Bipartisan voices boost higher ‘Rainy Day’ deposit cap
Not too long before this winter’s second major storm rolled into Oklahoma, Gov. Brad Henry and state Treasurer Scott Meacham gave ringing endorsements to a proposal to increase the deposit cap for the Constitutional Reserve, better known as the Rainy Day Fund.
Their support in effect boosts a Senate Republican proposal being advanced anew by state Sen. John Ford of Bartlesville. A similar measure has been submitted by Midtown Oklahoma City Sen. Andrew Rice, designated leader for Senate Democrats beginning in 2011. As a result, the Sooner State might be better prepared the next time a severe recessionary chill reduces state government revenues.
Meacham told reporters earlier this week, “Nobody could have predicted how severely tax revenues would drop as the Recession reached Oklahoma. But the best single tool we have in such circumstances is our reserves.” Meacham noted the Rainy Day Fund is essentially a state savings account, and that state government should plan to save more money to avoid future funding crunches.
After the governor’s press conference last Tuesday, Sen. John Ford said he was encouraged by Henry’s announcement. Ford pushed a bill to raise the rainy day deposit cap from 10 to 15 percent in the 2007 legislative session, but the proposal did not make it through the process and onto the governor’s desk.
Sen. Ford’s Senate Joint Resolution 47 is expected to have brighter prospects for passage during the 2010 legislative session that begins this week. Ford commented, “When I first filed this legislation for the 2007 session, the economy was good and there wasn’t a lot of interest in raising the cap. Obviously, that’s all changed now, and I’m pleased to see the governor has voiced his support for this measure. I’m only sorry there wasn’t more support earlier on for this concept.”
Gov. Henry, in his prepared statement this week, observed he backed a higher “rainy day” cap in 2006. The release from Henry’s office said this year, as the state faces “historic budget crisis,” the higher limit would have made a big difference in responding to revenue shortfalls without major cuts in monthly allocations.
In comments to reporters, Meacham said a 20 percent collapse in revenue, as the state has experienced over the last 12 months, could not have been anticipated in advance, but declines in the 10 to 15 percent can be expected in down times. He and the governor applauded Sens. Ford and Rice for proposals to increase the cap. Meacham said he expects short-term recovery in commodity prices to help, but not end, the state’s fiscal stress. Meacham emphasized higher deposits in good years are necessary to assure more nuanced responses to future revenue shortfalls.
Ford, caucus chairman for Senate Republicans, serves as chairman of the Education Committee. This year, tax revenues have fallen short of projections for the last 12 months. SJR 47, if it passes the Legislature, could go to a vote of the people later this year.
Ford and Henry both observed that Oklahoma, relatively healthy with nearly $600 million in the Constitutional Reserve, would have had nearly $900 million to weather the current crisis, if the proposed 15% cap had been in place the last few years.
Ford said, “We could have had an emergency fund of nearly $900 million, compared to the $600 million in the Rainy Day Fund today. The oil bust of the 1980’s taught us the importance of having an emergency savings account. This recession has shown us we need to expand that fund.”