State Fiscal Briefs

June 2020

Oklahoma’s budget basics

According to the National Association of State Budget Officers (NASBO), Oklahoma’s total expenditures in fiscal year (FY) 2019 were $23.8 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Oklahoma’s combined state and local direct general expenditures were $29.3 billion in FY 2017 (the most recent year census data were available), or $7,458 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

Oklahoma’s largest spending areas per capita were public welfare ($1,723) and elementary and secondary education ($1,463). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Oklahoma’s combined state and local general revenues were $30.2 billion in FY 2017, or $7,670 per capita. National per capita general revenues were $9,592. Oklahoma uses all major state and local taxes. After federal transfers, Oklahoma’s largest sources of per capita revenue were charges ($1,409), such as state university tuition and highway tolls, and general sales taxes ($1,185).

Oklahoma’s politics

Governor Kevin Stitt, a Republican, was elected in 2018 with 54 percent of the vote. The next gubernatorial election is in 2022.

Republicans control both the House of Representatives (77 Republicans to 24 Democrats) and Senate (39 Republicans to 9 Democrats), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Oklahoma. All Oklahoma House seats are on the ballot in 2020 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2020, and the other half will be up for election in 2022.

Oklahoma’s budget institutions, rules, and constraints

Oklahoma uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. Oklahoma further limits both spending and revenue growth with binding budget rules, thus requiring a legislative supermajority or vote of the people to override them. A three-fourths supermajority or vote of the people is also required for any bill that raises revenue. The state limits total authorized debt and debt service incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Oklahoma’s recent fiscal debates

  • In 2018, nearly half of Oklahoma’s school districts closed after teachers went on strike to protest the state’s low education funding and staff pay. The teachers returned to work after a nine-day walkout after concluding the state would not increase funding. However, legislation that increased education funding was passed before the walkout. The new spending mostly came from higher taxes on cigarettes and on oil and gas production. The Center on Budget and Policy Priorities reported that Oklahoma lawmakers increased per student funding by 19 percent. Additional funding was allocated for teacher pay in 2019, but no taxes were increased to pay for it.
  • Oklahoma collects a relatively large amount of revenue from severance taxes—that is, taxes on the extraction of natural resources such as oil and natural gas. When oil prices were high, the state had revenue surpluses and cut taxes. But when the price of oil collapsed in 2014, the state’s budget fell into a deep deficit. Making the budget math more difficult was the state’s strict supermajority rule for tax increases. Although several states have supermajority rules, only Arkansas and Oklahoma require three-quarters of legislators approve any tax increase (and Arkansas exempts sales taxes and alcohol taxes from its rule). The supermajority was the main reason the state could not agree on a budget plan and tax increase until 2018 (the same legislation that raised teacher pay). In fact, that tax increase was the first in Oklahoma since the supermajority rule was approved by voters in 1992. Some legislations considered reforming the rule, but reform efforts stalled after the tax agreement and a growing economy helped state revenues recover.
  • Oklahoma was the first state to file a lawsuit against opioid manufacturers. Oklahoma sought $17 billion over 20 years from Johnson & Johnson, claiming the company was liable for the opioid epidemic and should help fund addiction treatment and other related services in the state. In August 2019, a judge ordered Johnson & Johnson to pay the state $572 million, but he later reduced the award to $465 million because of a miscalculation. Johnson & Johnson says it will appeal. Oklahoma’s lawsuit could shape other government lawsuits against drug manufacturers.

Oklahoma’s current budget

Governor Kevin Stitt announced his proposed FY 2020 budget in February 2019. The budget and Governor Stitt’s 2019 state of the state address emphasized education, including $70 million in new spending for teacher pay increases. Governor Stitt also focused on increasing the state’s savings and calling for the state to increase its rainy day fund formula from 15 percent to 30 percent of certified actual revenue collections.

The legislature passed its budget in May 2019. The enacted budget generally followed the governor’s recommendations, including roughly $60 million for teacher salaries and $200 million for the rainy-day fund. However, the legislature did not make any changes to the rainy-day fund formula.

Governor Stitt released his proposed FY 2021 budget and gave his 2020 state of the state address in February 2020.

For more on Oklahoma’s budget, see