State revenue projected to rise 5.1 percent for 2006-2007
Thursday, December 22nd 2005, 2:29 pm
By: News On 6
OKLAHOMA CITY (AP) -- Oklahoma lawmakers will have $314 million more to spend in the fiscal year that begins July 1 than the previous year, driven largely by increases in income tax, sales and use tax and gross production tax collections, state finance officials said Thursday.
The projected increase marks the third straight year of revenue growth following the largest budget shortfall in state history, almost $700 million more than two years. The steep decline forced agencies to slash programs and jobs in 2002 and 2003.
Claudia San Pedro, the director of the Office of State Finance, described the revenue estimate as "very positive" and said it reflects a robust state economy that is strong enough to absorb the loss of thousands of jobs from the closure of the General Motors Assembly Plant in Oklahoma City.
The plant employs about 2,000 hourly and 200 salaried employees. San Pedro said studies indicate the plant's closure, scheduled in February, will result in a job loss of 13,400 workers who are directly or indirectly involved with the plant.
State revenue will total almost $6.5 billion for the 2007 fiscal year, enough for the state to deposit $35 million into the constitutional Rainy Day Reserve Fund. The fund, almost depleted during the revenue shortfall, currently contains $461 million.
"We're really projecting a positive year," San Pedro said. Growth revenue for the 2006 fiscal year, which ends June 30, is projected at $370 million, a 6.9 percent increase over the prior year. San Pedro said the increase is due largely to unexpected increases in oil and natural gas production taxes.
"We're benefiting from the oil and gas increases," she said. The gross production tax on gas is projected to increase almost 10 percent in 2007, a total of more than $63 million, although gas prices are expected to decline from $9.61 per thousand cubic feet currently to $7.75 over the next year.
The state Board of Equalization plans to meet on Tuesday to consider certifying the 2007 revenue estimate.
Gov. Brad Henry said the projections are "good news" for the state, but cautioned lawmakers to keep budget commitments from previous years before they consider spending growth revenue on new programs.
"That means paying for road and bridge maintenance, teacher salaries, health care improvements, public safety needs and a variety of other important initiatives," Henry said.
The Legislature is in the second year of a four-year plan to raise teacher salaries up to the regional average.
Senate President Pro Tem Mike Morgan, D-Stillwater, said the state's strong revenue growth indicates "Oklahoma's economy continues to grow -- especially in the oil and gas sector.
"With that in mind, it is important that we move forward responsibly and take great care as we consider how best to invest this one-time windfall to ensure a brighter future for our state," Morgan said.
House Speaker Todd Hiett, R-Kellyville, urged lawmakers to "hold the line on spending" and reduce the state's income tax and death tax, which he described as "morally wrong and economically harmful."
"Hardworking taxpayers created this positive economic climate, and they deserve to get some money back in the form of permanent tax relief," Hiett said.
Individual income tax revenue is expected to climb 11.3 percent, more than $241 million, in 2007 in spite of an income tax cut scheduled to go into effect on Jan. 1. The maximum rate will drop from 6.65 percent to 6.25 percent.
San Pedro said strong revenue growth will trigger the first year of a transportation program to increase the road and bridge maintenance budget by $35 million a year until new revenue totals $170 million.
Revenue from the statewide education lottery is projected to climb 89 percent, more than $58 million, during the fiscal year -- the lottery's first full year of operation.
The revenue estimate projects a steep decline in tobacco tax collections, more than $16 million less than the prior year or a 34.4 percent drop.
San Pedro said the estimate reflects tobacco tax collections in 2005. Collections from a tobacco tax approved by voters last year have been lower than projected because some tribal smoke shops are using cheap tax stamps on cigarettes in apparent violation of tribal compacts with the state.