The legislative session's final two weeks were definitely eventful. The final budget that passed through the legislature was vetoed and then the veto override provided more than enough anxiety for budget makers. The most important factor that came out of the final budget was that we at least know what we are starting with for the year. Actual State Aid allocations will be less than in the previous two years, but the CARES money should help offset part of the state funding decrease.
The movement of the annual April 15 income tax collection deadline to July has caused issues not normally anticipated: a significant drop in FY20 revenues in April will be reflected in FY20's final collections. The August state revenue reports will be significant indicators of the FY21 budget's general health. If these revenues come in as expected, they'll bolster the state budget to alleviate other revenue sources' loss.
As we move through the fall, the economic recovery speed from the nationwide shutdown will be critical. The movement of reserve funds and retirement fund payments into the 1017 Fund should shield education funding somewhat, but if state revenues don't collect at a steady rate, we could see a revenue failure in January. Midterm allocations per WADM will most likely drop due to increases in WADM, but the fall collections' health will directly impact net losses.
We are in a position where we need to realize that the models we have used before will be difficult to apply in FY21. This is an unprecedented time, but with careful uses of resources, we can manage this. The combination of the CARES revenue and legislative efforts should help offset some future difficulties, but we should all manage the situation conservatively.
We do see some positive signs, though. Oil prices are rebounding quicker than expected, but this is still a tenuous recovery, and several factors could negatively affect its permanence. We have seen normal collection cycles in the other chargeables are not deviating from previous years. If sales tax and other revenue streams for both the General and 1017 Funds rebound, then we may come out of the fiscal year with minimal disruption.
As we've stated before, this is a time when caution is a good thing. It will be crucial to closely monitor your district's situation and be prepared to make adjustments as necessary. There is a chance to see some recovery, but that recovery's speed will be central to the return to normal fiscal activity. No one expected both an oil supply war and a pandemic months ago, but we must remain hopeful that the economic conditions in Oklahoma will rebound as quickly as they were disrupted.
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