A significant reduction in the amount of revenue expected to flow into state coffers in Fiscal Year 2007 signals a need for a Constitutional amendment that will help stabilize the state budget, a veteran State Senator said Tuesday.
When the State Board of Equalization certified the final FY 2008 revenue projections Tuesday, the estimate of funds available for the coming fiscal year was about $270 million less than the amount the board initially certified in December.
Senator Kenneth Corn said the cyclic nature of Oklahoma’s energy-driven economy is exactly why he believes the state needs a Constitutional amendment that would limit use of excess gross production tax revenue to one-time expenditures.
“State government in Oklahoma cannot afford to repeat the mistakes of the past – going on a spending spree when times are good and, thus, creating a financial crisis when oil and gas prices drop,” Corn said. “I have filed legislation that would protect against the roller coaster budgeting that results from the cyclic nature of energy prices.”
Senate Joint Resolution 5 calls for a constitutional amendment to be considered by state voters. It would require the certification of the 10-year average of gross production tax revenue from oil and natural gas and limits Legislative appropriation of revenue above that average to one-time expenditures. SJR 5 has not yet been granted a hearing in the Senate Appropriations Committee, which will hold its final meeting on Senate bills Wednesday.
“This would prevent the Legislature from repeating the mistakes of the 1980s when the oil boom dramatically increased state revenues and, in turn, led to a series of tax cuts and growth in state expenditures, leaving a huge hole in the state budget when the boom went bust,” Corn said.
The measure has been named the Fiscal Responsibility and Budget Stabilization Act.
Last year, Corn said, oil and gas revenues spiked to all-time highs. The Legislature simultaneously passed the largest tax cut in state history and the largest state budget ever. Now the forecasts on which those budgetary decisions were made appear to be inflated.
“We can’t keep doing that and not expect to face a fiscal crisis in the future. Oil and gas prices have already dropped below their levels from last year and that is going to lead to some tough budget decisions to make in the next session,” Corn said. “By limiting appropriation of gross production revenues above the 10-year average to one-time expenditures, we can provide greater stability in the state budget. If we don’t get a handle on this issue we’re going to be facing a full-blown fiscal crisis.”
Corn said that under his proposal the excess gross production revenue could be spent on capital needs and things like highway maintenance and bridge replacement.
“This measure won’t allow the Legislature to use an unstable source of revenue to create new programs or expand old ones. That’s not fiscally responsible and my bill will allow the people to force some fiscal restraint on their elected leaders with a constitutional amendment,” Corn said.
The 8-year legislative veteran filed a similar measure last year.