Volume 11, Issue 1 • August 2021

Oklahoma Economic Report TM State Treasurer Randy McDaniel

News and analysis of Oklahoma’s economy • A publication of the State Treasurer’s Office Improving quality of life

August is set aside as the month to Treasurer Randy McDaniel and was for qualified individuals living with observe and promote ABLE programs launched in May disabilities and throughout the country. 2018. OK STABLE can their families to save for the future, ABLE to Save Month is an opportunity OK STABLE change the lives while protecting to highlight the value and importance operates under the of individuals with eligibility for public these plans bring to those living with federal Achieving “ disabilities and their benefits. disabilities. a Better Life Experience Act families.” People with Oklahoma’s official ABLE plan, OK (ABLE Act), which disabilities that STABLE, is administered by State created a tax-advantaged option SEE IMPROVING PAGE 3

Contents

• Commentary by State Rep. Kyle Hilbert: Income tax deduction for Oklahomans with disabilities • Financial Literacy Spotlight: 5 mistakes to avoid when saving for college in a 529 plan • Gross Receipts: July receipts impacted by tax deadline • Recession declared over • Jobless rate trends downward in June • Economic Indicators Editor Tim Allen, Deputy Treasurer for Governor Kevin Stitt signs House Bill 2178 into law, creating a state income tax deduction for contributions to OK STABLE. Pictured with Stitt are, l-r, Rep. Kyle Hilbert, Communications and Program Treasurer McDaniel, Deputy Treasurer Tim Allen, OK STABLE Ambassadors RoseAnn Administration Duplan, Ellyn Hefner and Angela Donley, and Sen. John Michael Montgomery.

State Capitol Building, Room 217 • Oklahoma City, OK 73105 • (405) 521-3191 • www.treasurer.ok.gov Oklahoma Economic Report TM August 2021

Guest Commentary By Kyle Hilbert, Oklahoma State Representative

Income tax deduction for Oklahomans with disabilities

he Legislature passed and the certain public benefit programs, Tgovernor signed into law House like Medicaid or Supplemental Bill 2178, a measure that creates Security Income. a state income tax deduction for those who wish to contribute to the House Bill 2178 was requested taxpayer or $20,000 for taxpayers State Achieving from Oklahoma State Treasurer filing a joint return. The accounts a Better Life Randy McDaniel. can work alongside Special Needs Experience HB 2178 is a bill It is designed to Trusts and function like a regular (OK STABLE) that will make a offer an identical checking account. This provides program. financial independence and real difference income tax “ deduction as the empowerment for individuals with The program for the families disabilities. allows families one offered for of people with and individuals in contributions to Before, individuals with disabilities disabilities to Oklahoma who most Oklahoma’s 529 could only save $2,000 before College Savings set aside money need it.” losing needs-based benefits. for their care in Plan, which the Now, Oklahoma STABLE allows a way that earns Treasurer’s office individuals with disabilities to save special tax benefits. also oversees. The 529 program and invest up to $15,000 annually has been immensely successful without affecting eligibility for This legislation will improve the in helping parents save for their certain public benefits programs. quality of life of eligible people with children’s college education. disabilities. Oklahoma STABLE funds can Under current Oklahoma law, be used on qualified disability Eligible individuals are those who contributions were not deductible, expenses including: education, were blind or disabled before the but distributions – including housing, transportation, health age of 26 and have been living with earnings – were tax-free to the care, assistive technology, their disability for at least one year, designated beneficiary if used to employment needs and basic living or who expect their disability to last pay qualified disability expenses. expenses. for at least a year. The investment accounts allow qualified individuals HB 2178 now allows an income Earnings on the accounts can grow with disabilities to save and invest tax deduction to STABLE accounts money without losing eligibility for of up to $10,000 per individual SEE COMMENTARY PAGE 3

www.treasurer.ok.gov • Page 2 Oklahoma Economic Report TM August 2021

Commentary FROM PAGE 2 to five tax years. Deductions may are more than 800 active STABLE be taken for contributions made accounts in Oklahoma. It’s hoped tax-free and are not subject to during the tax year and through that with the new change in federal or state income tax as long April 15 of the succeeding tax year, law, even more individuals with as the money is spent on Qualified or through the date of a taxpayer’s disabilities will have access to these Disability Expenses. state income tax return excluding accounts. extensions, whichever is later. The program was authorized I greatly appreciate the work under the bipartisan Achieving a Under current Oklahoma law, of Senator John Michael Better Life Experience Act of 2014. interest dividends and capital Montgomery and our colleagues Although the federal tax code gains from funds invested in the in the legislature for making this allows for ABLE accounts, it’s up to OK STABLE program are exempt legislation become a reality. HB the states to set up and administer from Oklahoma income taxes, 2178 is a bill that will make a real the program. Oklahoma’s STABLE as are qualified distributions difference for the families and program launched May 31, 2018. from disability savings accounts individuals in Oklahoma who most Accounts contributed but not established under the OK STABLE need it. deducted by the taxpayer in the tax program, with respect to the designated beneficiary’s income. More information about OK STABLE year for which the contribution is can be found online at https:// made may be carried forward as Data from the Oklahoma State okstable.org/. a deduction from income for up Treasurer’s office indicates there

Improving FROM PAGE 1 “The goal of OK STABLE is to improve It took teamwork to accomplish began by age 26 are eligible to open the quality of life for individuals the goal, including advocacy from and use an ABLE account. The OK with disabilities and their families,” the disability community. The bill, STABLE program is available for all McDaniel said. authored by Representative Kyle qualifying Oklahomans. Hilbert and Senator John Michael “The program fosters more Montgomery, sailed through the Federal legislation is under independence, transparency and Legislature and was signed into law consideration in Washington that savings. I encourage everyone eligible by Governor Kevin Stitt. would raise the disability onset age to to open an account today.” 46 for participation in the program. In addition to the state tax deduction, Adding a tax break withdrawals are free from state and Thanks to OK STABLE, more than federal taxation if they are used for 800 Oklahomans have been able to McDaniel requested legislation to qualified disability-related expenses. set aside $4.3 million to help them create an Oklahoma income tax manage their resources while living deduction on contributions up to OK STABLE, operating under the with disabilities. $20,000 to OK STABLE accounts beginning with tax year 2021. SEE IMPROVING PAGE 4

Opinions and positions cited in the Oklahoma Economic ReportTM are not necessarily those of Oklahoma State Treasurer Randy McDaniel or his staff, with the exception of the Treasurer’s Commentary, which is, of course, the viewpoint of the treasurer.

www.treasurer.ok.gov • Page 3 Oklahoma Economic Report TM August 2021

Improving FROM PAGE 3 change the lives of individuals with Spotlight on federal ABLE Act, is now poised disabilities and their families. Financial Literacy to grow substantially as more Oklahomans become aware of its “OK STABLE removes disincentives to advantages. work and invest, while empowering 5 mistakes to avoid people to save for the added expenses when saving for The money invested in an OK that come with having a disability,” he STABLE account is not counted as said. college in a 529 plan a disqualifying asset of the account Saving for college in a 529 plan owner, so it does not impact eligibility Contributions to OK STABLE accounts can come from most sources, is easy — in theory, at least. To for public benefits. start, you have only to choose including earned income from account a plan and begin putting Building for the future owners and their families. money away.

McDaniel said OK STABLE can To learn more at OKSTABLE.org. But in spite of the apparent simplicity, it is possible to mess up a college savings plan, even after you’ve succeeded with the much more difficult task of setting aside money to save in the first place.

Yet experts say errors that prevent you from enjoying a 529 plan’s full suite of benefits are surprisingly common and easy to make. Here’s what to watch out for.

#1: Leaving a state tax deduction on the table

#2: Not choosing carefully between low fees and a state tax deduction

#3: Stopping 529 contributions when your kid enters college

#4: Missing the American Opportunity Tax Credit

#5: Choosing a 529 plan through your financial advisor

Learn more at Money. Treasurer McDaniel and advocates for people with disabilities recently spent time together at the Oklahoma City Zoo and recorded a promotional video for OK STABLE.

www.treasurer.ok.gov • Page 4 Oklahoma Economic Report TM August 2021

Pandemic- July gross receipts affected driven recession declared over by tax filing deadline Oklahoma Gross Receipts to the of April in 2020. He also noted every It was harsh and deep, but Treasury in July are impacted by last revenue stream except income taxes short-lived. year’s delayed income tax filings but have substantial gains. show solid economic growth once The recession that began with the extension is “Gross receipts the start of the coronavirus taken into account, demonstrate pandemic lasted only two State Treasurer Gross receipts a resilient and months, ending in April 2020. Randy McDaniel demonstrate expanding state economy,” McDaniel Such was the announcement announced. a resilient and on July 19, 2021, of the Business said. “Last July’s McDaniel said the “expanding state large income tax Cycle Dating Committee of the National Bureau of Economic monthly report economy.” collections are an Research, the arbiter of the appears negative outlier caused by a timing of recessions. at first glance timing issue.” due to a reduced bottom line of 15 It is the shortest U.S. recession percent compared to the same month July collections total $1.22 billion on record – dating back to with growth reported in sales 1854. of last year. However, he pointed out the comparison is distorted because and use, motor vehicle, and gross According to the committee, income taxes were paid in July instead SEE REVENUE PAGE 6 the U.S. economy reached a peak in February 2020 with the recession beginning the following month and ending in Monthly Gross Receipts Change from Prior Year April.

The end of the recession 50% occurred when the economy reached its lowest point in 40% terms of jobs and output.

Analysts estimate the nation’s 30% output of goods and services likely reached its pre-pandemic 20% level during the second quarter of 2021. 10% U.S. unemployment peaked at 14.8 percent in April 2020 and 0% has since fallen to 5.9 percent in June 2021. -10%

Oklahoma’s jobless rate -20% reached 13 percent and fell to 3.7 percent during the same Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 time period. Source: Office of the State Treasurer

www.treasurer.ok.gov • Page 5 Oklahoma Economic Report TM April 2021

Revenue FROM PAGE 5 $1.22 billion, down $214.3 million, ° Sales tax collections total $464.9 production taxes. Even so, individual or 15 percent. million, an increase of $43.3 and corporate income tax receipts are million, or 10.3 percent. almost 50 percent less this month. • Gross income tax collections, a combination of individual and ° Use tax receipts, collected on Consumer confidence is strong as corporate income taxes, generated out-of-state purchases including sales and use tax receipts are 12 $352.8 million, down by $346.7 internet sales, generated $81 percent higher than a year ago. The million, or 49.6 percent. million, an increase of $15 million, gross production tax on oil and or 22.8 percent. natural gas is 260 percent more than ° Individual income tax collections last July. Every major revenue stream, are $324.2 million, a decrease of • Gross production taxes on oil and including income taxes, exceed $226.9 million, or 41.2 percent. natural gas total $82.6 million, an collections from 2019. increase of $59.7 million, or 260.1 ° Corporate collections are $28.7 percent. Twelve-month total collections million, down by $119.8 million, of $14.1 billion reflect a year of or 80.7 percent. • Motor vehicle taxes produced $81.3 economic expansion with every million, up by $6 million, or 7.9 • Combined sales and use tax percent. revenue source higher than during collections, including remittances the previous 12-month period. This on behalf of cities and counties, total • Other collections composed of some 12-month report is the first in 19 $545.8 million – up by $58.3 million, 60 different sources including taxes months showing positive growth in oil or 12 percent. and gas production tax collections. SEE REVENUE PAGE 7 Other indicators Monthly Gross Receipts vs. Prior Year The Oklahoma Business Conditions Dollar change (in millions) from prior year. Index for July anticipates continued economic growth. The monthly index $300 was set at 72.7, down slightly from $200 73.6 in June. Numbers above 50 indicate expansion is expected during $100 the next three to six months. $0 The June unemployment rate in -$100 Oklahoma was reported as 3.7 percent -$200 by the U.S. Bureau of Labor Statistics. Income Tax Motor Vehicle -$300 Sales & Use Tax Other The state’s jobless rate was down Gross Production -$400 from 4.0 percent in May and from Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 8.2 percent in June 2020. The U.S. (In $ millions) July-20 July-21 Variance From Prior Year unemployment rate was set at 5.9 Total Income Tax 699.5 352.8 (346.7) -49.6% Individual 551.1 324.2 (226.9) -41.2% percent in June. Corporate 148.4 28.7 (119.8) -80.7% Sales (In $ millions)& Use Tax (1) April-18 487.5 April-19 545.8 Variance58.3 From Prior Year 12.0% July collections Income Sales TaxTax 709.1421.5 820.2464.9 111.043.3 15.7%10.3% Gross Use ProductionTax 60.765.9 79.881.0 19.215.0 31.6%22.8% GrossSales Tax Production (1) 410.622.9 415.682.6 59.75.0 260.1%1.2% Compared to gross receipts from July Motor VehicleVehicle 75.362.8 81.371.1 6.08.3 13.2%7.9% 2020, collections in July 2021 show: Other Sources Sources (2) (2) 145.8160.4 154.2194.8 34.48.4 21.4%5.8% TOTAL REVENUE REVENUE 1,431.01,403.5 1,216.71,581.4 (214.3)177.9 -15.0%12.7% • Total monthly gross collections are Source: Office of the State Treasurer

www.treasurer.ok.gov • Page 6 Oklahoma Economic Report TM August 2021

Revenue FROM PAGE 6 million, or 2.9 percent. ° Medical marijuana taxes generated $66.5 million, up by on fuel, tobacco, medical marijuana, ° Corporate collections are $759.4 $21.3 million, or 47.2 percent. and alcoholic beverages, produced million, an increase of $118.3 $154.2 million – up by $8.4 million, million, or 18.5 percent. About Gross Receipts to the or 5.8 percent. Treasury • Combined sales and use taxes ° The medical marijuana tax generated $5.88 billion, an increase The monthly Gross Receipts to the produced $5.6 million, up by of $393.6 million, or 7.2 percent. Treasury report, developed by the $372,354, or 6.7 percent from July state treasurer’s office, provides a 2020. ° Gross sales tax receipts total $5 timely and broad view of the state’s billion, up by $270.5 million, or economy. Twelve-month collections 5.7 percent. It is released in conjunction with Combined gross receipts for past 12 ° Use tax collections generated the General Revenue Fund report months compared to the trailing 12 $873.7 million, an increase of from the Office of Management and months show: $123.1 million, or 16.4 percent. Enterprise Services, which provides • Gross revenue totals $14.1 billion. • Oil and gas gross production tax information to state agencies for That is $784.3 million, or 5.9 collections generated $814 million, budgetary planning purposes. percent, above collections from the up by $42.6 million, or 5.5 percent. The General Revenue Fund, the state’s previous period. • Motor vehicle collections total main operating account, receives less • Gross income taxes generated $828.3 million, an increase of $44.7 than half of the state’s gross receipts $4.97 billion, an increase of $237.9 million, or 5.7 percent. with the remainder paid in rebates million, or 5 percent. and refunds, remitted to cities and • Other sources generated $1.61 counties, and apportioned to other ° Individual income tax collections billion, up by $65.6 million, or 4.2 state funds. total $4.21 billion, up by $119.5 percent. Learn more: http://go.usa.gov/xF5mP

Jobless rate trends downward in June The Oklahoma unemployment rate in Oklahoma Unemployment Report June was down slightly from May, and June 2021 substantially below the state’s jobless rate of a year ago. The unemployment Unemploy. Labor force* Employment* Unemployment* rate of 3.7 percent in June is down Rate* from 3.9 percent in May and 8.2 Jun-21 3.7% 1,864,283 1,794,740 69,543 percent in June of last year. May-21 3.9% 1,864,522 1,791,479 73,043 Apr-21 4.1% 1,864,383 1,786,096 79,467 The U.S. Bureau of Labor Statistics Mar-21 4.3% 1,865,563 1,786,096 79,467 (BLS) reports the state has added Feb-21 4.4% 1,865,515 1,784,222 81,293 107,478 jobs over the past year. Jan-21 4.4% 1,864,691 1,783,422 81,269

Jun-20 8.2% 1,838,543 1,687,262 151,281 The U.S. jobless rate was set at 5.9 percent in June, according to figures *Data adjusted for seasonal factors Source: U.S. Bureau of Labor Statistics released by the BLS.

www.treasurer.ok.gov • Page 7 Oklahoma Economic Report TM August 2021

Economic Indicators

Unemployment Rate Gross Receipts vs. Oil & Gas Employment January 1980 – June 2021 January 2008 – July 2021 15.0 90.0 $16.00 12-Month Gross Receipts 12.5 70.0 $14.00 10.0

7.5 50.0 $12.00

5.0 30.0 $10.00

OK-3.7% Oil & Gas Employment 2.5 12-Month Gross Receipts (in $ billions) U.S. U.S.-5.9% Oklahoma Oil & Gas Employment (in thousands) 0 10.0 $8.00 80 85 90 95 00 05 10 15 20 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Shaded areas denote U.S. recessions Source: Bureau of Labor Statistics Shaded areas denote U.S. recessions Sources: BLS & State Treasurer

Business Conditions Index Oklahoma Stock Index January 2011 – July 2021 Top capitalized state companies 80 January 2009 – July 2021 $75 65 $60 50 Avg=$44.22 $45 35 Mid-America Oklahoma $38.47 $30 20 11 12 13 14 15 16 17 18 19 20 21 22 This graph predicts three-to-six-month economic movement by tracking leading $15 indicators, including new orders, production, inventories, employment, delivery lead time 09 10 11 12 13 14 15 16 17 18 19 20 21 22 and prices. Numbers below 50 indicate anticipated contraction. Shaded area denotes U.S. recession Source: Creighton University Shaded areas denote U.S. recessions Source: Office of the State Treasurer

Oklahoma Oil Prices & Active Rigs Oklahoma Natural Gas Prices & Active Rigs January 2011 – July 2021 January 2011 – July 2021 300 $120 160 $8 Active Rigs Active Rigs Price Price 225 $90 120 $6 Price per BBL Price per MMBtu

150 $60 80 $4 Active Rigs Active Rigs 75 $30 40 $2

0 $0 0 $0 11 12 13 14 15 16 17 18 19 20 21 22 11 12 13 14 15 16 17 18 19 20 21 22 Shaded area denotes U.S. recession Sources: Baker Hughes & U.S. EIA Shaded area denote U.S. recessions Sources: Baker Hughes & U.S. EIA

www.treasurer.ok.gov • Page 8