Oklahoma leaders brace for steep budget shortfall

With oil prices hovering below $50 a barrel and an income tax cut scheduled to take effect on Jan. 1, Oklahoma’s already bleak budget outlook for the upcoming fiscal year is likely to take a turn for the worse.

A little more than two months into the current budget year, the state’s top finance official already is meeting with legislative budget leaders and urging agency directors to start looking now for ways to save money.

“There is concern, but I would also say that it’s still manageable,” said Secretary of Finance Preston Doerflinger, Gov. Mary Fallin’s chief budget negotiator. “Concern does not equal panic.”

Exacerbating the anticipated shortfall in the budget for the fiscal year that begins next July 1 is more than $500 million in one-time revenue sources that lawmakers used to close a roughly $611 million hole in the current fiscal year’s budget. That included money from the Rainy Day Fund, various agency revolving accounts, the Unclaimed Property Fund, and road improvement funds, among others.

A reduction in the individual income tax rate from 5.25 percent to 5 percent that the Republican-controlled Legislature approved in 2014 will take effect on Jan. 1 and is expected to reduce collections by another $57 million for the last six months of the fiscal year.

While some lawmakers have worried the budget hole could exceed $1 billion, Doerflinger said it’s simply too early to tell how big the shortfall will be.

“I want us to be cautious as we approach what things might look like and not just be throwing out arbitrary numbers,” Doerflinger said. “Let’s wait until we have solid numbers.”

Policymakers will get their first real snapshot of the budget situation during a Board of Equalization meeting in December when Doerflinger’s office develops a projection that Fallin will use to build her executive budget proposal.

In the meantime, he’s warning agency heads not to bother making fiscal wish lists, but to come up with ideas on how to save money.

“This year more than ever, my message and the governor’s message to agencies is going to be: We need you to come with your hands up with ideas about how you as an agency might mitigate the challenges we’re going to face, versus asking for a hand out asking for more and more,” Doerflinger said.

Earl Sears, the chairman of the House Appropriations and Budget Committee, said he expects budget writers this year to again look at all possible revenue sources as they work to start crafting next year’s budget. Among the likely targets will be so-called “pass-through” funding that has been typically appropriated to state agencies and then directed to pet projects such as a youth livestock show or an aquarium in Jenks.

“Everything is on the table,” Sears said. “And nobody’s waiting until February to have this conversation. All of those things are being talked about right now.”

I want us to be cautious as we approach what things might look like and not just be throwing out arbitrary numbers. Let’s wait until we have solid numbers.”

PRESTON DOERFLINGER

SECRETARY OF FINANCE