We received the first round of State Aid allocations in July. The State Aid formula factors increased to $3042.60 per WADM. This was expected because fewer WADM are counted in the original allocation. This happens most years and should be met with some caution for several different reasons:
- The WADM will increase dramatically at mid-term due to the increase of ADM counted after the 1st Quarter Statistical Report.
- The actual allocation will increase because the mid-term holdback is added back into the allocation, but the increase of WADM will more than likely drive the allocation down.
- We are in a situation that will probably see a trend continuation of having the formula factors decrease due to revenue failures or cash flow issues in collections at the state level. The question is when will this happen?
Budget makers need to be aware of this tendency and insure that as they monitor and modify their budgets through the year, they are taking these factors into account. A few other factors to be aware of as we move into the FY18 budget year would include:
- Motor vehicle continues to be an under performer.
- There are several different factors involved in this issue, the biggest being that not as many funds pass through the motor vehicle fund.
- If you know you had a decrease in ADA, you might want to modify your expectations for collections in this area.
- Do not get excited when you receive a large deposit from motor vehicles next February and April. Those months continue to collect at earlier year rates and can be a false indicator on the health of motor vehicle funds.
- Gross production (GP) is not uniformly increasing across the state; there are hot spots and cold spots in GP collection.
- We could see a modification in the funding amount flowing into State Aid from the 1017 Fund due to other issues not associated directly with education funding.
- If the sales tax, use taxes and Indian gaming funds don’t collect properly, there will be an issue in the 1017 Fund.
- The 1017 Fund can be impacted by decisions necessary to balance the state budget. Remember that the December and February State Equalization Board meetings are central to how much money will allocated for spending in the 1017 Fund.
- The lawsuits over the fees for tobacco, motor vehicle sales and oil and gas fees could have a negative effect on the education budget.
- We don’t yet know if the Oklahoma Supreme Court will uphold these fees as correctly attached fees.
- We don’t know what the effect will be if the fees are disallowed and how the budget issue will be corrected.
Uncertainty continues in our current budget. The best course of action is to proceed with great caution. We could see a legislative special session, we could see the fee structures upheld and could also see a major rebound in sales tax revenue, which would make this fiscal year much easier to navigate. OPSRC will be monitoring the situation closely. If you have questions, don’t hesitate to call or email me.