Budget & Tax
Oklahoma spending discipline fuels savings growth
May 23, 2023
While strong revenue growth has allowed Oklahoma state lawmakers to boost spending on certain parts of government—K-12 education alone is receiving a nearly 25-percent increase in this year’s budget plan—legislative leaders say they are also continuing to follow a practice that has resulted in the largest amount of state savings in Oklahoma history.
Put simply, lawmakers are not spending every dollar available.
“We are looking ahead,” said House Appropriations and Budget Chairman Kevin Wallace, R-Wellston. “We are trying to plan ahead. And we know there will be another downturn.”
During a Tuesday budget hearing on the state’s “general appropriations” bill that will fund state government, Wallace noted that the proposed 2024 budget plan spends $13.2 billion, but said the plan still leaves $948 million unspent from money certified available for appropriation.
He said that unspent money will instead be held in reserve “if the economy does turn.” Wallace said that is “another conservative move to make sure that when the next downturn comes, the agencies don’t have to take cuts.”
Senate Appropriations Chairman Roger Thompson, R-Okemah, also highlighted state savings when discussing this year’s general-appropriations bill.
Thompson said the state currently has a little more than $1 billion in the “rainy day” fund, and officials expect to deposit another $222 million into that fund at the end of the current fiscal year because state tax collections have exceeded estimates.
The state’s “revenue stabilization fund,” a savings account designed to capture excess growth in energy taxes and smooth out volatility, is expected to reach its cap of $401 million.
A special Medicaid savings fund, which is used to prevent rate cuts to providers during a downturn, has $317 million and could receive a deposit of $27 million at the end of June, Thompson said.
The state also has an unspent balance of $145.8 million from the 2021 state budget year, $64.2 million from the 2022 state budget year, and $183 million from the 2023 state budget year, which will conclude on June 30.
Because the state cap on the “rainy day” fund will be reached this year, excess collections above the cap level will be available in the same way as unspent funds from the normal budget process. Thompson said officials expect around $850 million in those “spillover” funds will be added to state reserves at the end of June.
The shift in state government’s financial planning has coincided with the election of Gov. Kevin Stitt. A successful businessman prior to serving as governor, Stitt began his first year in office in 2019 with a plan calling for the state to set aside $2 billion into savings over four years, a level of savings that was three to four times greater than the total savings achieved under any prior governor.
Today, the state has far more held in reserve than even Stitt’s initial ambitious goal.
In addition to Stitt’s election, some lawmakers say they were determined not to repeat the final years of former Gov. Mary Fallin’s second term in which an oil bust devastated state revenue collections, and shortfalls were exacerbated by heavy reliance on one-time sources of funding and a lack of savings.
The confluence of those factors generated major budget shortfalls throughout Fallin’s second term with shortfalls running as high as $1.3 billion in a year.
Budget leaders say the post-2018 emphasis on holding greater amounts of money in reserve has now made it possible to provide significant spending increases in areas like education while also maintaining financial stability.
“It’s become a standard practice that we haven’t appropriated our full authority in quite a few years now,” Wallace said. “As you can see, it has resulted in a strong state of the state, financial standing.”