|PRESTON L. DOERFLINGER
Director and Secretary
of Finance and Revenue
Tuesday, Dec. 19, 2012
For Immediate Release
Public Information Officer
Oklahoma Office of Management and Enterprise Services
OKLAHOMA CITY – State Finance Secretary Preston L. Doerflinger announced Wednesday that initial projections indicate Gov. Mary Fallin will have an additional $214.6 million to craft her executive budget, while warning that budget caution should be exercised because of the fiscal instability in Washington.
"This isn't your typical certification because of the uncertainty surrounding the fiscal cliff. National events could change the equation down the road, so we must proceed cautiously as we begin building the state budget," Doerflinger said. "Nonetheless, the figures we're seeing are encouraging and indicative of a state economy that's been on a strong roll for more than two years now."
On Thursday, the Board of Equalization will consider certification of $7 billion in revenue that Fallin can use to build her executive budget for Fiscal Year 2014 – a $214.6 million, or 3.1 percent, increase over Fiscal Year 2013. Under state law, Fallin, who is chairman of the Equalization Board, must use the figure certified Thursday for the executive budget she will present to the Legislature Feb. 4.
"This is the first time in five years that the state could have an appropriations authority of $7 billion," Doerflinger said. "No one should get too excited about these figures just yet because everything is in a state of flux until the president and Congress come to an agreement."
The seven-member Equalization Board will meet Thursday to act on the official initial estimate of revenues that will be available for Fiscal Year 2014, which begins next July 1. The board will meet again in late February to make a second estimate, which will be used in negotiations between the governor and lawmakers in determining new appropriations levels for state agencies.
"We'll build a conservative, pro-growth budget based on Thursday's figure, but the February figure will carry far more weight assuming Washington gets its act together by then," Doerflinger said.
Doerflinger added: "Because we are required to base projections on existing law, estimates the Equalization Board will consider on Thursday are linked to the tax structure that would exist if the president and Congress go over the fiscal cliff. That event would repeal the Bush tax cuts for individuals and businesses and raise all federal tax brackets.
"Oklahomans would be hit with a double-whammy because state income tax withholding rates also would go up. That's because Oklahoma’s income tax laws are tied to the federal system of allowable deductions and credits."
A majority of Oklahomans would see their state taxes climb simply because the Budget Control Act of 2010 – the current law – has a lower standard deduction than the one in place under the Bush tax cuts.
"The bright spot here is that Oklahoma’s economic performance has been strong even in the face of federal fiscal folly," Doerflinger said. "I'm happy to report that General Revenue Fund projections for the next fiscal year anticipate an economy that is still growing, with healthy increases forecast in such areas as sales and income taxes.
"Another beneficiary of our economic expansion is common education, specifically the House Bill 1017 Education Reform Revolving Fund, which stands to get an extra $78.6 million next year because of increases in dedicated tax revenues.
"Our growth also is reflected in adjusted projections for the current fiscal year that would produce a $66.4 million deposit into the Rainy Day Fund. That would raise the Rainy Day Fund balance to well over $600 million for the first time ever."
When Fallin took office in January 2011, the Rainy Day Fund had a balance of $2.03, but huge deposits as result of an economic surge over the past two years increased that balance to $577.5 million, just shy of the previous record of $596.6 million. Under the current scenario, the RFD balance would climb to $643.9 million next year.
Any year-end surplus from the General Revenue Fund is deposited into the state’s savings account in July up to the constitutional limit, which now stands at $834.7 million. The GRF is where all state taxes and fees flow, with the exception of earmarked or dedicated funds, and is considered a key barometer of economic growth.
Doerflinger is director of the Office of Management and Enterprise Services, which works with the governor's office to build the annual executive budget. The OMES, in conjunction with the Oklahoma Tax Commission, prepares revenue estimates that are presented to the Equalization Board.
"We have come almost full circle from the Great Recession in Oklahoma and the future looks good, unless the budget stalemate in Washington goes on for several months, leading to another national downturn," he said.