Even though the price of a barrel of oil has risen, Oklahoma’s state revenue shortfall is deepening.
The state treasurer reported last week that there was not enough revenue coming in to cover costs in the current budget, forcing 4 percent reductions to all agencies.
In February, the State Board of Equalization projected a $1.3 billion dollar shortfall for the 2016-17 fiscal year. But cuts have to be made during the current fiscal year.
A 4 percent cut is about $236 million, with a $62 million cut from common education and $56 million from higher education.
Revenue to the state treasury in February dropped for the 10th straight month. The February figures was $758 million – down $90 million compared to February last year. It is the lowest February figure since 2011.
“With oil prices off their 2014 peak by some 70 percent and our state’s anchor industry in the midst of correction, we have apparently not yet found the bottom and continue to see the spillover effect in all major revenue streams,” said State Treasurer Ken Miller.
Twelve-month revenue shrank by more than 5 percent compared to the previous 12-month period, and – at $11.4 billion – is the lowest 12-month total since October 2013.
Monthly collections from oil and natural gas production taxes have been lower than the same month of the prior year for one year and two months. February gross production collections are more than 45 percent lower than last February. Monthly receipts are based on production activity from December when the average price of benchmark West Texas Intermediate crude oil was $37.19 per barrel. Average oil prices were below that level in both January and February.
After monthly apportionment is complete, the Office of Management and Enterprise Services will determine the across-the-board cuts necessary to avoid deficit spending in March as required by the state constitution.
And Oklahoma’s jobless rate of 4.1 percent is expected to rise because of layoffs in the energy sector, Miller said.
And sales tax collections are dropping.
Sales tax collections, including remittances on behalf of cities and counties, total $321.6 million in February. That is $31.6 million or 8.9 percent less than February 2015.
Taxes on fuel, tobacco, horse race gambling and alcoholic beverages produced $101.4 million during the month. That is $9 million or 8.2 percent less than last February.
“This is a brutal time for schools,” said Oklahoma School Superintendent Joy Hofmeister said. “A second General Revenue failure means schools will have lost nearly $110 million since the start of the spring semester alone, and that does not take into account next fiscal year, which looks equally bleak. Efforts that districts are making to cope with these cuts today will further impact the next school year, as they are forced to significantly deplete their cash-fund balances.”
Hofmeister said some rural school districts will have to go to a four-day school week to cope with cuts. That is a possibility for Tulsa Public Schools, too.
This November, Oklahoma voters may vote on a state question to increase the state’s sales tax rate by 22 percent in order to fund teacher pay increases and other educational funding.
But, according to SoonerPoll’s most recent Quarterly Poll, likely Oklahoma voters would like to first see the state government create savings by eliminating tax credits and subsidies for alternative energy production and other corporate tax credits and subsidies.
The poll found 54 percent of likely voting Oklahomans wanted to prioritize using existing resources to fund teacher pay raises before raising the sales tax.
“The Oklahoma voting public believes, particularly in budget deficit times, that first looking at how you are spending your money should be priority one before raising taxes,” said Bill Shapard, founder of SoonerPoll. “While legislators have been hesitant to do so in the past, perhaps this will be the year they listen to the advice of their constituents.”