Deeper midyear reductions necessary
OKLAHOMA CITY — General Revenue Fund (GRF) collections continued tumbling in January, missing the estimate by 17.2 percent and the prior year by 16.2 percent, as the effects of low oil prices became more pronounced.
As state government’s main operating fund, the GRF is the key indicator of state government’s fiscal status and the predominant funding source for the annual appropriated state budget. GRF collections are revenues that remain for the appropriated state budget after rebates, refunds and mandatory apportionments. Gross collections, reported by the State Treasurer, are all revenues collected by the state before rebates, refunds and mandatory apportionments.
January GRF collections of $507.6 million were $105.5 million, or 17.2 percent, below the official estimate upon which the Fiscal Year 2016 appropriated state budget was based, and $98.1 million, or 16.2 percent, below prior year collections.
Total GRF collections for the first seven months of FY 2016 were $3.1 billion, which is $277.6 million, or 8.2 percent, below the official estimate and $280.5 million, or 8.3 percent, below prior year collections.
The Board of Equalization meets Feb. 16 to update FY 2016 and FY 2017 revenue projections.
“When the board updates the current year projections, it will require a deepening of the midyear general revenue reductions made following December’s revenue failure declaration,” said Secretary of Finance, Administration and Information Technology Preston L. Doerflinger said. “The precise amount of the deeper reduction will be determined following the board meeting. It is also possible the Legislature may take actions that could affect the revised reduction amount.”
Due to collection schedules, monthly gross production tax collections typically reflect production levels and commodity prices from two months prior. Therefore, January gross production tax collections reflect production and prices from November, when oil fell below $45 per barrel, where it has remained since.
“The truly bottom of the barrel oil prices that started in November are just now hitting collections and will continue doing so for the next several months,” Doerflinger said. “All tax categories are feeling the pain.”
In addition to low oil prices, unexpectedly high wind production tax credit costs have caused further revenue reductions. The $44.7 million cost for wind incentives to date in FY 2016 is an approximately 83 percent increase over the same period in FY 2015, which puts further strain on state revenue collections already weakened by the effects of low oil prices.
The increased cost of wind production tax credits was a large contributor to corporate income tax refunds exceeding corporate income tax collections in October, November and December. January marked the first month since October that the state did not have to transfer monthly personal income tax collections to pay monthly corporate income tax refunds.
“It took until January to pay personal income tax back for the money that was borrowed mostly to pay those wind tax credit claims that started in October,” Doerflinger said.
Doerflinger is director of OMES, which issues the monthly GRF reports.
Major tax categories in January contributed the following amounts to the GRF:
- Total income tax collections of $233.7 million were $58.5 million, or 20 percent, below the estimate and $57.7 million, or 19.8 percent, below the prior year.
- Individual income tax collections of $219.4 million were $43.7 million, or 16.6 percent, below the estimate and $27.4 million, or 11.1 percent, below the prior year.
- Corporate income tax collections of $14.3 million were $14.8 million, or 51 percent, below the estimate and $30.3 million, or 68 percent, below the prior year.
- Sales tax collections of $164.6 million were $26.9 million, or 14 percent, below the estimate and $20.9 million, or 11.3 percent, below the prior year.
- Gross production tax collections of $7.2 million were $17.7 million, or 71 percent, below the estimate and $23.2 million, or 76.2 percent, below the prior year.
- Natural gas collections of $6.7 million were $3.2 million, or 31.9 percent, below the estimate and $77,800, or 1.2 percent, above the prior year.
- Oil collections of $509,600 were $14.5 million, or 96.6 percent, below the estimate and $23.2 million, or 97.9 percent, below the prior year.
- Motor vehicle tax collections of $18.3 million were $4.6 million, or 20.1 percent, below the estimate and $0.4 million, or 1.9 percent, below the prior year.
Other revenue collections of $83.8 million were $2.2 million, or 2.7 percent, above the estimate and $4.1 million, or 5.1 percent, above the prior year.
Monthly revenue tables are available on the OMES website: https://www.ok.gov/OSF/News/January_2016_Financial_Report_Data_Tables_.html
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