oklahoma budget trends and outlook (september 2011)
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The State Budget Outlook:An Incomplete Recovery
Updated September, 2011
David Blatt
Oklahoma Policy [email protected] - (918) 794-3944
mailto:[email protected]:[email protected] -
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Oklahomas Path to Prosperity
OUR STARTING POINTGovernment is among our means of
achieving our common goals as astate --- alongside private businesses,non-profit organizations, faith groups
and families.
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Oklahomas Path to Prosperity
Were In This Together State and local governments help us meet ourgoals:
Educate our children and train our workforce;
Protect our streets and investigate crimes;
Maintain and upgrade our roads and bridges;
Pay for medical care provided by private doctors, nurses,therapists, home health aides, hospitals, etc.
Ensure our water is clean and safe;
Promote our small towns, rural areas, artists, and investors; Support those at risk of harm and abuse.
Our families, communities and businesses cannotthrive without effective public structures & systems.
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Oklahomas Path to Prosperity
Oklahoma Is A Low Tax State Oklahomans pay among the lowest state and local
taxes in the nation, either as a share of state personalincome (40th) or per capita (41st);
Just under a dime of every dollar earned by
Oklahomans goes to pay for state and local services.
Source: Source: Center on Budget and Policy Priorities tabulations based ondata from the Bureau of the Census.
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Oklahomas Path to Prosperity
We Already Lag Behind Oklahoma invests less than most states in our publicstructures:
Total per capital state and local spending is $1,627 (18percent) less than the national average;
We spend below the national average in just about everycategory of expenditure.
-$1,000
$1,000$3,000
$5,000
$7,000
$9,000
Spending
perPerson
State and Local Spending per Person by Function, 2007-08
Oklahoma
US Average
Source: U.S. Bureauof the Census
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Oklahomas Path to Prosperity
We Already Lag BehindWe already fall short in many of our commongoals as a state:
Our average teacher pay is 42nd in the nation (2007);
We rank in the bottom 10 states in smoking, obesity, job-related
deaths, access to health insurance and doctors, and days lost tomental and physical illness (2007);
We are 4th in total prisoners per capita and 1st in femaleincarceration rates (2009);
We rank 9th worst among the states in road condition, with29.5% of roads in mediocre or poor condition (2005).
The ongoing state budget crisis threatens a serious and long-term corrosion of our public structures that will weaken ourprosperity, security and well-being.
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Budget Trends: FY 02 FY 09
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Budget Trends: FY 02 FY 09FY 02 FY 09: Bust and Boom
State budget suffered steep downturn, deep cuts, 02 - 04;
Strong economy led to robust revenue growth and increased stateappropriations between FY 06 and FY 08.
Most agency appropriations frozen in FY 09
$4,981
$5,389 $5,491
$5,191 $5,145
$5,459
$6,217
$6,760$7,043 $7,089
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
$7,000
$7,500
FY'00 FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09
State Appropriations History, FY '00 - FY '09, in $ millions(includes supplementals, excludes one-times from Rainy Day spillover funds)
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Where did the growth revenue go?
Increased State Appropriations, Selected Agencies,
FY 06 FY 08
Dept. of Education: $453M
Health Care Authority: $289M
Higher Education: $271M
Human Services: $129M
Corrections: $80M
Transportation: $72.5M
Budget Trends: FY 02 FY 09
80 percent of new dollars went to six core agencies.
Covering rising costs of basic services and supportingtargeted investments for shared goals.
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Lost Revenues from Select Tax Cuts Enacted 2004 - 2006
FY'05 through FY'10 (in $ millions)
$18.7$144.8
$333.3
$561.8$651.1
$776.9
$0.0
$200.0
$400.0
$600.0
$800.0
FY'05 FY'06 FY'07 FY'08 FY'09 FY'10
sourc e: Okla homa Tax Commission
Tax Cuts Had a Long-Term Impact Tax cuts were large, permanent, and back-loaded;
Tax cuts were stretched out over several years; full impactwill not be felt until FY13;
Major cuts were almost all to the personal income tax.
Budget Trends: FY 02 FY 09
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Budget Trends: FY 10 FY 12
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Budget Trends: FY 10 FY 12
The Recession Hit in Late 2008 Oklahomas unemployment rate rose quickly from under 4 percent to
around 7 percent between Sept 2008 and June 2009;
Unemployment less severe, recovered more quickly than the nation.
10.1%9.8%
9.1%
7.0%
5.6%
2.5
3.5
4.5
5.5
6.5
7.5
8.5
9.5
10.5
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Monthly Unemployment Rate, National and Oklahoma,
January 2008 to August 2011 (seasonally adjusted)
United States Oklahoma
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Budget Trends: FY 10 FY 12
The Recession Hit in Late 2008 Oklahoma experienced three straight quarters of negative growth
(declining state personal income) in late 2008 early 2009;
Economy growing faster than the nations since start of 2010.
-5.0%
-3.0%
-1.0%
1.0%
3.0%
5.0%
2007.4 2008.1 2008.2 2008.3 2008.4 2009.1 2009.2 2009.3 2009.4 2010.1 2010.2 2010.3 2010.4 2011.1
% Change from Prior
QuarterQuarterly Change in Personal Income,
Oklahoma and National,
3rd Quarter 2007 to 1st Quarter 2011
U.S. Oklahoma
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Budget Trends: FY 10 FY 12
State Budgets Hammered States facing cumulative budget shortfalls close to $600 billion.
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Budget Trends: FY 10 FY 12
State Budgets Hammered
All but four states faced budget shortfalls in FY 11.
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Budget Trends: FY 10 FY 12
State Budgets Hammered
All but four states faced budget shortfalls in FY 11.
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Budget Trends: FY 10 FY 12
Its a Revenue Problem Five consecutive quarters of worsening collections;
Revenue drops more than twice as steep as during thelast downturn;
Revenues recovering over past five quarters.
-12.1%
-29.5%
12.9%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Q1
FY
'02
Q3
FY
'02
Q1
FY
'03
Q3
FY
'03
Q1
FY
'04
Q3
FY
'04
Q1
FY
'05
Q3
FY
'05
Q1
FY
'06
Q3
FY
'06
Q1
FY
'07
Q3
FY
'07
Q1
FY
'08
Q3
FY
'08
Q1
FY
'09
Q3
FY
'09
Q1
FY
'10
Q3
FY
'10
Q1
FY
'11
Q3
FY 11
Quarterly Year-over-Year Change in Oklahoma General
Revenue Collections, FY '02 - FY '11
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Budget Trends: FY 10 FY 12
Its a Revenue Problem FY 10 General Revenue 23 percent below pre-downturn (FY
08) levels;
Between 2001 2010, state population grew 6 percent, inflationincreased costs of good and services by about 30 percent yetstate collected less revenue in FY 10;
Revenues increased by 10.5 percent in FY 11 but remained 16.5percent below FY08.
4,7174,408
4,1744,616
4,966
5,7015,935 5,953
5,544
4,6215,138
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11
Annual General Revenue Collections,
FY '01 - FY '11 (in Millions)
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Budget Trends: FY 10 FY 12
Its a Revenue Problem All major taxes fell sharply in FY 09 and FY 10 personal
income tax and gross production tax most steeply;
Only sales tax has fully recovered to pre-downturn levels.
$2,380 $2,338 $2,239 $2,014 $1,708 $1,832
$265 $435 $279$266
$168 $275
$730 $640 $825$724
$445$489
$1,455 $1,531 $1,612$1,647
$1,516$1,668
$234 $259 $252$176
$147
$199
$638$732 $746
$716
$637
$676
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
FY'06 FY'07 FY'08 FY'09 FY'10 FY'11
Oklahoma General Revenue Collections, FY '06 - FY '11 (in $ millions)
Personal Income Tax Corporate Income Tax Gross Production Sales Tax Motor Vehicle Other Sources
Total=
$5,935
Total=
$5,953
Total=
$4,621
Total=
$5,138
Total=
$5,541
Total =
$5,701
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Budget Trends: FY 10 FY 12
Its a Revenue Problem Monthly collections down by over 15 percent for 12straight months (Feb 2009 Jan 2010);
Collections now showing solid recovery;
FY 12 year-to-date up 19 percent from FY 10 but still 16
percent below FY 09.
-8%
-22%-19%
-21%
-28%-30%
-26%
-32%-30%
-24%
-31%-29%
-17%
-7%
1.6%
0%
6%
2%
10%
5% 6%3%
9%13%
20%
12%9%
13%10%
22%
4%
19%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Jan-09 Mar-09May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11May-11 Jul-11
Change in Monthly General Revenue Collections,
Compared to Same Month Prior Year, Jan '09 - Aug '11
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Budget Trends: FY 10 FY 12
Budgeting Through the Crisis Budgets for each of the past three years (FY 10, FY 11 & FY12) have been repeated variations of a similar theme:
Large shortfalls in projected revenues;
Fear of deep and devastating budget cuts;
Use of non-recurring revenues to partly bridge the budget gap;
Budget cuts across state government but less severe for coreeducation, health, human service, public safety agencies.
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Budget Trends: FY 10 FY 12
Budgeting Through the Crisis FY 12 appropriations of $6.511 billion:
Three consecutive years of declining appropriations;
$254.8 million, 3.8 percent, below FY 11;
$613.5 million, 8.6 percent, below FY 09;
$249 million, 3.7 percent below FY 07.
See FY 12 Budget Highlights at:http://okpolicy.org/fy-2012-budget-highlights
$6,217$6,760
$7,043 $7,095$6,590
$5,897 $5,938$6,312
$30$641
$838 $554 $99
$224$273 $100
$4,000
$4,500
$5,000$5,500
$6,000
$6,500
$7,000
$7,500
FY'06 FY'07 FY'08 FY'09 FY'10 -
Initial
FY '10 -
Final
FY '11 FY '12
State Appropriations, FY '06- FY '11(in $ Millions, includes supplementals, excludes Rainy Day "spillover" funds)
State Revenues Federal Relief Rainy Day Fund
Total=
$6,511
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Budget Trends: FY 10 FY 12
Budgeting Through the Crisis Governors Henry and Fallin and the Legislature used variousrevenue enhancements to help bridge budget shortfalls and reducethe severity of cuts;
Most new revenues have been one-time/non-recurring
Totaled close to $3 billion over 3 years, including:
Federalstimulus
funds,
$1,491
Rainy Day
Funds, $597 Transfers
from State
Funds, $525
Suspension
and deferral
of tax credits,
$129
Tax
compliance
efforts, $154Fee
increases,
$34Other
measures,
$59
Revenue Enhancements, FY '10 - FY 12 (in $millions)
Total:
$2,988
Federal funds from thestimulus bill (~$1.5billion);
State Rainy Day Fund($597 million);
Cash transfers from
various funds ($525million);
Enhanced taxcompliance ($154million);
Suspending anddeferral of tax credits
($129 million).
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Budget Trends: FY 10 FY 12
Budgeting Through the Crisis Federal Stimulus bills (American Recovery and Reinvestment Act)provided single largest source of assistance for state budget);
Funds divided between support for education and health care.
American Recovery and Reinvestment Funds Authorized in FY '10, FY '11 & FY '12 Budgets by Agency
Total FY '10 FY' 11 FY '12 Total
1. State Fiscal Stabilization Fund*
Education, State Department of $ 219,711,616 $ 139,521,635 - $ 359,233,251
Higher Education, Regents for $ 68,792,477 $ 59,794,986 - $ 128,587,463
sub-total State Fiscal Stabilization Fund $ 288,504,093 $ 199,316,621 $ - $ 487,820,714
2. Enhanced FMAP
Health Care Authority (OHCA)** $ 431,111,338 $ 278,139,950 $ 70,866,174 $ 780,117,462
Human Services, Department of $ 101,355,640 $ 43,000,000 $ 22,618,363 $ 166,974,003
University Hospital Authority $ 10,316,683 $ 24,407,120 $ 34,723,803
Other agencies $ 2,816,784 $ 9,196,768 $ 5,297,146 $ 17,310,698
sub-total enhanced FMAP $ 545,600,445 $ 354,743,838 $ 98,781,683 $ 999,125,966
Total of All Agencies $ 837,850,680 $ 554,060,459 $ 98,781,683 $ 1,490,692,822
*Common Education received $114 million in extra stimulus money for FY '11 that was not appropriated*OHCA includes $10 million from State Fiscal Stabilization Fund (General Purpose) in initial FY '10 budget. Excludes $30million enhanced FMAP for FY '09
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Budget Trends: FY 10 FY 12
Budgeting Through the Crisis 90 percent of appropriations consistently goes to 10 agenciesthat provide core services;
Over 65 agencies share remaining 11 percent of funding
Common Ed.; $2,278 ;35.0%
Higher Ed.; $945 ;14.5%
OHCA (Medicaid);$983 ; 15.1%
DHS; $537 ; 8.3% Corrections; $460 ;7.1%Transportation; $107 ;1.6%
Mental Health; $187 ;2.9%Career Tech; $134 ;2.1%
Juv. Affairs; $96 ; 1.5%Public Safety; $85 ;1.3%ll Other Agencies;
$699 ; 10.7%
FY '12 Appropriations: Total and 10 Largest Agencies
TotalAppropriations:
$6,510.5 million
Total Ten Largest:
$5,811.9; 89.2%
Notes:
Transportation also received $70 from
bond issue;
OHCA excludes revenue from hospital
provider assessmber (SHOPP)
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Budget Trends: FY 10 FY 12
Budgeting Through the Crisis Almost every agency has absorbed successive and significant cutsover past three years;
Some 40 agencies more than half of all appropriated agencieshave absorbed cuts of greater than 20 percent since FY 09;
Cuts to some key health, human service, and public safety
agencies have been minimized:
Mental Health -12.7%; DPS 12.6%; Common Education10.0%; Higher Ed 9.1 percent; Corrections -8.6%; DHS -3.9%; OHCA +12.7%
No agencies have been funded to cover rising operating andemployee benefit costs over the past three years;
Budget cuts and funding shortfalls will continue to impactOklahoma students, teachers, families, public employees, non-profitorganizations and private sector businesses.
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Looking Ahead
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Looking Ahead
Budget Outlook: An Incomplete RecoveryTAX COLLECTIONS AT HISTORIC LOWS
Tax collections in FY 10 equal to just 5.2 percent of
state personal income ;
Declined from 6.7 percent in FY 06 due to tax cuts and
economic downturn.
5.0%5.5%
6.0%
6.5%
7.0%
7.5%
$0$2,000
$4,000
$6,000
$8,000
$10,000
State Tax Collections, FY '82 - FY '10Total and as % of State Personal Income
State Tax Collections (in $millions)
Tax Collections as % of State Personal Income
Sources: State personal income from Bureau of Economic Analysis; Taxcollections from Annual Executive Budget
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Looking Ahead
Budget Outlook: An Incomplete Recovery
5.7%
5.2%
4.8%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Oklahoma State Appropriated Budget as Share of
State Personal Income, FY '81 - FY '11
Sources U.S. Bureau of Economic Affairs, State Quarterly Personal Income (estimated 1.0% growth 2nd-4th Qtr SFY 2011);
A ro riations histor rom annual Executive Bud et other sources
State appropriated spending has reached its lowestlevel in at least 30 years and will fall even further inFY 12
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Looking Ahead
Budget Outlook: An Incomplete Recovery Revenues unlikely to recover to pre-downturn nominallevels prior to FY14 under current policies
$5,938 $5,953
$5,518
$4,600
$4,912
$4,969
$5,121 $5,380
$5,643
$6,044
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
FY '07
(act.)
FY '08
(act.)
FY '09
(act.)
FY '10
(act.)
FY '11
(est.)
FY '12
(est.)
FY '13
(est.)
FY '14
(est.)
Fiscal Year
General Revenue Fund Collections, FY '07 to FY '14,Actual and OK Policy Forecasts (Oct. 2010) (in $ millions)
Actual
Low
Forecast
Middle
Forecast
High
Forecast
See: "A NewFiscal Reality forOklahoma: TheState BudgetOutlook, 2011-2014; at:
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Looking Ahead
Budget Outlook: An Incomplete Recovery Make smarter expenditure decisions:
Consolidate duplicative agencies and streamline services;
Prioritize prevention and surveillance;
Ensure adequate funding of public pensions.
Improve our forecasting capacities and budget reserves;
Give control for making decisions about revenues and spendingback to our elected representatives.
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For More Information
Updated Budget Information:okpolicy.org/current-budget-
information
Oklahoma Policy Institutes OnlineBudget Guide
www.okpolicy.org/online-
budget-guide
http://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guidehttp://www.okpolicy.org/online-budget-guide -
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