A billion here, and a billion there: Government revenue grows, but big tax cut unlikely
Published: December 20th, 2012
OKLAHOMA CITY — The vibrant Oklahoma economy’s impressive expansion — with the state in the top three for per capita personal income growth over the last few years — is yielding a lot more money in state tax coffers. However, taxpayers probably should not count on significant tax relief any time soon.
The Oklahoma Legislature will have about $214.6 million more to spend for Fiscal Year 2014 than in FY 2013 — yet state officials don’t seem prepared to make a fresh push for a major personal income tax reduction.
Finance Secretary Preston Doerflinger said Gov. Mary Fallin has not made several significant decisions about the Executive Budget she will submit to the Legislature in February.
However, he said she would likely support a $50 million increase in funding for the Department of Human Services, as projected in the Pinnacle Plan released last summer. The plan reflects an accord Fallin and other officials signed, which flowed from lengthy controversy and litigation.
Additionally, Fallin supports implementation of historic judicial reform legislation. While that is intended to save money in the medium-term (over the next 5 to 10 years), in the near-term the state Corrections Department wants money for salary hikes and to cover implementation costs for that “reinvestment” initiative.
Corrections is not alone: state agencies have requested increased spending totaling $1.4 billion, far surpassing the revenue growth, Doerfllinger noted.
Hanging over the state government’s financial planning is the so-called “fiscal cliff” at the federal level, with broad implications for state governance. In response to a question, Doerflinger said that his hunch now – 10 days before the end of the calendar year – is that the nation will “go over the cliff, sort of.”
Discussing the issue with news organizations, including CapitolBeatOK, Doerflinger explained he anticipates federal negotiations will continue through the end of the year, with some accord emerging only after the eleventh hour.
Doerflinger stressed that the state Finance staff is basing its projections on current law – i.e. the tax increases and federal sequestration that will, if not changed, occur beginning January 1.
Here in Oklahoma, despite the spending pressures from agencies, Doerflinger told reporters there will likely be a tax reduction proposal from the Fallin administration – but “not as detailed or broad” as last what was put on the table last year. He declined to indicate a percentage or fraction for possible reductions in personal income taxes.
This months projection’s led state finance officials to anticipate a deposit into the Constitutional Reserve, popularly known as the Rainy Day Fund, of $66.4 million, which now has a $577.5 million balance.
The now-expected deposit will build the fund past $600 million for the first time in history. That fund is capped at 15 percent of the prior year’s general fund collections, meaning that additional revenue growth might take the reserve to $834.7 million.
When Fallin took office in January 2011, the Rainy Day Fund had 3 cents, Doerflinger stressed. He detailed the following projected revenue bumps flowing into the General Revenue Fund:
·personal income tax collections leaping ahead $121.1 million, or 6.1 percent over the estimate a year ago
·Corporate income taxes rising $164.6 million, or 51.3 percent
·Sales taxes increasing $126.6 million, or 6.6 percent
·Interest and investment estimates up $3 million, or 3.6 percent.
On the flip side, revenues from gross production taxes on oil and gas decreased. For natural gas, the decline is $41 million (21.8 percent); for oil the decline was $799.8 million or 21.8 percent.
The State Board of Equalization on Thursday (December 20) certified $7 billion for expenditure next year, reflecting growth in tax revenues in line with the healthy state economy. Doerflinger noted that the coming fiscal year will be the first since the beginning of the Great Recession in 2008 where revenues available for expenditure exceed $7 billion.
That total comes from certified funds anticipated at $6 billion, with $5.7 billion available for appropriation, and another billion dollars in other income streams.
Thursday’s revenue certification actually understates significantly the total state budget. Jill Geiger, state budget director in Doerflinger’s office, told CapitolBeat that as of Wednesday, “The total budget for all funds (state appropriated, federal, agency special accounts, etc) is $24,399,489,307.”
In addition to his Finance position in Fallin’s executive Cabinet, Doerflinger is director of the Office of Management and Enterprise, successor agency to the Office of State Finance. His staff prepares fiscal and revenue estimates for the governor and presents those to the State Board of Equalization.
The equalization board consists of six statewide elected officials – including the governor, lieutenant governor, auditor and inspector, treasurer, attorney general, and superintendent of public instruction — and president of the board of agriculture.
After the constitutional board’s formal certification of anticipated revenue, state Senate President Pro Temp Brian Bingman, a Sapulpa Republican, said national uncertainty “will continue to adversely impact the states. We must plan accordingly, and while celebrating positive indicators of growth, remain cautious and forward-thinking.”
You may contact Patrick B. McGuigan at Patrick@capitolbeatok.com and follow us on
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Twitter: @capitolbeatok.