Oklahoma state government’s budget year ended on June 30 with significant surplus revenue that boosted state savings, leading Gov. Kevin Stitt to renew his call to cut taxes.

“Oklahomans know how to spend their money better than the government, so let’s leave more in their pocket,” Stitt said. “With a record $1.3 billion in the Rainy Day Fund and continued growth in our savings, there has never been a better time to cut taxes.”

The state’s General Revenue Fund collections for fiscal year 2023, which ended on June 30, were $493.7 million above prior-year collections for the same period and approximately $1.6 billion greater than estimates.

The resulting surplus adds to existing state savings, which remain at levels undreamed of prior to Stitt’s service as governor, which has included a focus on restraining spending to build up financial reserves.

Under the Oklahoma Constitution, a share of surplus collections goes to the state’s Constitutional Reserve Fund, commonly called the “Rainy Day” fund, which is capped at 15 percent of the prior-year’s collections. Because of the end-of-year surplus, $222.9 million was deposited into that fund, filling it to the cap with a record $1.27 billion.

“We’re proud to have achieved another record-breaking year for revenue collections, enabling us to make a sizable deposit to the Constitutional Reserve Fund (Rainy Day Fund),” said state Office of Management and Enterprise Services executive director John Suter. “This strong finish to FY 2023 indicates a stable foundation for our future efforts and the citizens we serve.”

Money in the “rainy day” fund is only a share of total state savings.

State government also has a Revenue Stabilization Fund. Each year, if collections from gross production taxes exceed a five-year average, the difference is deposited into the Revenue Stabilization Fund. That fund currently has $401 million and the governor’s office estimates another $249 million will be deposited into the Revenue Stabilization Fund in the coming year.

Oklahoma government also has an FMAP Rate Preservation Fund, which is used to offset cuts in federal Medicaid payments to the state. The Federal Medical Assistance Percentage (FMAP) is the federal match provided for state Medicaid spending. It fluctuates from year to year and typically declines during state economic downturns. The FMAP rate fund allows the state to offset those federal funding cuts without reducing payments to Oklahoma health care providers who treat Medicaid patients.

Currently, the FMAP Rate Preservation Fund has $345.2 million and the governor’s office projects that it will receive another $150.4 million in the coming year.

The lion’s share of state savings has been generated by leaving money unspent during Stitt’s tenure. The state has built up $2.4 billion in financial reserves by not appropriating every available dollar over a four-year period. In the 2021 state budget year, $145.8 million that could have been appropriated was left unspent. In 2022, officials held $64.2 million in reserve. In 2023, state officials left $1.8 billion unspent, and in the now-ongoing 2024 state budget year officials left another $352.2 million set aside to build up reserves.

The combination of the Constitutional Reserve Fund, the Revenue Stabilization Fund, and unspent reserves from prior years gives Oklahoma government more than $4 billion in state savings. Adding the FMAP Rate Preservation Fund to that total raises that figure to $4.4 billion in savings. And if projected deposits are made to the Revenue Stabilization Fund and the FMAP Rate Preservation Fund, combined states savings from those sources could soon reach $4.82 billion.

As the 2023 legislative session began last February, Stitt called for reducing Oklahoma’s personal income tax rate from 4.75 percent to 3.99 percent, eliminating the state sales tax on groceries, and reducing the state’s corporate income tax rate by three-quarters of a point.

The combined tax cuts would have saved Oklahomans $655 million in the then-pending budget year, and more in subsequent years when the tax reductions would have been in effect for all 12 months of the year.

However, lawmakers ultimately opted against those tax cuts and instead voted to eliminate the franchise tax on businesses and eliminate the “marriage tax” that imposed a higher rate on couples filing jointly than those filing separately. The latter change will save couples around $14.7 million annually.

Rather than provide broad-based tax cuts, lawmakers voted instead to provide millions of dollars in funding to select businesses through what critics called a “corporate welfare” subsidy. Stitt also supported the business subsidies.

House Bill 1038X provided $145 million to subsidize one project. Senate Bill 1176 dealt with nearly $700 million set aside for subsidies to potentially just one business. Senate Bill 1179 provided another $180 million for subsides with that money coming out of state savings.