Fiscal Year 2011 Legislative Appropriations Oklahoma House of Representatives Speaker Chris Benge Appropriations and Budget Committee Representative Ken Miller, Chairman Representative Scott Martin, Vice Chair October, 2010 Prepared by: House Fiscal Staff APPROPIATIONS AND BUDGET COMMITTEE Ken Miller, Chair Scott Martin, Vice Chair John Auffet Joe Dorman Guy Liebmann John Carey Larry Glenn Danny Morgan Doug Cox Jeff Hickman Ron Peters Lee Denney Chuck Hoskin Randy Terrill Dale DeWitt Mike Jackson Weldon Watson Subcommittees Education Public Health & Social Services Lee Denney, Chair Doug Cox, Chair Earl Sears, Vice-Chair Paul Wesselhoft, Vice Chair Ed Cannaday Lisa Billy Ann Coody Gus Blackwell David Derby Samson Buck Eddie Fields John Enns Wes Hilliard George Faught Corey Holland Rebecca Hamilton Sally Kern Charlie Joyner Jeannie McDaniel Lucky Lamons Bill Nations Jabar Shumate Todd Thomsen Harold Wright General Government & Transportation Public Safety & Judiciary Guy Liebmann, Chair Randy Terrill, Chair Colby Schwartz, Vice-Chair Mark McCullough, Vice Chair Gary Banz Mike Christian Mike Brown Rex Duncan Mike Jackson Scott Inman Shane Jett Fred Jordan Steve Kouplen Ryan Kiesel Ken Luttrell Richard Morrissette Steve Martin Jason Nelson Ryan McMullen Paul Roan Eric Proctor Mike Sanders Mike Reynolds Glen Bud Smithson T.W. Shannon Daniel Sullivan Mike Thompson Human Services Revenue & Taxation Ron Peters, Chair Jeff Hickman, Chair Marian Cooksey, Vice Chair Neil Brannon, Vice Chair Dennis Bailey Tad Jones Wallace Collins Dan Kirby David Dank Randy McDaniel Dennis Johnson Jerry McPeak Al McAffrey Pat Ownbey Charles Ortega R.C. Pruett Pam Peterson Ben Sherrer Wade Rousselot John Trebilcock Sue Tibbs Weldon Watson Cory Williams John Wright Natural Resources & Regulatory Dale Dewitt, Chair Skye McNiel, Vice Chair Don Armes Terry Harrison Charles Key Lewis Moore Jason Murphey Leslie Osborn Brian Renegar Phil Richardson Seneca Scott Jerry Shoemake Purcy Walker Note: The same Members appointed to the Appropriations and Budget Committee were appointed to the General Conference Committee on Appropriations (GCCA). Since the Chairmanship rotates between the House and Senate each year, Representative Ken Miller served as Vice Chairman of GCCA. Oklahoma House of Representatives Fiscal Staff Janice Buchanan, Director Mark Tygret, Deputy Director Marilyn Anderson David Ligon Terry McKenna John McPhetridge Mark Newman Mark Nichols Nicole Taylor Diane Thomas Appropriations and Budget Committee Assistant Barbara Porter Fiscal Staff Assistant Amanda McCarrell Preface and Acknowledgements This document serves as a reference to House members, staff and other interested parties in summarizing the Fiscal Year 2011 Legislative Appropriations Process. As the final report on appropriations of the 2010 Legislative Session, the document contains specific information relating to the issues addressed by the Legislature in constructing the FY‐11 budget for the State of Oklahoma. This final report contains a host of detailed information pertaining to past and present decisions affecting FY‐11 appropriations. It is hoped that the content and format are presented in a manner that is useful to members of the House, their constituents and the overall appropriations process. A ten‐year appropriation history of each state appropriated agency is included as a final summary for the readers’ review. Each staff member of the Fiscal Division is to be commended for making contributions in preparing information for this report, as well as for their professional and dedicated work throughout the 2010 legislative session. Significant contributions to the appropriations process were made by Mark Harter of the Legal Division. Special thanks are also deserving of Barbara Porter, Assistant to the Appropriations and Budget Committee and Angie LaPlante, Legislative Assistant. Important to the final work product were Amanda McCarrell (coordination/formatting), David Ligon (writing), and Mark Tygret (editing). Janice Buchanan Fiscal Director House of Representatives FY‐11 Appropriations Overview Ten Year Appropriation History Total Appropriation Level 8.0 7.0 6.0 5.0 4.0 Billions 3.0 2.0 1.0 0.0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 FY‐02 $5,611,514,760 FY‐07 $6,554,329,152 FY‐03 $5,532,095,223 FY‐08 $6,932,106,070 FY‐04 $5,106,597,024 FY‐09 $7,089,333,227 FY‐05 $5,358,101,676 FY‐10 $6,574,296,466 FY‐06 $6,038,003,816 FY‐11 $6,152,776,766 *FY‐11 Total Appropriations with Federal Stimulus $6,691,837,225 Notes: 1. These figures include appropriations, pension systems, capital and special projects. Figures exclude Rainy Day Fund spillover transfers and supplemental appropriations. 2. Totals also include the Tobacco Settlement Fund, the Common Education Technology Revolving Fund, the Education Reform Revolving Fund, the Higher Education Scholarship Revolving Fund and the Higher Education Capital Revolving Fund. Distribution of FY‐11 Appropriations By Subcommittee General Natural Resources Government 2% 4% Federal Stimulus 8% Human Services 9% Education 49% Judicairy & Public Safety 10% Public Health 18% Total Appropriations = $6,691,837,225 * Federal Stimulus $539,060,459 Excludes supplemental appropriations, reappropriations and Rainy Day spillover transfers. Includes capital and one‐time expenditures. Fiscal Overview Economic Status The current national economic recession is the longest and most challenging since the Great Depression. Oklahoma’s economy is certainly not immune to the affects of a national recession of this magnitude. In a recent article published in The Federal Reserve Bank of Kansas City Economic Review, researchers found that financial stress, measured in terms of credit and liquidity, plays a role in Unemployment Rates eventually tipping even a strong U.S. and Oklahoma economy into a distressed state. 2006 –2010 YTD A key economic indicator that Percent 11 provides evidence of the 10 9 recession’s impact is 9.6% unemployment rates From peak 8 7 employment levels in FY‐08, 6 4.7% 6.9% Oklahoma has lost over 52,000 jobs, 5 3.2% according to Bureau of Labor 4 4.0% 3 Statistics data, but remains low J A J O J A J O J A J O J A J O J A J O relative to national unemployment U.S. Oklahoma rates. 2006 2007 2008 2009 2010 Crippling budget deficits have forced many states to enact drastic cuts as nearly half of all states reported an estimated cumulative FY‐11 budget gap of $174 billion with half the states raising taxes in 2009 netting more than $28 billion. (National Conference of State Legislatures). General Revenue Fund Collections ‐ Active Rig Count and GRF Gross Production Revenue FY(Six ‐Month02 –FYMoving Average)‐11 (Est.) 2006 –2010 YTD 6,500 Revenue Assessment 18% Drop from FY‐08 5,934.8 5,953.2 6,000 250 5,704.5 120 5,518.5 5,500 200 95 The severity of Oklahoma’s current 4,959.5 5,000 4,888.6 budget crisis is more clearly realized 4,615.8 4,599.6 1504,500 4,413.3 70 4,185.3 4,703.9 4,636.8 Collections ($ Millions) ($ Collections 4,413.3 4,305.3 when compared to revenue 4,000 4,404.0 100 4,259.9 45 4,018.0 4,098.3 collections in the not too distant 3,500 3,545.3 50 3,355.6 20 past. General Revenue Fund (GRF) 3,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 J S J S J S J S J S collections, which constitute about Real CollectionsM 2002 = 100 M MFiscal Year M M 2006 2007GRF Collections 2008Real GRF Collections 2009 2010 GDP Implicit PriceActive Deflator Rigsfor State andGP Local Revenue Government used as index 70 % of total appropriations, have decreased 18 % since the “high‐ water mark” in FY‐08. When adjusted for inflationary effects the GRF has also lost substantial purchasing power. Active Rig Count and GRF Gross Production Revenue (Six Month Moving Average) Because much of the growth in 2006 – 2010 YTD revenue collections since 2004 has been realized in gross production 250 120 tax collections on oil and gas, the 200 95 turning point for Oklahoma’s 150 70 budget occurred in the later half of FY‐09 with a dramatic fall in oil and 100 45 gas prices to five year lows. 50 20 J J J J J M S M S M S M S M S 2006 2007 2008 2009 2010 Active Rigs GP Revenue Although revenue collections continued to weaken from all sources in 2009, the FY‐10 state budget was based on the FY‐10 appropriations authority established by the Board of Certification in February, 2009. Most state agency budgets were reduced by approximately 7 % to reflect overall decreases in available state revenues even though approximately $223.7 million in Rainy Day Funds were employed to offset the revenue shortfall. FY‐10 began with a poor revenue FY‐10 performance and although there was General Revenue Fund Collections modest improvement in the final few months as natural gas prices General Revenue Fund Comparisons With Estimate increased, total collections for the 12 Month Year to Date SUMMARY Jul‐June, 2010 year were less than 85 % of the FY‐10 Estimated FY‐10 Actual Variance from Estimate estimate. (in $ millions) Jul‐Jun, 2009 Jul‐Jun, 2010 $ % Net Income Tax 2,351.4 1, 875.8 (475.5) (20.2) Gross Production 427.5 444.4 16.9 3.9 Sales Tax 1,754.1 1,515.7 (238.3) (13.6) Motor Vehicle 141.4 147.3 5.8 4.1 Further complicating the FY‐10 Subtotal: Major Taxes 4,674.4 3,983.2 (691.2) (14.8) budget were the first time Other Sources 741.0 616.4 (124.6) (16.8) appropriation and subsequent TOTAL: GRF $5,415.4 $4,599.6 ($815.7) (15.1) formulation of rules and regulations governing the American Recovery and Reinvestment Act (ARRA) federal stimulus funds, designed primarily to offset imminent FY‐10 state budget decreases in the areas of education and Medicaid related programs.