Claremore Daily Progress

February 18, 2014

Legislature to have $188M less to spend

Sean Murphy
Associated Press

OKLAHOMA CITY —

The Oklahoma Legislature will have about $188 million less available this year to spend on state services than last year, an even deeper hole than was initially projected, a state panel determined Tuesday.
The Board of Equalization, headed by Gov. Mary Fallin, certified $6.9 billion in available revenue for the Legislature to spend on state programs for the fiscal year that begins July 1. That amount is $188 million less than the Legislature appropriated for the current fiscal year, and $17 million less than what was projected in December to be available.
Oklahoma’s Secretary of Finance Preston Doerflinger said the main reason for the sharp decline since December is a decrease in the estimate for corporate income tax collections, which he described as an “always volatile” revenue source.
Although Oklahoma’s economy is booming and overall tax collections to the state treasury are growing, the Legislature has less money to appropriate from the state’s General Revenue Fund, the main operating fund for state government. 
Doerflinger has cited several reasons for this decline, including a tax incentive for certain kinds of oil and gas drilling and the diversion of revenue for things like transportation improvements and college scholarships.
“It’s a classic ‘only in government’ paradox to collect more money than ever but have less to spend,” Doerflinger said. “The silver lining is this year’s decrease has nothing to do with the economy, which is still strong in the state and improving nationally.”
Fallin prepared her executive budget based on a projection of $170 million less to spend, and most agencies under Fallin’s budget proposal were expected to make up for the lost revenue with 5 percent cuts to their budgets.
“It’s manageable,” Doerflinger said. “It’s not ideal, but it’s manageable.”
Doerflinger also reported that projected collections for the current fiscal year that ends June 30 will be within a 5 percent budget cushion that should prevent any automatic budget cuts to state agencies for the remainder of the fiscal year.
Despite having $188 million less to spend on state services for the next fiscal year, Fallin said that did not dampen her enthusiasm for an income tax cut that would take effect in 2015.
“I still support an income tax (cut) for the state of Oklahoma,” Fallin said after the meeting. “We still think we’ll make up the revenue.
“We’ve created a lot of new jobs in Oklahoma, and we think that’s because we’ve been gradually and responsibly lowering the income tax rate as it’s possible.”
Fallin’s proposal to cut the top personal income tax rate from 5.25 percent to 5 percent, beginning Jan. 1, has been drafted into a bill that passed a Senate committee Tuesday. The bill would further reduce the rate to 4.85 percent in 2016 if revenue collections continue to climb.
Oklahoma City Republican state Sen. Kyle Loveless, the author of the bill, said his plan is to offset much of the revenue lost to the state as a result of the tax cut by eliminating what he described as a “loophole” in existing law. He said current law allows tax filers to claim a personal deduction for state and local property taxes twice and that eliminating that provision will result in a savings to the state of about $80 million.
Fallin’s proposed income tax cut would cost the state $53 million in the first fiscal year and $172 million when fully implemented, according to the Oklahoma Tax Commission.
Fallin and Senate President Pro Tem Brian Bingman have supported the idea of offsetting lost revenue from an income tax by eliminating various tax deductions and exemptions. Newly elected House Speaker Jeff Hickman said Monday that he has discussed broadly the idea of a tax cut with House Republicans but that no consensus has been reached on how such a cut would be structured.
Hickman, R-Fairview, was one of a handful of Republicans who voted against last year’s tax cut proposal, which was later ruled unconstitutional by the Oklahoma Supreme Court because it included more than one subject.