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August 11, 2010
Mickey Hepner Quoted In Tulsa World Story on State Revenue Report
Today's edition of the Tulsa World included a story by World Capitol Reporter Barbara Hoberock discussing yesterday's state revenue report. The story included a quote from Dr. Mickey Hepner, the Director of the UCO Policy Institute:
Mickey Hepner, a professor of economics at the University of Central Oklahoma, called the July revenue report "surprisingly strong" because of the surge in income taxes. The strength of sales tax collections is also an indicator of economic activity, he said.
August 10, 2010
Strong July Revenue Report Shows State Economic Recovery Continues
Sales tax collections were also strong for the month, coming in 7.4% higher than last year and 5.8% higher than the estimate. On a seasonally-adjusted basis though, sales tax collections are now 17.3% higher than the low last September and have increased by 10.3% in the last six months. As I've mentioned before, the seasonally-adjusted sales tax series is a reliable indicator of current economic activity (I would argue the most reliable). Since this series continues to rebound from its lows last September, it is clear that the Oklahoma economy is recovering too.
This afternoon State Treasurer Scott Meacham released the state's latest general revenue report and the numbers were very good. Overall, state general revenue collections for July came in 9.9% better than last year and 11.9% better than the official estimate (which pretty closely mirrored mine). The strongest reading came with state income tax collections which soared to $140 million last month--which was 5.6% higher than last year's reading and 26% above the estimate. On a seasonally-adjusted basis, July's figure was the highest in 14 months and the second-highest in the last 18 months. In fact, the magnitude of July's jump indicates that the August reading will likely move closer to the estimate.
Interestingly, the continued surge in state sales tax collections coupled with this month's jump in income tax collections raises the prospect that my most recent state revenue forecast might be too conservative. Last month I estimated that FY 2011 general revenue collections would be $4.85 billion. With this month's data it looks more like collections will be closer to $4.9 billion, with a $5 billion year not all that unrealistic.While that would be a strong 8.7% revenue growth over last year, it would still be 16% below the FY2008 level. So, the budget picture is continuing to improve...but there is still a long ways to go.
July 20, 2010
Mixed Labor Report for June
The U.S. Bureau of Labor Statistics latest state employment report offered a mixed bag for the Oklahoma economy. According to the BLS report, Oklahoma's unemployment rate ticked up slightly in June to 6.8% (from 6.7% in May). The increase was not statistically significant, which could indicate the change was caused by random sampling error instead of an actual worsening of the labor market.
To add to the confusion, the establishment survey portion of the report, which surveys Oklahoma businesses, reported a growth of 4,300 new jobs in the state economy last month and nearly 11,000 new jobs over the last two months. The bulk of the growth last month came in the "Professional and Business Services" sector, but manufacturing and finance also posted gains. What's good about job growth in the professional and business services sector is that those jobs are relatively high-paying jobs that support the growth of other sectors in the economy.
While the two different surveys (the household survey which generates the unemployment rate figure and the establishment survey) provide slightly different snapshots on the current labor market, I trust the readings from the establishment survey more for two reasons. First, the establishment survey covers a much larger sample of workers which leads to smaller sampling error. Second, the establishment survey captures the employment trends of Oklahoma's large and moderately-sized companies--the same companies that are responsible for the bulk of Oklahoma's economic activity.
So, despite the unemployment rate ticking up slightly...I would argue that on the whole, today's report brings more good news than bad.
July 14, 2010
FY 2011 State Revenues Should Exceed $4.8 Billion
This week Oklahoma State Treasurer Scott Meacham announced that FY 2010 General Revenue collections totaled $4.6 billion--17% less than the 2009 totals. After such an historic shortfall many are concerned about what lies ahead in 2011.
Using the most recent economic data and some fairly conservative estimates on economic growth, I estimate that FY 2011 looks significantly better than this last year...but state revenues will still remain well below pre-recession levels. Specifically, I estimate that FY 2011 general revenues will total $4.85 billion--or 5.4% above FY 2010 levels ($57 million of this has already been set aside to fund the Oklahoma's Promise program). Furthermore, considering the parameters used to make these projections, there is a greater probability that the estimate is too low instead of being too high. I would not be surprised if I need to make some upward revisions to this forecast in the coming months.
Despite the overall growth, I estimate that income tax collections will fall by 1.3% this year. This is because income tax collections fell so steeply in the last year that it will take some time for revenue growth to catch up. Sales tax collections should fare better (and already are). I estimate that sales tax collections will rise by 5.4% this year. The biggest gains will be in other taxes (which include Gross production and motor vehicle taxes) though. I estimate that these other taxes will rise by a combined 16.1% over FY 2010 levels...mainly due to stronger gross production taxes. In the first six months FY2010 gross production tax revenues averaged only $20 million/month. In the final five months they average nearly $60 million/month. Even if the monthly figures fall slightly in the coming months (as I project they will), the year-over-year comparison will still show a very strong growth simply because the early months of FY'10 were so weak.
Perhaps what is so interesting is that this revenue projection is very similar to my first FY 2011 forecast that I made last December. As I projected back then, it appears that the days of declining state revenues are behind us.
July 13, 2010
Oklahoma Economic Recovery Enters Tenth Month
According to my latest computations, the Oklahoma economic recovery is entering its 10th month. However, we are still well below pre-recession levels of economic activity.
As I've mentioned before, seasonally-adjusting state sales tax collections generates a reliable concurrent economic data series. Other popular data sources are either released with a long delay (like the BEA's Gross State Product for which 2009 data isn't even available yet) or are more of a lagging economic indicator (e.g. unemployment rates and the Philadelphia Fed's coincident index). For example, my data series showed the Oklahoma economy turning around a full six months before the Philadelphia Fed's coincident index started to rebound.
According to my model, seasonally-adjusted state sales tax collections decreased by 2.9% in June to $130.8 million. This is the second straight month of decline following an extremely high April reading. Despite the recent decline, June's reading is still 12.73% higher than the low reached last September when the Oklahoma economy bottomed. There is one other positive data nugget to mention, the three-month moving average reached it's post-recession high this month indicating that the last three months have been the strongest since the recession ended, even though May and June were weaker than April. In fact, the last time the data series registered readings this high was back in March 2009.
About the UCO Policy Institute
The UCO Policy Institute is a university based think-tank dedicated to enhancing the policy debate in Oklahoma by providing policymakers and the general public with factual, timely, and relevant information. Read more...Recent Publications
- Economic Impact of Oklahoma's Oil & Gas Industry
- Oklahoma Meth Lab Problems & Legislative Responses
- Incarceration: How Much Is Too Much?
- Beware the API: Does Oklahoma's Measure of School Performance Actually Measure School Performance?
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