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Oklahoma Faces Nearly $869 Million Budget Shortfall

Dec 20, 2016

Oklahoma’s state government will face a budget hole of about $869 million in the upcoming fiscal year, a 12.6 percent decrease from the current year, according to figures released Tuesday by Secretary of Finance Preston Doerflinger.

Updated December 22, 9:49 a.m.

The State Board of Equalization formally certified a $6 billion budget estimate Wednesday for Fiscal Year 2018, which is $868 million below the $6.8 billion allocated for the current fiscal year.

Gov. Mary Fallin will use that figure to start creating her executive budget that will be released to lawmakers when the legislative session begins in February.

Fallin says cigarettes and services like tattoos and car washes – currently exempt from sales taxes – are some of the likely targets for new taxes as Oklahoma budget writers try to close the multimillion-dollar hole in Fiscal Year 2018.

Fallin said Wednesday modernizing Oklahoma's tax code to reflect a more service-based economy will be one of the ways she hopes to help ease cuts to state agencies next year. She told The Oklahoman during a wide-ranging interview she also wants to overhaul the state's budgeting process.

"There is a discussion about what are areas that we might look at to change the structure of our budget, which has been one of my top goals over the past several years, is let's fix the budget so we don't use one-time funds,” Fallin said. “We don't rob this account to pay for this account to float us along."

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Doerflinger says lawmakers will have to make difficult decisions in the upcoming legislative session.

“I think it’s important for everybody to realize you’re not cutting your way out of this situation. I’ll start there. We have to have a serious conversation about revenue in this state,” Doerflinger told reporters.

As part of those conversations, Doerflinger specifically mentioned sales taxes on services that are taxed in surrounding states but not in Oklahoma.

“For me and for this administration, it’s more about the fact that our economy has changed to a services-based economy and I think we have to realize that, and at least have a serious conversation, looking at some of the sales tax and use tax exemptions and services that aren’t taxed today,” Doerflinger said.

Doerflinger says the declining revenue means an income tax rate cut from 5.0 percent to 4.85 percent will not go into effect. He adds that projections show there will not be a revenue failure during the current fiscal year, but there will not be a deposit in the Rainy Day Fund.

The Board of Equalization will meet on Wednesday to certify a budget shortfall of about $692 million. Doerflinger says the $869 million estimate is more accurate because it takes into account one-time money that was authorized during the current fiscal year.

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