OKLAHOMA CITY (AP) — Early projections show Oklahoma lawmakers will have about $214 million more to spend on next year's state budget, despite huge reductions in oil and natural gas tax revenue, state finance officials said Wednesday.
The state Board of Equalization is expected to meet Thursday and certify about $7 billion in revenue that Gov. Mary Fallin will use to build her executive budget for the upcoming year. The board will meet again in February for a final certification of the amount that lawmakers will have available to appropriate.
"This isn't your typical certification because of the uncertainty surrounding the fiscal cliff," said Secretary of Finance Preston Doerflinger, referring to the automatic, government-wide spending cuts and tax hikes set to take effect Jan. 1. "National events could change the equation down the road, so we must proceed cautiously as we begin building the state budget. "Nonetheless, the figures we're seeing are encouraging and indicative of a state economy that's been on a strong roll for more than two years now."
The increase of about 3.1 percent over the amount spent on the current fiscal year budget comes despite a major reduction in the amount of revenue generated from the production of oil and natural gas. State finance officials said much of that reduction is due to a change in how oil and gas companies receive tax exemptions for drilling deep and horizontal wells.
Figures released Wednesday show gross production taxes on natural gas decreased by $41 million, or nearly 22 percent, from last year, while the gross production taxes on oil dropped by nearly $80 million, or 42.3 percent. Included in that reduction are some deferred tax rebates that oil and gas companies are receiving for drilling over the last two years. Those rebates were suspended for two years in 2010 to help lawmakers close a hole in the state budget, and now the state is paying back an estimated $300 million that accrued while they were suspended.
Revenue projections also show an increase in personal income tax collections of $121 million, or 6 percent, and a hike in corporate income tax collections of $164 million, or 51 percent. Doerflinger said part of the reason for the increase in income tax collections is that the projections are based on most Oklahomans seeing an increase in their state taxes after Jan. 1 because of a lower allowable standard deduction than the one currently in place under the Bush-era tax cuts.
"Because we are required to base projections on existing law, estimates the Equalization Board will consider on Thursday are linked to the tax structure that would exist if the president and Congress go over the fiscal cliff," Doerflinger said.
Incoming House Speaker T.W. Shannon said the projected increase in state revenue is a good sign of Oklahoma's strong economy, but he said the looming fiscal cliff and its potential impact on the state's economy is a "real concern."
"This legislative session, I will require all state agencies prepare for reductions in federal spending," Shannon, R-Lawton, said in a statement. "It needs to be a serious goal this legislative session that Oklahoma lessens its reliance on the federal government."
Finance officials said current projections for the remainder of the current fiscal year would result in a $66 million deposit into the state's Rainy Day Fund, pushing the fund balance to more than $600 million for the first time in state history. The fund, which includes any year-end surplus from the state's General Revenue Fund, currently has a balance of $577.5 million.
Sean Murphy can be reached at www.twitter.com/apseanmurphy