state’s top executive officials got much better news during the annual revenue check-in, but they said another round of cuts was still likely.
The Board of Equalization meets a few times a year to discuss state revenue projections. Every February, the board certifies the projections that lawmakers will use to draft the following year’s budget. For the past few years, finance officials have offered dire messages and discussed shortfalls that either flirt with or surpass the billion-dollar mark.
On Tuesday morning, those officials said the budget gap for fiscal 2019, which begins in July, is at less than $170 million. It would be higher, but it was offset with about $100 million in revenue growth. Tax adjustments accounted for most of the growth, but economic recovery was a factor.
Lawmakers will have to make room for about $142 million in several financial obligations that will carry over into fiscal 2019, such as bond payments for Department of Transportation and capital improvements and the increased lease payments for the prison in Sayre. The Legislature has nearly finished paying a bill that would bail the state’s medical schools out of a financial hole after a dispute with the federal agency that oversees Medicaid. That will cost about $31 million this fiscal year and $110 million in fiscal 2019. They also have to pay about $20 million in lottery supplanting funds for education.
Although those costs total $272 million, the hole shrinks. Revenue collections for 2018 are up about $104 million, which offsets some of those obligations and takes the hole down to $167 million.
“This is better than we anticipated,” said Shelly Paulk, the deputy budget director of revenue for the Office of Management and Enterprise Services, after the meeting.
Her presentation was matter-of-fact, but she said a few times that certain portions were good news or positive indicators. It was night and day from last year’s board meeting, where then-Secretary of Finance and Revenue Preston Doerflinger announced a revenue failure, which triggered cuts, and said that lawmakers would soon face an $800 million budget gap. Although the revenue failure was never realized, and those cuts were reversed, state agencies lost tens of millions of dollars. Instead of putting money into the Rainy Day Fund, officials had to empty it. Executive officials at the time acted as though there was no light at the end of the tunnel.
Automatic across-the-board cuts won’t be necessary, and plugging the gap is easily attainable. This time, the chance of a revenue failure is so low and revenue projections are so solid that no one will be able to tap the Rainy Day Fund. Instead, the state is pouring $300 million into it.
Projections for the revenue that lawmakers get to spend – excluding money that is already earmarked – are at $6.19 billion, up by more than $300 million over the last fiscal year. Officials have to save 5 percent of revenues as a cushion they can access during a revenue failure. Otherwise it’s off limits until the next fiscal year. Any money that comes in over that 5-percent estimate goes into the Rainy Day Fund.
Instead of a general feeling of hopelessness, officials pointed that sentiment toward the Legislature. Gov. Mary Fallin said she was happy that revenues were up and the economy seemed to be recovering, but it’s not doing so to the point that tax increases or spending cuts won’t be necessary.
“We’re not to the point that we need to be,” she said.
Although filling a gap that small with new revenue would be significantly easier than it would have been when the gaps were in the billions, she said it’s likely lawmakers will simply cut their way to an even budget. Lawmakers fought over revenue measures for 54 weeks so far, she said, and they have failed to pass almost any. To cut the necessary amount, lawmakers would stymie monthly allotments to agencies by 2.5 across the board, or lawmakers could target the cuts to protect agencies such as the Department of Corrections or common education. She said that was disappointing, but she was done expecting them to do anything else.