Cuts to state agencies are likely coming sooner than expected. The secretary of finance says we are now in a revenue failure. That means the state doesn't have enough money to continue paying their bills.
All state agencies will likely be asked to make cuts for the second half of the fiscal year. State
Finance Secretary Preston Doerflinger blames OPEC but state democrats point out an income tax cut will still take effect this year.
When oil prices started spiraling down earlier this year so did state revenues. Gross production taxes, the money the state collects on oil and gas produced in Oklahoma, has fallen 62% below last year. Layoffs brought down income and sales tax revenues as well.
Now revenues have now fallen below the 5% cushion meaning agencies will have to make immediate cuts. And that likely includes schools.
Superintendent Joy Hofmeister notified schools Tuesday evening to prepare for cuts.
“It is very hard for me to imagine a scenario where children are not going to be impacted by this,” said State Superintendent Hofmeister. “It is our hope to be able to insulate as best as humanly possible.”
OCU Meinder’s School of Business Dean Steve Agee says it’s not just OPEC but a number of factors that drove oil production up and prices down.
“Those of us in the economic world saw that this was coming,” he said.
Some state democrats including House Minority Scott Inman leader argue that this crisis is self-inflicted. He says the legislature has cut over a billion dollars in income taxes since 2004 coupled with nearly $2 billion in tax credits and exemptions. And at the beginning of this year another income tax cut will go into effect.
Agee says those tax cuts didn't cause the problem but certainly added to it.
“Because we’ve cut income taxes, we’ve cut other taxes, we’ve had incentives, we’ve cut the gross production tax from 7% to 2% so all those cuts effect revenue. They cause less revenue so if you have a decline in the price of oil 60% to 65%. It’s going to continue to exasperate the problem.”
The board of equalization will meet on Monday to determine how much each agency will have to reduce their budget.