Economic growth yields 'Rainy Day Fund' deposit of $219 million
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Published: 11-Jul-2011
Office of State Finance Director Preston Doerflinger announced Monday (July 11) that the bone-dry Rainy Day Fund will be replenished with a deposit of approximately $219 million after General Revenue Fund collections closed out the 2011 fiscal year “on a roll,” as his office put it in a statement sent to CapitolBeatOK.

The deposit more than fulfilled Doerflinger’s projection, just a few weeks ago, that the Constitutional Reserve (better known as the Rainy Day Fund) would far exceed the $70 million deposit projected a few months ago.

“It will be the largest deposit into our constitutional reserve fund since the end of the 2005 fiscal year,” Doerflinger said.  “And while we will likely face a tight budget again next year, this enhances stabilization of Oklahoma’s overall revenue situation.’’

Doerflinger, secretary of finance in Gov. Mary Fallin’s cabinet, made the announcement this morning as he released the final General Revenue Fund report for June, wrapping up the FY-11 fiscal year.  The FY-12 fiscal year started July 1.

“June revenue collections from all major sources continued to beat the official state estimate and last year’s receipts, led by income, sales and energy taxes,’’ the OSF director said.

“We’re getting economic traction in all areas, including some where it appears stagnation has set in for the national economy.  Specifically, recent declines in Oklahoma’s unemployment rate coincide with strong GRF income tax collections, both individual and corporate,” Doerflinger said.

Oklahoma’s jobless rate fell to a 28-month low of 5.3 percent in May. That compares to a national unemployment rate exceeding 9 percent.  As late as March of 2010, the state unemployment rate stood at 7.3 percent.

Preliminary estimates show total June GRF collections hitting $576 million, an increase of $78.1 million or 15.7 percent from the prior year and $66.2 million or 13 percent over the estimate.  As is often the case, June was the strongest revenue month of the year.

The end-of –the-fiscal-year total was $5.1 billion, an increase from the prior year of $487.1 million or 10.5 percent.  Collections for 12 months topped the estimate by $219.4 million or 4.5 percent, according to preliminary figures.

“This month’s revenue report is one more sign that things are trending up in Oklahoma,” said Gov. Mary Fallin.  “It is great news that tax revenues continue to climb, unemployment is ticking down and the state is quickly replenishing its Rainy Day Fund.”

“Looking forward, we need to keep our momentum going in the right direction by continuing to pursue the kind of pro-business policies that bring more jobs and tax revenue into Oklahoma.”

The state’s Rainy Day account had dwindled to only $2.03 after it had to be tapped during the recession to ease huge budget shortfalls that threatened essential state services. It had reached a record $596.6 million before the recession.

The balance in the state savings account could reach new heights in the future years, in the wake of adoption by voters of a constitutional amendment in 2010 raising from 10 percent to 15 percent the ceiling on prior year GRF funds that can be deposited into the fund.

That measure had worked its way to passage after strong support from the Republican legislative majority and a high degree of bipartisan backing, including from then-Governor Brad Henry.

In today’s release, Doerflnger’s office argued, “Having a healthy amount of money in reserve is important for several reasons, including meeting funding emergencies.  It also is one item national bond rating companies consider when rating a state.  Having a high bond rating permits states to get low-interest financing for public infrastructure projects, saving taxpayers money.”

Oklahoma’s energy industry has played a significant role in Oklahoma’s ongoing recovery from the effects of the deep national downturn, providing high-paying jobs that lead to higher income and sales tax collections.

“Oil revenue bolstered our General Revenue Fund in Fiscal Year 2011 and a surplus from the source helped us provide additional funds for educational entities that they were able to use for the end of the 2011 fiscal year or carry into 2012,” Doerflinger said.

“I was particularly pleased to see natural gas revenue rebound in June after being a drag on total gross production tax collections for much of the last fiscal year. This is one area we will be watching closely in the months ahead,” he added.

General Revenue Fund collections for the major tax categories in June were:

Income taxes -- This source collected $263.9 million in June for the FY-2011 General Revenue Fund, which was $46.7 million or 21.5 percent more than prior year collections from individual and corporate income taxes and $51.1 million or 24 percent above the estimate.
 
Individual income tax receipts of $208.7 million were $28 million and 16.1 percent above the prior year and $23.6 million or 12.8 percent above the estimate. 

Corporate returns totaled $55.3 million for the month which was $17.9 million or 47.8 percent more than prior year collections and $27.5 million or 98.9 percent above the estimate.

Sales tax -- Sales tax collections produced $146.2 million for the General Revenue Fund, $11 million or 8.2 percent more than the prior year and $4.5 million or 3.2 percent above the estimate. 

Gross production tax -- The June taxes on natural gas and gross production oil accounted for $81.9 million in General Revenue Fund receipts, which was $30.5 million or 59.4 percent above the prior year and $27 million or 49.3 percent above the estimate.  

Collections of gross production taxes on natural gas totaled $35.2 million, $13.6 million or 62.6 percent above prior year collections and $3.9 million or 12.3 percent more than the estimate. 

Gross production taxes on oil contributed $46.7 million.  That amount was $17 million or 57.1 percent above prior year collections and $23.2 million or 98.6 percent more than the estimate. 

Motor vehicle taxes -- This tax source produced $23.3 million, which was $4.3 million or 22.3 percent above the prior year and $7.4 million or 46.4 percent above the estimate.

Other Revenue -- Other revenue produced $60.6 million in June. This was $14.5 million or 19.3 percent below the prior year and $23.8 million or 28.1 percent below the estimate.

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