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Oklahoma's Fiscal Outlook: Moving From Crisis To Stability (February 2013)
Oklahoma's Fiscal Outlook: Moving From Crisis To Stability (February 2013)
Oklahoma's Fiscal Outlook: Moving From Crisis To Stability (February 2013)
February 2013
David Blatt
Quality education system from early childhood to post-secondary More college graduates
Safe streets and neighborhoods Stable safety net for those in need
Successful outcomes for our families, businesses and communities depend on effective public structures and systems Government is among our means of achieving our common goals as a state working with private businesses, non-profits, philanthropies, faith groups, and families
Budget Trends: FY 10 FY 13
Quarterly Change in Personal Income, Oklahoma and National, th Quarter 2007 to 3rd Quarter 2012 4
2007.4
2008.2
2008.4
2009.2
2009.4
2010.2
2010.4
2011.2
2011.4
2012.2
National
Oklahoma
10.1%
9.8%
National
Oklahoma
Budget Trends: FY 10 FY 13
Its a Revenue Problem
Five consecutive quarters of worsening collections Revenue dropped more than twice as steeply as in the previous downturn Revenues recovering from late 2010 thru 2012 but have weakened in past four quarters
30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY '02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10 '11 11 12 12 13
-3.2%
FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12 FY '13 (proj.) (est.)
$651.1
$776.9
FY'09
FY'10
S t a t e T a x e s ( i n 0 0 0 0 s )
$10,000,000
Sources: State personal income from Bureau of Economic Analysis; Tax collections from Annual Executive Budget
Budget Trends: FY 10 FY 13
Budgeting Through the Crisis
Three consecutive years of declining appropriations (FY 10 FY 12) followed by modest increases (FY 13) FY 13 appropriations of $6,855.8 million:
$253 million, 3.8 percent, above FY 12 $269 million, 3.8 percent, below FY 09
State Appropriations, FY '06- FY '13 (in $ Millions, includes supplementals, excludes Rainy Day "spillover" funds)
$7,500
$7,043
$30
$6,760
$224 $273
$838 $554
Total= $6,603
$100
99
$6,856
FY'07
FY '10
FY '11
FY '12
FY '13
Budget Trends: FY 10 FY 13
Budgeting Through the Crisis
Just under 90 percent of appropriations consistently goes to 10 agencies that provide core services Over 65 agencies share remaining funding
FY '13 Appropriations: Total and 10 Largest Agencies (in $millions)
OHCA (Medicaid); $934 ; 13.6% DHS; $587 ; 8.3% Corrections; $464 ; 6.8% Transportation; $206 ; 3.0% Mental Health; $311 ; 4.5% Higher Ed.; $955 ; 13.9% All Other Agencies; $731 ; 10.7% Common Ed.; $2,347 ; 34.2% Career Tech; $135 ; 2.0% Juv. Affairs; $96 ; 1.4% Public Safety; $90 ; 1.3%
Budget Trends: FY 10 FY 13
Budgets for three straight years (FY 10, FY 11 & FY 12) involved variations on a theme:
Large shortfalls in projected revenues Fear of devastating budget cuts Use of non-recurring revenues to partly bridge the budget gap Budget cuts across state government but less severe for core education, health, human services, and public safety agencies
Budget Trends: FY 10 FY 13
Budgeting Through the Crisis: FY 10 FY 12
Governors Henry and Fallin and the Legislature used various revenue enhancements to bridge budget shortfalls and reduce the severity of cuts: Revenue enhancements totaled close to $3 billion over 3 years Half from federal stimulus bills; remainder divided between Rainy Day Fund, cash transfers, enhanced tax compliance, and suspending and deferring tax credits Most new revenues were one-time/non-recurring Budget cuts for almost all agencies for 3 consecutive years Some 40 agencies more than half of all appropriated agencies absorbed cuts of greater than 20 percent Cuts to some key health, human services, education, and public safety agencies were less severe
Budget Trends: FY 10 FY 13
Budgeting Through the Crisis: FY 13
Total appropriations increased by $253 million (3.8 percent) from FY 12 Most agencies received flat funding in FY 13
46 of 78 appropriated agencies will receive the same amount or less
Budget Trends: FY 10 FY 13
Impact of Cuts
State appropriated spending reached its lowest level in at least 30 years in FY 12 Budget cuts and funding shortfalls continue to affect Oklahoma students, teachers, public employees, nonprofit organizations and private sector businesses
State Appropriations as Share of State Personal Income, FY '80 - FY '12
7.0% 6.5% 6.0% 5.5% 5.0% 4.5%
1980 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 2012
Sources: State personal income from Bureau of Economic Analysis; Appropriations from various sources
Budget Trends: FY 10 FY 13
Impact of Cuts: Education
Per pupil funding in Oklahoma down by 20 percent since 2008 (inflation-adjusted) Third steepest cuts in the nation
Budget Trends: FY 10 FY 13
Impact of Cuts: Education
State aid funding has declined by $214 million since FY 2008 while public school enrollment has increased by over 31,000 students. Public School Enrollment and State Formula Funding, 2008 - 2013
$2,050 $2,037 654,542 641,721 644,777 $1,924 $1,894 $1,815 $1,816 $1,800 $1,700 $1,600 FY '08 FY '09 FY '10 FY '11 FY '12 FY '13 Public School Enrollment (October)
State Formula Funding (in Millions)
659,615
666,150
673,190
Budget Trends: FY 10 FY 13
Impact of Cuts: Education
Almost 1,000 fewer teachers than in 2008, leading to larger class sizes and reduced class offerings. Department of Education eliminated funding for adult education, alternative education, research-based teacher training programs, evaluation contracts, and other programs. Despite new testing requirements, funding reduced for ACE remediation and eliminated for Reading Sufficiency in FY 13. Common education has fallen to lowest share of state appropriations since at least FY 00. Funding for higher education down 8.1 percent since FY 09 and down 14.6 percent for Career Tech
Budget Trends: FY 10 FY 13
Impact of Cuts: State Government
Agencies have not been funded for four years to cover rising operating and employee benefit costs State government workforce has shrunk by 9.8 percent compared to FY 09 and is 4.4 percent smaller than in FY 01 Staffing cuts have been especially severe for correctional facilities Many state workers have not received a pay increase in 6 years.
State Employee FTE Count by Fiscal Year Average, FY 01 - FY '12 (excluding Higher Education; FY '12 YTD Apr)
40,000 35,000 30,000 25,000 20,000 FY-01 FY-02 FY-03 FY-04 FY-05 FY-06 FY-07 FY-08 FY-09 FY-10 FY-11 FY-12
39,350 38,231 38,834 38,924 38,154 37,139 37,486 37,684 36,723 37,403 36,081 35,504
Budget Trends: FY 10 FY 13
Impact of Cuts: Public Safety
The Department of Corrections remains critically understaffed. Staffed positions are just over 60 percent of recommended levels, while facilities are consistently at 98 percent to 99 percent of inmate capacity Stress from being required to work frequent double-shifts and low pay is leading to high staff turnover. Often just one officer may be on duty in a dining hall of 160 inmates Juvenile justice facilities are overcrowded and understaffed for highest-level offenders The number of state troopers on Oklahoma highways is at its lowest level in 22 years
Budget Trends: FY 10 FY 13
Impact of Cuts: Health and Human Services
In the past four years, the Health Department has been cut by 18 percent, forcing layoffs for at least 300 employees Health Department eliminated 17 child guidance centers serving pre-school children with developmental delays Department of Mental Health and Substance Abuse Services reduced beds and closed centers for childrens mental health and adult substance abuse, cut contracts to all providers Over 6,000 families on waiting list for developmentally-disabled home and community based waiver program Significant reductions in counseling programs for abused women and children and prenatal education for low-income mothers Office of Juvenile Affairs cancelled youth detention and gang prevention programs
Budget Trends: FY 10 FY 13
Impact of Cuts
Oklahomans expect state government to: educate our children train our workforce maintain our infrastructure protect our communities aid our most vulnerable family members and neighbors Have years of underfunding and the extended period of flat funding and cuts shrunk state government to where it can no longer perform these core functions?
1,000 500
M i l l i o n $2005
0 (500) (1,000) (1,500) (2,000) (2,500) 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Ye ar B e fo r e Tax Cut s A ft e r Tax Cut s
Source: Projections conducted in 2007 by Dr. Kent Olson, Professor of Economics, Oklahoma State University
6%
-4% -13%
May-09 Sep-09
Jan-10
May-10 Sep-10
Jan-11
May-11 Sep-11
Jan-12
May-12 Sep-12
Jan-13
+10.1%
+7.0%
+11.0% -83.1%
Gross Production Tax
-1.4%
Sales Tax Motor Vehicle Tax Other Sources
FY '11
FY '12
FY '13
$6,856
FY 13
FY 14
Whatever our tax structure is in Oklahoma, its doing a good job of not holding us back, and on the other hand we dont want to do anything to mess it up. And thats what you always have to be careful of when you start getting political solutions to problems that may not really exist.
- Scott Meacham, Former State Treasurer, April 2012
You have to be sure you're right before cutting tax rates or shrinking the tax base. The Legislature and the governor cannot say in following years, Oops, we made a mistake.
- Larkin Warner, OSU Regents Professor of Economics, Nov. 2011
Income tax cuts will not make Oklahoma more competitive If our ability to educate and train employees for a 21st century economy is damaged through lack of funding, if we cant maintain our roads and bridges, strong health care system, robust research and technology infrastructure, safe streets, etc., then the benefits of a reduction in the income tax rates may be limited.
-Tulsa Metro Chamber Vice President & Former House Speaker Chris Benge, Oct. 2011
I can't sit here and say having no income tax, having low property tax, whatever, is going to make a big difference We have to have a state that's known for excellence.
-Ardmore Chamber of Commerce Pres. Wes Stucky, Oct. 2011
House leadership refused to let bill get heard by full House Senate rejected last-minute House plan Governor acknowledged defeat
Senate Republican tax bill (SB 585) takes top rate down to 4.75 percent, eliminates various income tax credits to limit fiscal impact Other proposals would cut top rate lower, phase down top rate over several years
Together Oklahoma is a grassroots, nonpartisan coalition of citizens, community groups, and businesses working together to ensure important public investments that support a robust economy and quality of life. Website: www.togetherok.org Follow on Twitter: @togetherok Like on Facebook: TogetherOklahoma
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