POINT OF VIEW STATE BUDGET SHORTFALLS

by David Blatt

Published April 4, 2010

Each day, we learn more about the painful impact that state budget shortfalls are having on the public services Oklahomans rely on. Seventeen centers that serve preschool children with developmental delays are closing. So are facilities for children with mental health problems and for adults needing substance abuse treatment. Department of Corrections staffing is only 76 percent of authorized levels, prompting one Corrections Board member to warn, "Someone has got to understand we can't continue the way it is, or someone is going to die."

But all indications are that conditions will get worse. Though some agencies have already been cut more than 10 percent, education, health, social services and public safety have been spared the full impact of declining revenues. Thanks to over $1.4 billion from last year's federal recovery act, the state's Rainy Day Fund and cash reserves, this year's budget cuts have been limited to $159 million, or 2.2 percent. By contrast, the shortfall for the coming year looks to be some $850 million - a 12 percent drop. This leaves Oklahoma with some very difficult choices.

Cuts in spending of this magnitude would not be easily absorbed. They would inflict serious damage to our ability to provide education and public safety, meet the growing needs for social services that accompany economic hard times, and maintain needed investments in roads and other infrastructure essential to the state's economic future.

Budget cuts and layoffs would also threaten the state's economic recovery by increasing unemployment and eroding purchasing power. But it need not happen that way - not if state policymakers adopt a balanced approach to bridging the budget gap, one that includes new revenue sources in addition to budget cuts, efficiencies, and using reserves.

Gov. Brad Henry's proposed budget for the coming year includes several promising revenue enhancement ideas. For example, several investment tax credits whose costs have skyrocketed with little or no apparent economic benefit should be capped or eliminated. The state should attempt to level the playing field for Main Street merchants by more aggressively pursuing the sales taxes that online retailers are supposed to collect. The rebate given to vendors for collecting sales tax - set so long ago that it doesn't reflect today's far lower compliance costs - should be reduced.

The state also should close a loophole allowing the deductions from federal income tax returns for state income taxes to be carried over to state returns. This practice, permitted in only five states, costs almost $120 million and mainly benefits only the highest-income households.

None of these actions, or other revenue options that may be on the table, would fully avert the need for deeper cuts. We must expect hard times to continue into next year and beyond. But when the unquestionable alternative is more teachers laid off, more people with mental health issues untreated, more seniors unfed, more children with disabilities uncared for, and less investment in Oklahoma's future, then finding more revenues must be part of the equation for balancing the budget.

Blatt is director of Oklahoma Policy Institute, a state policy think tank

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