On a rainy day, analysts debate best use of Rainy Day Fund deposit
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Published: 12-Jul-2011
State Finance Director Preston Doerflinger’s announcement of a $219 million deposit into the Rainy Day Fund sparked immediate hopes among many government employees to see some funding restored to next year’s budgets.
 
However, other voices say the state should take advantage of Oklahoma’s good economic news to move aggressively to "right size" government and fund priorities.
 
On an unexpected day of rain (Tuesday, July 12) at the state Capitol in Oklahoma City, contrasting views of what to do after hearing the good news on revenue made the rounds via email and phone calls.
 
CapitolBeatOK asked conservative analyst Jonathan Small, of the Oklahoma Council of Public Affairs, to reflect on how best the state might approach the opportunity presented by recent economic growth, and the consequent surge in government revenues.
 
Small commented, “The news of the Rainy Day Fund deposit just shows again the continued hard work and income generation of all industrious and working Oklahomans. While there is much angst from tax users that this money wasn’t available to prevent much needed cuts in government, this money is going right where it belongs, savings for future, true emergencies.
 
“Let’s hope that lawmakers don’t misuse these funds in the future, to avoid requiring government to spend within its means. It is unfortunate that the past $600+ million plus balance of the fund was drained completely to avoid much-needed cuts in state government spending.”
 
Small declared additional fiscal discipline is needed across much of Oklahoma’s government: “Tax users and their advocates conveniently forget that the reason for [spending] cuts is solely due to the monstrous growth of 32 percent in state appropriations in just four years prior to this current period of less than record revenues.”
 
David Blatt of Oklahoma Policy Institute, blogging this morning, said the end of Fiscal year 2012 “confirmed the increasingly solid recovery of Oklahoma’s tax collections that has been apparent over the course of the year.”
 
He noted, “For the full year, General Revenue increased by $487.1 million, or 10.5 percent, from the depths of FY ’10. However, …revenue collections remain substantially below pre-downturn levels. This year’s GR came in 14.2 percent below FY ’08 and remains considerably below collections of five years ago, FY ’06.”
 
Blatt argued the state has not recovered from what he deemed the “collapse of 2009 and 2010.”
 
He said, “The strong finish to FY ’11 provides good reason to imagine that if current economic trends continue, we will see collections in FY ’12 outperform the official estimates developed five months ago. … However, this will have little, if any, impact on the current year budget. So while revenues are on an upwards swing, this is too little and too late to spare state agencies from having to absorb more swings from the budget cutting axe.”

The entire debate over what to do with comparatively robust state revenues is made possible by a year of consistent growth in government revenues, with a particularly notable surge over the past two months. The deposit into the constitutional reserve (popularly dubbed the “Rainy Day Fund”) was the largest since 2005, according to Doerflinger.

That boost is the result of both the surging economy and an increase to 15 percent (from the previous 10%) of the amount above Board of Equalization projections. Voter approved the change in state requirements when they gave overwhelming approval last November to State Question 757.

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