OK finance secretary: Appropriations tight, but ‘sky is not falling’

Patrick B. McGuigan | Oklahoma Watchdog

OKLAHOMA CITY — The Oklahoma economy is growing and total tax revenue is up, but the amount available for legislative

appropriations, in the general revenue fund, is down slightly.

The state official responsible for monitoring state government cash flow pre-empted critics of a proposed state income tax cut, saying the state economy is robust.

Tuesday, the state Board of Equalization approved a general fund revenue estimate of more than $5.9 billion for fiscal 2015. Under budget provisions, nearly $5.65 billion of that is available for legislative appropriation in the coming four months.

Noting a reduction of 2.6 percent in tax receipts available for appropriation, Cabinet Secretary of Finance Preston Doerflinger told members of the BOE — which sets state spending based on revenue projections in state Tax Commission reports — “the sky is not falling.”

He emphasized the point in an interview with Oklahoma Watchdog, calling critics of tax cut proposals, “the usual characters swearing the end of the world is near.” In contrast, he said, spending will be “back at FY 2013 levels” in the coming year. He reflected, “Last time I checked, the skies didn’t fall and the seas didn’t boil … when we had this much to spend.”

Although the state has “more money than ever,” there is less to appropriate than last year. State tax collections have grown in every major category other than corporate income, and gross tax collections hit an all-time high in January — led by the largest sales tax collections in state history.

Lower corporate receipts came for two reasons, Doerflinger told the BOE. First, “the federal government didn’t have a tax code in place to start the 2013 tax year, and businesses are filing amended returns.” The director of the Office of Management and Enterprise Services, as well as Gov. Mary Fallin’s cabinet secretary, Doerflinger believes the state Tax Commission — whose analysis is the legal source for BOE actions — overweighted corporate income projections.

The appropriated budget will be about $188.5 million less than in fiscal 2014, but overall tax receipts are up. The increase, though, is flowing into non-appropriated accounts.

Doerflinger and his boss, Fallin, say possible agency cuts, reduced government spending and overall state economic improvement means an individual state income tax cut is still very much on the table.

The BOE consists of the governor and five other statewide elected officials: Lt. Gov. Todd Lamb, Auditor Gary Jones, Schools Superintendent Janet Barresi, Treasurer Ken Miller, and Attorney General Scott Pruitt. The appointed secretary of agriculture also serves as a voting member.

Pruitt reflected historic frustration with the Tax Commission’s revenue projections. BOE approval of the projections is customarily routine – and, indeed, under legal provisions the board must simply approve or disapprove a mix of budgeting authority steps.

Pruitt, however, voted against the overall revenue estimate and against the “estimate of funds available for appropriation” in fiscal 2015, saying he was not confident in the Tax Commission’s methodology.

During the BOE meeting, Fallin said continued frustrations with revenue projections indicate it “might be wise” to get input from several economists about the art (or science) of tax revenue prediction.

Moments before adjournment of the BOE session, she appointed Treasurer Ken Miller and Secretary Doerflinger to analyze the Tax Commission’s process and see whether improvements are possible.

Despite the appropriations challenges that may flow from the tighter stash of cash available for legislative action, the Sooner State economy continues to be the envy of many.

Oklahoma family incomes have risen 6.3 percent since January 2011. The unemployment rate, at 5.4 percent, is far below the U.S. average. A September 2013 Forbes magazine analysis put the state at seventh best in business costs, fourth in economic climate and 14th best for “for doing business” among the states.

You may contact Pat at pmcguigan@watchdog.org .

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