Budget & Tax

Ray Carter | December 23, 2019

State government to have ‘flat’ budget next year

Ray Carter

The State Board of Equalization has certified that the governor and lawmakers will have only $9 million more to spend in the 2020 legislative session than in 2019. That represents an increase of just one-tenth of 1 percent.

Gov. Kevin Stitt, who fought to place a large share of last year’s growth revenue in reserve, said his emphasis on increased savings is already paying off.

“Thank goodness that we were able to save $200 million last year, or we would be in a worse situation this year,” Stitt said. “But it’s going to be flat this year. So I’m just telling agencies to let us know what their true needs are, but keep in mind we’ve got a flat budget this year so we’re going to have to pick and choose where we invest our resources.”

Even with almost no increase in state collections that can be directly appropriated by the Legislature, Stitt said a significant amount of money can be redirected to other uses in 2020.

“We’re going to back out what’s called the ‘one-time’ money,” Stitt said. “This is a new discipline that I started last year. You’ve got the base expense level, and then a lot of agencies last year asked for one-time money to invest in technology or to some deferred maintenance. Well, I’m backing all of those things back out, and so we should have some money.”

He said roughly $250 million will be freed up after accounting for one-time funds in the current state budget.

Much of that redirected money may be quickly consumed, however. In a release, Senate Appropriations Committee Chairman Roger Thompson, R-Okemah, noted the state also faces some increased costs.

“Any growth in a budget is good, but we have to be cautious in our outlook and continue to monitor economic conditions as we prepare the budget,” Thompson said. “And before the first drop of ink is spilled in writing the state budget, we already have nearly $200 million in obligations for things like the ad valorem reimbursements to schools, the bond debt on the Capitol, and increased costs for teacher health care benefits.”

The governor and legislators will also have to be cautious in crafting a budget because the gap between projections and reality can be quite different. A packet provided to board members noted that collections to the state’s general revenue fund for the current budget year, which runs through June 2020, are now projected to be $244 million less than what was previously estimated. The negative $244 million shift in official estimates for the current budget year occurred between June and December of this year.

However, that $244 million reduction will not force budget cuts at state agencies, because lawmakers are allowed to spend only 95 percent of certified revenue. The reduction in the estimate is less than the built-in 5-percent cushion.

The announcement of a flat budget year came against a backdrop in which Stitt is working to renegotiate state gaming compacts. Stitt has argued the exclusivity fees that tribes pay to the state government for the monopoly right to operate casinos should be increased.

The current “exclusivity fees” paid by tribal governments to Oklahoma state government range from 4 percent to 6 percent on slot machines and up to 10 percent on other games. Rates in other states run as high as 25 percent, while commercial rates in many states run even higher.

The chairman of the Oklahoma Indian Gaming Association has publicly conceded that the exclusivity fees are subject to renegotiation, but tribal leaders have refused to meet with Stitt to discuss the issue unless the governor agrees the compacts auto-renew.

Tribal casinos’ total combined payments to Oklahoma state government since 2006 total more than $1.5 billion. However, if the per-machine state payout from tribal casinos was equal to the rate paid on slot machines by state racetracks, which are taxed at commercial rates, Oklahoma government would receive more than $1 billion annually from tribal casinos, based on current per-machine averages.

Stitt noted that the money certified by the State Board of Equalization represents only a portion of total state government spending and that his goal of making Oklahoma a “top 10” state is not dependent upon massive annual increases in tax collections.

“When you talk about the federal dollars and everything we spend, it’s close to $20 billion,” Stitt said. “And so when you look at that per person, we’re not a poor state. We’re right in the middle. For example, North Dakota spends about $4 billion total in their state. And so we’ve got a lot of money to make sure that we deliver services. That’s why it’s about management to me, and it’s about getting the right people in these different agencies and making sure that they focus on the right goals to deliver top 10 services for Oklahomans.”

Ray Carter Director, Center for Independent Journalism

Ray Carter

Director, Center for Independent Journalism

Ray Carter is the director of OCPA’s Center for Independent Journalism. He has two decades of experience in journalism and communications. He previously served as senior Capitol reporter for The Journal Record, media director for the Oklahoma House of Representatives, and chief editorial writer at The Oklahoman. As a reporter for The Journal Record, Carter received 12 Carl Rogan Awards in four years—including awards for investigative reporting, general news reporting, feature writing, spot news reporting, business reporting, and sports reporting. While at The Oklahoman, he was the recipient of several awards, including first place in the editorial writing category of the Associated Press/Oklahoma News Executives Carl Rogan Memorial News Excellence Competition for an editorial on the history of racism in the Oklahoma legislature.

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