Dipping into the state’s savings account may be necessary this fiscal year if revenue continues to fall below projections, budget leaders said. "We don’t know yet exactly where we’re going to bottom out,” state Treasurer Scott Meacham said. "We have to be ready for it. It could go lower.” Gov. Brad Henry and legislative leaders have resisted calls the past two years to take money out of the Rainy Day Fund because of the economic slowdown in the state. They were able to develop a $7.2 billion budget for this fiscal year without using Rainy Day Fund money, largely because the state used about $630 million in federal stimulus money. Less than three weeks into the 2010 fiscal year, Meacham, the governor’s chief economic adviser, is asking agency heads to come up with budget cuts. Revenue reports last week showing state money collected in June, the last month of the 2009 fiscal year, fell 30 percent below the previous year are a reason for concern, he said. The state has another $600 million in stimulus money set aside for the 2011 fiscal year. The Rainy Day Fund, under Henry’s watch since 2003, has grown to its highest-ever amount of nearly $600 million. The governor and legislative leaders said earlier this year they avoided using Rainy Day Fund money for this fiscal year’s budget. Because of likely sour economic conditions, it was likely, they said, it would be needed for the 2011 fiscal year. Meacham said the governor and lawmakers may have no choice but to use money from the Rainy Day Fund this fiscal year. He’s predicting the state will experience a revenue shortfall as actual collections fall below state Tax Commission estimates. Rep. Ken Miller, chairman of the House Appropriations and Budget Committee, said using money from the Rainy Day Fund this fiscal year is an option. "I don’t want to say that that’s the course that will be pursued, but we have to be prepared to use all the tools that we have available to us and that’s certainly one of those tools,” said Miller, R-Edmond. "We’ll just have to wait and see how things progress over the next few months and see the trend.” Cutting appropriations to agencies would be the first action. Meacham is asking state agency directors, many of whom are dealing with 7 percent cuts this fiscal year, to look for further reductions because of the likelihood of a revenue shortfall. He wants their recommendations within the month. If the revenue shortfall is prolonged or steep, budget cuts likely won’t be enough, Meacham said. When cuts start affecting employees and vital services, the Rainy Day Fund has to be considered. "It is a Rainy Day Fund,” Miller said. "If the revenue picture dramatically deepens, then we’re going to have at some point say it’s a rainy day, but I’m not prepared to do that yet.” It would take legislative approval to spend money from the Rainy Day Fund. A special session could be avoided if budget cuts are sufficient to get the state through until February when lawmakers return. Lawmakers may use only 37.5 percent of the money in the Rainy Day Fund, or about $225 million, in any fiscal year to make up for revenue shortfalls. Another 37.5 percent can be used to stabilize the budget in another fiscal year; the remaining 25 percent may be spent on projects labeled as emergencies.
Natural gas pricesThe main factor affecting the state’s economy is the price of natural gas, Meacham said. While total 2009 fiscal year gross production collections, which consist of taxes paid on natural gas and oil production, were 5.5 percent below the estimate, in June they were off the estimate by 81.7 percent, reports show. In June 2008, the state collected $105 million in gross production taxes. A year later the state collected $13 million. "Until we see a firming of natural gas prices, things are going to stay pretty tough,” Meacham said. A rebound doesn’t seem immediate. Natural gas prices remain well below $4 per 1,000 cubic feet. The budget for this fiscal year is based on gas prices averaging $5.22 per 1,000 cubic feet. State revenue estimates are based on production levels, which have fallen. "It’s not just price,” Meacham said. "It’s price and volume. What happens with oil and gas is when price goes up, then volume produced goes up. When price goes down, volume produced goes down so it’s sort of a double hit.”