Budget Crisis Lessons

The OKPolicy Blog has published an excellent four-part series on what state leaders and financial analysts can learn from Oklahoma’s severe budget crisis.

The series calls for better budget forecasting, increasing the Rainy Day Fund, and delaying multi-year projects during a financial crisis. It also explores tax breaks that are often unused and unscrutinized..

All major state leaders should take the time to read through the series, which is probably the most thorough and informative outside look at the Oklahoma budget crisis. OKPolicy Blog is part of the Oklahoma Policy Institute, a state think tank that has recently advocated increasing assets for low- to moderate-income people while analyzing the state’s budget crisis.

Oklahoma, as I wrote in my last post, now leads the nation in the percentage of its budget deficit or shortfall at 18.5 percent. Arizona is next at 18 percent. I have argued that some state leaders and The Oklahoman editorial page have, until now, downplayed the crisis. But with state agencies now taking a 10 percent monthly cut that may well be changing.

This is from a new editorial (“Crash cow: State now leading budget deficit herd,” December 23, 2009) in The Oklahoman about the crisis:

Oklahoma’s most negative tax consumers and their advocates have been screaming "Fiscal meltdown!” for nearly two years. We urged everyone to keep things in perspective. It’s now hard to argue that we aren’t in a freefall, but perspective is still required. The Chicken Littles would have had us spend the Rainy Day Fund last year if not before. Thank goodness we didn’t.

Once you cut through the typical “tax-consumer” snark, you learn that it’s “hard to argue that we aren’t in a freefall.” Now that’s the truth. The editorial also tries to argue recent income tax cuts that primarily benefited the state’s wealthiest citizens had little effect on the crisis, but it does concede that budget “… problems may have been magnified by tax cuts but they weren’t caused by them.”

What is happening in Oklahoma right now is a classic case of how conservative, starve-the-beast ideology devastates public social services and public health and educational systems. During good revenue years, Oklahoma politicians give out tax cuts to the wealthy and don’t invest enough in the state’s future. During bad years, programs get cut to the bone and even small tax hikes or rollbacks for a small segment of the population are not even in the discussion.

As Will Rogers once claimed, “There is one rule that works in every calamity. Be it pestilence, war or famine, the rich get richer and poor get poorer. The poor even help arrange it.”