Economy

The OK Policy Blog had an insightful post this week that questions whether there really is a state budget deal for this fiscal year.

Earlier, Gov. Brad Henry and legislative leaders announced a plan to balance this year’s budget with, among other sources and cuts, money from the state’s Rainy Day Fund. OK Policy Blog points out what appears to be a disconnect between Henry and House Speaker Chris Benge, a Tulsa Republican, on how much Rainy Day money will be used to shore up the budget.

According to the post:

. . . what this uncertainty reveals is that this year’s budget cannot be fully resolved until there is a deal on next year’s budget. The budget negotiators are looking at a total pool of potentially available funds – including state tax revenues, federal stimulus dollars, reserve funds, and possible new revenues from other sources – that need to be stretched to cover the remaining months of FY ‘10 and all of FY ‘11. Revenue decisions will also be closely linked to decisions about how deeply to cut agency budgets in FY ‘11. Until the whole picture is drawn at least in outline, it doesn’t seem like there can be agreement on the size of each of the parts or how they fit together.

Meanwhile, some Democratic legislators are advocating for a shorter session this year to save money because of the budget crisis. One of those advocating for a shorter session is State Sen. Earl Garrison, a Muskogee Democrat. In a prepared statement published on the legislature’s web site, he said:

I’ve talked with the people in my district and they want to know what we are doing to share in their pain. For months legislative leaders have said we need to tighten our belts, just like Oklahoma families, and I couldn’t agree more, and one way to do that is by cutting session short.

Cutting the session short would allow us to by-pass these wasteful practices and allow us to concentrate on fixing the problems related to this budget crisis. People are tired of Legislators doing nothing while their families are hurting and this sends the right message that we want to get our job done in an efficient manner.

Overall, Garrison and some other Democrats want the legislature to focus on budget-related legislation and then adjourn. The money saved could be used to restore funding to the state’s senior nutrition programs, Garrison said.

State Senate President Pro Tem Glenn Coffee, an Oklahoma City Republican, quickly rejected the idea.

“While shortening the session to two months is a laudable goal that sounds good, the reality is we have no idea what level of revenues we’ll have through the end of the fiscal year in June, which directly impacts the current FY 2010 budget, not to mention the challenges we face in crafting the FY 2011 budget,” Coffee said in a prepared statement published online.

As I wrote last week in the Oklahoma Gazette, this year’s legislative session could become more contentious than usual because of the budget crisis.

It’s important to point out the recent announcement of a state budget deal for this remaining fiscal year doesn’t mean all is well with Oklahoma’s finances.

As the OK Policy Blog points out:

First, even with the injection of well over $1 billion in stimulus and Rainy Day Funds to buttress the FY ‘10 budget, the cuts agencies are facing this year are having serious and worsening effects on public services over a wide swath of state government. Many agencies that took 5 – 7 percent cuts going into FY ‘10 are now looking at 12 – 15 percent cuts compared to last year’s budget, while even those agencies that were spared steep cuts going into the year are reducing or eliminating core services.

The blog, which is part of the Oklahoma Policy Institute, also points out the agreement between Gov. Brad Henry and legislative leaders left out some key details about how the 2010 budget would be balanced. According to the blog:

Given projected shortfalls of $809 million and cuts of $295.5 million, the question that still needs to be sorted out is where exactly the $513.5 million in additional revenue needed to bring the FY ‘10 budget into balance will come from. The leadership announcement remained short on details.

In a media release about the budget deal, Henry said, “Given the magnitude of the crisis we face, there really were no good options available to us.”

According to the release:

As part of their budget pact, state leaders have agreed to assign priority status to K-12 schools, higher education, the Oklahoma Health Care Authority and the Department of Corrections, and provide each agency with a supplemental appropriation.

Will the pact hold up? The legislature convenes Feb. 1.

Another pressing issue is how the state will deal with a predicted $1.3 billion budget shortfall for next year. How much can you cut in a state that already is notorious in the nation for underfunding public education?

Conservative political ideology and recent tax cuts that have primarily benefited Oklahoma’s wealthiest citizens are the architects of the state’s current financial crisis, but don’t count on any real public discussion of this issue.

Do you want at least a partial solution to the massive budget crisis facing Oklahoma? Simply rollback some of the income tax cuts given to the state’s richest citizens in recent years. But this idea is not even part of the discussion as state employees face furloughs, vital human and health services are cut and the public’s safety remains threatened. The state’s public schools, which have also suffered from a decline in a dedicated revenue source, are facing financial disaster.

Right now, officials are predicting a massive $802 million shortfall for this fiscal year in an overall budget of $7.2 billion. Next year, officials predict the state’s budget will be $5.3 billion, a staggering decrease of $1.3 billion. Oklahoma’s current shortfall is the largest in the nation among states on a percentage basis.

There’s no other way to put it: This crisis could do serious, long-term damage to the state. Any foundational gains the state has made in recent years in its education and health systems will be wiped out, and Oklahoma will continue to project a national image as a poor, unhealthy state increasingly enslaved to weird ideological misguidance.

The Oklahoma Policy Institute has been the most intelligent and reasonable public voice during the budget crisis. The think tank has diligently presented proposals the state’s leadership should seriously consider as programs are slashed.

In a recent issue brief, OK Policy argues that “Oklahoma is currently in the midst of its worst fiscal crisis since the oil bust of the 1980’s.” The brief states:

This situation leaves legislative leaders and the Governor facing tough choices on the appropriate strategies to keep the budget into balance while attempting to avert catastrophic cuts to essential public services in the areas of education, health care, human services, and public safety.

Unfortunately, the state’s fiscal recovery is likely to be slow and difficult.

OK Policy recommends the state do four things: (1) Improve budget forecasting. (2) Increase its reserve funds. (3) Put multi-year revenue commitments on hold. (4) Suspend and cap some tax expenditures.

Ok Policy argues:

… at a time when budget cuts are threatening public health and safety, to claim that the priorities we’ve chosen to fund through the appropriations process can be slashed while the priorities we’ve embedded in the tax code are untouchable simply does not make sense.

All these neutral proposals make logical sense and should be implemented immediately. The state has talented people in both the private and public sectors who could improve the budget process and make the state less vulnerable to downturns in the oil and gas markets.

Unfortunately, some Republicans actually see the budget crisis as an opportunity.

Writing recently in the Tulsa World, Randy Krehbiel notes:

In addition, some Republican legislators have said that they view the revenue failure as an opportunity to make deep, permanent cuts in state government, although none has said exactly what should be eliminated.

As long as voters here continue to elect politicians who see basic human suffering and underfunded educational systems as an “opportunity” instead of a crisis, the state will never overcome its systemic problems.