The Oklahoma State Board of Equalization made official on Monday a $416.9 million revenue shortfall this fiscal year.
While oil prices plunged into negative territory, that did not worsen the situation.
"We’ve already collected approximately 90% of those revenues with three months remaining, and only two of those months are going to be significantly impacted by this drastic change in pricing," said Oklahoma Tax Commission Executive Director Jay Doyle.
With the equalization boards' action, lawmakers are free to tap the full amount of reserve funds they identified to cover the fiscal year 2020 shortfall. Next fiscal year, however, things will be markedly worse, and that’s with more than $350 million in delayed income tax collections coming in.
"Even with this additional revenue from FY20, we’re still forecasting a 20% decline in total dollars for apportionment, which equates to a decline of $1.3 billion to general revenue," Doyle said.
A recession is on the horizon amid deep job losses from COVID-19's economic effects.
"This initial peak employment loss for the state is a projected 180,000 jobs in the second quarter of 2020, and we won’t return to the pre-COVID-19 level of employment until the fourth quarter of 2022. And we’re likely to see a peak unemployment rate of 12% to 14% for a few months," Doyle said.
Right now, federal coronavirus relief funding will not be available to offset Oklahoma’s budget drop.
"They’ve been very explicit that these dollars are for COVID-related expenses – to build hospitals, to buy ventilators, to pay for expenses related to fighting COVID – and not for revenue failures," said Gov. Kevin Stitt.
Stitt said lawmakers will now have to decide whether to cover this year’s entire shortfall with savings or to make cuts now and smooth out budget declines the next two fiscal years.
Stitt estimated using $459 million in savings this fiscal year would lead the state to make 7.5% cuts next fiscal year while depleting its savings. That would be followed by an 8.2% cut in fiscal year 2022.
Stitt said if lawmakers make a 1.2% cut this year, savings can be spread out over the next two fiscal years, reducing cuts to 6.4% in FY2021 and 5.6% in FY2022.