Oklahoma’s state budget is becoming more dependant on one-time funding sources, according to state treasurer Ken Miller, during both good and bad economic times.
Miller remarked at the Oklahoma State University Center for Applied Economic Research 2016 Economic Outlook Conference in Oklahoma City that the state should not experience the biggest budget hole in its history at a time of 4.3 percent unemployment, according to Shawn Ashley from eCapitol.
Miller, who chaired the House Appropriations and Budget Committee for three years, outlined how state budget writers have used more than $1.7 billion of one-time funding over the most recent five fiscal years:
• $400 million in FY2012
• $300 million in FY2013
• $126 million in FY2014
• $292 million in FY2015
• $611 million in FY2016, the current fiscal year.
Miller noted state budget leaders began a two-year process of phasing-out the use of one-time funds in FY2014.
"I would say that was a very good faith effort on the part of budget writers after recognizing the structural imbalance problem. But the next year, nearly $292 million was included in the general appropriations bill."
Miller found three factors that convinced budget writers to use large amounts of one-time revenue at the current fiscal year’s budget: The loss of one-time revenues that were used in 2015, the drop in energy prices, and the decrease in the individual income tax rate.
Miller noted total gross receipts, which his office reports on monthly and issued its most recent report Monday, are at a 17-month low. That, in turn, he said, is impacting the General Revenue Fund, from which the majority of legislative appropriations are made.
"The picture of the General Revenue Fund, the state's main operating account which receives about one-half of gross receipts, is also showing signs of strain. With fiscal year to-date allocations 2.8 percent below the estimate, the specter of a revenue failure for the current fiscal year is now considered a possibility," Miller said.
When the Board of Equalization meets Dec. 21, Miller said, "Officials anticipate a reduction in funding greater than the final estimate for FY2016."
Miller said Oklahoma state government has four main functions: Education, transportation, public safety and health care. In each area, funding levels are less than the national average. Common education is well below the national average.
"Where do we go from here?" Miller asked. "Outside of government, it is well accepted that non-recurring revenue should not be used for ongoing expenditure and that recurring revenue streams should not be cut when current costs exceed them.
"Yet that has become standard operating procedure for our government and changes next session aren't likely given the expected shortfall. Common sense dictates that until the state proves it can live within its means, it really should stop reducing them," he added.
Miller continued, "Some thinkers continue to advocate eliminating the state income tax, even arguing that the state's largest funding source can be banished without a replacement and still fund needed teachers pay raises. This contention would be laughable if not so devastatingly irresponsible."
According to the eCapitol article, Miller believes the state should modernize its “outdated tax structure that was built for an economy that no longer exists.” He believes there Gov. Mary Fallin and legislative Leaders are willing to tackle the use of non-recurring revenue.
Referring to a question he was asked Monday during his office's budget hearing before the Senate Appropriations Subcommittee on General Government and Transportation, Miller said he explained he did not believe the use of non-recurring revenues could be addressed in the 2016 legislative session.
"We are facing the largest budget hole in state history. It is going take proper planning and a multi-year approach to wean us off that dependency, but I believe that it can happen. And I believe it will happen."
During a question and answer session, Miller expanded his comment, saying it would be necessary to use one-time funds during the upcoming legislative session or budget writers' "only other alternative would be to make very deep cuts."
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