Final FY 2016 revenues 9.4% below estimate
Midyear cut level reduction leaves $140.8M available for allocation
OKLAHOMA CITY – June General Revenue Fund (GRF) collections missed the estimate by 12.6 percent, causing total Fiscal Year 2016 collections to end the year $541.3 million, or 9.4 percent, short of the estimate.
The GRF’s final FY 2016 account reconciliation showed mandatory midyear funding cuts required by the state’s revenue failure declaration can now be reduced, making $140.8 million available for immediate allocation.
Gov. Mary Fallin is exploring a special legislative session to use the $140.8 million as part of a teacher pay raise package.
As state government’s main operating fund, the GRF is the key indicator of state government’s fiscal status and the predominant funding source for the annual appropriated state budget. GRF collections are revenues that remain for the appropriated state budget after rebates, refunds and mandatory apportionments. Gross collections, reported by the State Treasurer, are all revenues collected by the state before rebates, refunds and mandatory apportionments.
June GRF collections of $488.3 million were $70.1 million, or 12.6 percent, below the official estimate upon which the Fiscal Year 2016 appropriated state budget was based and $47.6 million, or 8.9 percent, below prior year collections.
Total GRF collections for FY 2016 were $5.2 billion, which is $541.3 million, or 9.4 percent, below the official estimate and $521.9 million, or 9.1 percent, below prior year collections.
Final reconciliation of FY 2016 revenues shows GRF allocation reductions required by FY 2016’s midyear revenue failure were deeper than necessary. The final reconciliation shows $140.8 million initially projected as needing to be cut from agency allocations midyear did not need to be cut.
Without a special session, the $140.8 million would be distributed equally among all agencies receiving general revenue allocations, said OMES Director and Secretary of Finance, Administration and Information Technology Preston L. Doerflinger. Money will not be sent to agencies until a determination has been made on whether a special session will occur.
“Many agencies have needs, but the fact is this money would do more good for Oklahoma in the form of a teacher pay raise than it would equally distributed to agencies,” Doerflinger said. “A lot of agencies – mine, for one – simply don’t have as compelling a case for the money as education, particularly our teachers.”
Midyear GRF reductions caused by the FY 2016 revenue failure were initially seven percent, or $412 million, but final revenue reconciliation shows the necessary reduction level was 4.4 percent, or $272 million, which results in $140.8 million that was cut now becoming available for allocation.
The $140.8 million is not eligible to be deposited in the Rainy Day Fund because the funds are not true surplus funds.
“Calling these funds a surplus is like taking $7 out of someone’s pocket, giving them $2.50 back and congratulating them on a $2.50 surplus,” Doerflinger said. “Let’s be clear: These are funds that are available because an emergency cut level can now be reduced, not because revenues were above expectations. The state is still in a challenging revenue environment due to energy sector contraction and other factors. If this were a true surplus, there would be a Rainy Day Fund deposit, which isn’t happening.”
The Board of Equalization in February had projected FY 2016 GRF collections to come in $549.3 million, or 9.6 percent, below the official estimate. The board’s February projection revealed the state’s initial revenue failure reduction of three percent, made in December, was insufficient, and that a GRF allocation reduction of at least another 1.6 percent would be necessary.
Due to significant revenue declines the state was experiencing at the time, OMES reduced general revenue allocations by an additional four percent to maintain the state’s constitutional requirement to operate under a balanced budget and reduce the possibility of having to cut agency allocations again midyear.
“We stand by the cut level we approved because instead of cutting agencies yet again, which would have happened if the cut level was too small, the state gets the chance to address a major priority in teacher pay,” Doerflinger said.
Doerflinger added: “This was by no means a good year on the revenue front, but it wound up slightly better than it looked midyear when revenues were in a freefall along with oil prices. There is now money available to spend from our biggest fund, the General Revenue Fund, and the state’s second-biggest fund, the 1017 Fund, made full allocations to public schools, as our office always projected it would.”
Doerflinger is director of OMES, which issues the monthly GRF reports.
Major tax categories in June contributed the following amounts to the GRF:
Total income tax collections of $229.7 million were $28.5 million, or 11 percent, below the estimate and $22.5 million, or 8.9 percent, below the prior year.
Individual income tax collections of $185 million were $18.9 million, or 9.3 percent, below the estimate and $5.2 million, or 2.9 percent, above the prior year.
Corporate income tax collections of $44.7 million were $9.6 million, or 17.6 percent, below the estimate and $27.7 million, or 38.2 percent, below the prior year.
Sales tax collections of $155.9 million were $23.3 million, or 13 percent, below the estimate and $7.3 million, or 4.5 percent, below the prior year.
Gross production tax collections of $6.6 million were $9.3 million, or 58.6 percent, below the estimate and $114,400, or 1.8 percent, above the prior year.
Natural gas collections of $5.7 million were $1.7 million, or 42.7 percent, above the estimate. There was no GRF contribution from June 2015 collections.
Oil collections of $895,000 were $11 million, or 92.5 percent, below the estimate and $5.6 million, or 86.2 percent, below the prior year.
Motor vehicle tax collections of $36 million were $14.3 million, or 66 percent, above the estimate and $17.7 million, or 96.6 percent, above the prior year.
Other revenue collections of $60 million were $23.3 million, or 28 percent, below the estimate and $35.5 million, or 37.2 percent, below the prior year.
Revenue tables can be viewed on the OMES website: June 2016 Financial Report Data Tables.
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