit: A
situation that occurs
when a state‟s “normal
growth of revenues is
insufficient to finance
the normal growth of
expenditures year after
year”
(CBPP, “Faulty Foundations: State Structural
Budget Problems”)
 Long-Term Fiscal Outlook
Oklahoma’s Structural Deficit
Projected Annual Budget Surpluses and Deficits
Before and After 2004-2006 Tax Cuts (2007 to 2035)
1,000

500

0
M i l l i o n $2005

(500) Before Tax Cuts

(1,000)
After Tax Cuts
(1,500)

(2,000)

(2,500)
2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
Year
Source: Projections conducted in 2007 by Dr. Kent Olson, Professor of
Economics, Oklahoma State University
 Long-Term Fiscal Outlook
Long-Term Recommendations

1. Serious review of our tax system;

2. Scrutinize our programs and spending

commitments;

3. Give control for making decisions about revenues

and spending back to our elected representatives.
 For More Information

• Updated Budget Information:

okpolicy.org/fy-10-fy-
11budget-information
• Oklahoma Policy Institute‟s Online
Budget Guide
www.okpolicy.org/online-
budget-guide
 Contact Information
Oklahoma Policy Institute
P.O. Box 14347
Tulsa, OK 74159-1437
(918) 794-3944
info@okpolicy.org

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