Revenues are "pathetic" and Oklahoma is "out of tricks," Finance Secretary Preston Doerflinger told the State Board of Equalization.
The board certified Tuesday an $878.2 million budget hole — $10 million dollars deeper than it was two months ago —and declared fiscal year 2017's first revenue failure.
Revenues declined from 4.4 percent below estimates in December to 5.7 percent below this month. State Treasurer Ken Miller said forecasting is difficult with an economy reliant upon commodities.
"Oil and gas and [agriculture] and all of those prices are set on the global market. And then all of those, then, spill over into our income, sales tax collections and everything else, and so you have some very volatile sources of revenue," Miller said. "And … 0.7 is pretty close to our margin of 5 percent."
A revenue failure is declared when revenues fall more than 5 percent below estimates. When a revenue failure is declared, state agencies take midyear budget cuts.
State agency budgets will be cut by 0.7 percent March 1. The cuts will total almost $35 million, with the Department of Education taking the biggest hit at $11 million. Another revenue failure this fiscal year can't be ruled out.
The deeper budget hole for next fiscal year puts pressure on lawmakers to find new revenue. Gov. Mary Fallin said she's put a sales tax on services, cigarette and fuel tax increases, and off-the-top revenues on the table, so she doesn't want to see lawmakers deliver her a budget with another $900 million in cuts.
"If our legislature isn't willing to solve some of these problems and prioritize our services, invest in some of our services, there may just come a time at the end of session where I just veto the appropriations until we get a deal worked that works for the state of Oklahoma," Fallin said.
Fallin's sales tax proposal is opposed by Lt. Gov. Todd Lamb and has drawn criticism from Democrats in the state legislature. Fallin said lawmakers need to pass some of her ideas to fix the problem or come up with their own.
"Standing in the middle of the road and doing nothing is not an option. It is not working. Our budget is broke, and we've got to fix it. And if we want to prioritize education, we want to prioritize public safety, health, transportation, we have to act," Fallin said.
Doerflinger told the equalization board as things stand now, not cutting the seven core state agencies' budgets for fiscal year 2018 would leave no money for any other agency or branch of government, and the state would still be $20 million in the red. Those seven agencies are the Department of Education, the Oklahoma Health Care Authority, State Regents for Higher Education, the Department of Human Services, the Department of Corrections, the Department of Mental Health and Substance Abuse Services, and the Department of Transportation.
