Straight off the press release. Note especially the “free and open to the public” part. Come cheer me on!

The University of Central Oklahoma Policy Institute will be host for a panel discussion – “Oklahoma’s budget crisis in the midst of recession: What policies should the state pursue to minimize the budget shortfalls?” – from 2 p.m. to 3 p.m. March 25 at UCO’s Nigh University Center.

Panelists will include state Sen. Clark Jolley, R-Edmond; state Rep. Ken Miller, R-Edmond; and David Blatt, director of the Oklahoma Policy Institute.

“Policymakers are facing budget challenges as a result of the current economy,” said Jeremy Oller, associate director of the UCO Policy Institute and assistant professor of economics at UCO’s College of Business Administration. “This presentation is intended to provide an open forum to discuss the current state of the Oklahoma budget, and to provide insight on the solutions that are or should be considered.”

The panel presentation is free and open to the public. The presentation is part of the 27th annual Southwest Business Symposium.

Even assuming that we are in the early stages of what will eventually be a robust economic recovery, Oklahoma’s budget crisis is not going to end anytime soon. Revenue collections this year and next are projected to come in 20 to 25 percent below their levels of FY ‘08, the year prior to the onset of the downturn. The Legislature has been able to use substantial amounts of non-recurring revenue from the federal stimulus bills and the state’s Rainy Day Fund to soften the shortfall and thus far avoid the catastrophic impact of budget cuts in the 20 – 25 percent range across the full range of state government.  However, next year’s cuts look to be substantially deeper than this year’s. After FY ‘11, most or all of the non-recurring revenues will likely be exhausted. As shown in the chart below, we project that  revenue collections are likely to remain 10 percent below those of FY ‘08 in FY ‘12, and may not return to pre-downturn levels until at least FY ‘13.

There are no easy or painless solutions to the problem of the budget hole that looms once federal stimulus funds have expired and the Rainy Day Fund is no longer available. One thing the Legislature can and should do, however, is not allow the hole to get needlessly bigger by allowing additional cuts to the top income tax rate to kick in automatically in FY ‘12.

Back in 2006, the Legislature voted to cut the state’s top individual income tax rate down from 6.25 percent to 5.5 percent over several years. It opted to further cut the top rate to 5.25 percent, but made that final cut contingent on General Revenue collections being projected to grow by at least 4 percent in the upcoming year compared to the current year. However, as soon as that trigger mechanism is enabled, the tax cut becomes permanent.  And more urgently, the trigger can be enabled any time revenues are projected to grow by at least 4 percent – even if projected growth would leave collections below previous levels.

In practice, revenues are likely to rebound in FY ‘12 but remain at only 85 percent or 90 percent of where they were four years prior.  Budget cuts are likely to remain in effect and perhaps get even more severe due to the loss of one-time revenues. But barring legislative action this session, the trigger lowering the top rate will go off automatically for Tax Year 2012. According to an analysis conducted for us by the Institute for Taxation and Economic Policy, the fiscal impact of reducing the top rate from 5.5 to 5.25 percent would be $112 million in lost revenue – nearly half of which, incidentally, would benefit taxpayers in the top 5 percent of households, those with annual income above $163,000.

Many of us will disagree over whether our top tax rate is too high or too low and whether it is better for the state’s economic prosperity to lower the income tax or invest more in education and infrastructure.  But at least over the course of the fiscal crisis, there has been a bipartisan consensus that while we are cutting budgets, eliminating programs, and laying off  teachers and state employees, tax cuts must take a back seat. If we can expect to continue to be facing large budget shortfalls past next year, shouldn’t our priority continue to be to attempt to restore funding for education, health care, social services and public safety to close to pre-downturn levels? Or should we be bound by a decision made by legislators years ago and let ourselves be dug over $100 million deeper into the budget hole?

From time to time, we use the OK Policy blog to post submissions we receive from Oklahomans who have interesting perspectives on important policy issues for the state. This entry is from Amy Santee, Senior Program Officer with George Kaiser Family Foundation in Tulsa. The opinions stated below are not necessarily the opinions of OK Policy, its staff, or its board. This blog is a venue to help promote the discussion of ideas from various points of view and we invite your comments and contributions. To see our guidelines for blog submissions, click here.

Currently, the State of Oklahoma incarcerates more women per capita than any other state in the nation, a rate of 134 per 100,000, compared to a national average of 69 per 100,000. Tulsa County incarcerates at an even higher rate, 169 women per 100,000.

This practice has a devastating impact on thousands of children around our state.  There are an estimated 4,500 minor children in Oklahoma with their mothers in prison.  These children are at greater risk of school failure, depression, drug and alcohol abuse. Without a successful intervention, they are likely to become the next generation of inmates at the Oklahoma Department of Corrections.  Incarcerating non-violent female offenders does not make economic sense, nor does it protect the public safety.  Is it not better public policy to provide these women with treatment and the tools to become better parents and productive citizens?

George Kaiser Family Foundation (GKFF) has made the issue of female incarceration a priority and has led efforts to make a systemic change to Oklahoma’s statistics.   GKFF has invested nearly two million dollars on diversion services, pre-release counseling and treatment, services to children of incarcerated parents and reentry services. In January, the Foundation helped sponsor the Summit on Incarcerated Women as part of the Complex Dialogues series at Oklahoma Christian University, which was an important step in raising public awareness of the need to promote alternatives to incarceration for non-violent female offenders.

GKFF’s principal funding has been in the investment of significant resources on model diversion services, as the Foundation believes that the true value is derived from rehabilitating these nonviolent offenders and reunifying families.  Recognizing the lack of viable alternatives to prison for women in Tulsa, GKFF, an organization committed to improving the lives of at risk young children, and Family & Children’s Services (F&CS), Tulsa’s premier family service and mental health provider, co-designed and implemented the Women in Recovery (WIR) pilot program in June 2009.

WIR, based on proven models, offers a cost-effective and holistic approach to diverting female offenders from incarceration in Tulsa County.  WIR has already served 33 nonviolent women offenders who together have 73 children. The Program is a true wraparound model, changing the way traditional services are delivered, allowing women the maximum potential to succeed by providing them the necessary tools to regain their independence financially and exit the judicial system.  Focusing primarily on substance abuse and mental health treatment, and providing safe housing and transportation from the beginning, each woman’s total needs are met.

In building on the success of Women in Recovery, HB2998 proposed this session by Rep. Kris Steele of Shawnee represents landmark legislation.  The bill would establish pilot programs, consisting of private donations and state funds, “to provide diversion programs to reduce the high rate of female incarceration and to provide reentry services that both employ evidence-based practices and techniques.”

George Kaiser Family Foundation proposes including a $500,000 cash match to the state funds.  Thus, $1 million will be appropriated to the implementation of a state pilot diversion program and a reentry program.  Half of these funds will supplement the work currently being undertaken by Women In Recovery to reduce female incarceration, while the other half will go to the implementation of a reentry programs that will provide support services, employment opportunities and other needed resources for female offenders and their children.

The need for change in Oklahoma’s criminal justice system is critical, and the total approach represented by this bill is impressive.  HB 2998 passed the full House in February by a unanimous bipartisan vote of 92-0. The bill would still need to pass the full Senate and be signed by the Governor to become law. However, these early successes provide real hopeful signs that the tide is beginning to turn and the issue of female incarceration is beginning to change.

If, as Judge Louis Brandeis famously stated, “Sunshine is the best disinfectant”, the Oklahoma Legislature seems to be on a bit of a cleaning frenzy. Several bills making their way through the legislative process this session HB 3422, SB 1633 and HB 3253 – would expand the amount of information on public expenditures that is made available online to the public.

The measures all build on the 2007 Taxpayer Transparency Act, authored by Sen. Randy Brogdon, which led to the state’s OpenBooks website. The site makes available data on expenditures by each state agency by year and purpose, including detailed payroll and vendor information. OpenBooks also provides information on individuals and businesses who claimed tax credits against the income tax (see our post on this subject).

HB 3422, dubbed Open Books 2.0, expands directly on the Taxpayer Transparency Act by aiming to make available more information in a more user-friendly format. The bill’s author, Ken Miller, asserts that:

Over the past few years we’ve put in place tools that make our state government more accountable to the taxpayers who fund its operation. Open Books 2.0 will continue our progress by revealing unprecedented transparency on government spending.

The bill:

requires that all purchases made with state funds be disclosed on the online database, regardless of the amount of the expenditure

requires that each individual expenditure be listed separately instead of being lumped together as one purchase (…)

requires that the information provided on the website be searchable, either by using the name of the recipient, the entity making the purchase, or the date of the expenditure

requires that the data provided on the website be in a format in which users can easily export it into a separate document

requires that the Office of State Finance create an online archive database where users can access data older than 18 months

HB 3422 was amended in the House to include new language on tax credits to require that the names and addresses of taxpayers who claim income tax credits be collected and published online (the Earned Income Tax Credit and a few others would be exempt). The bill passed the House unanimously and goes to the Senate.

The other two bills – SB 1633 by Sen. Brogdon and HB 3253 by Rep. Blackwell, both known as the School District Transparency Act – would apply the principles of the Taxpayer Transparency Act to school districts. The bills would task the State Department of Education with creating a website, by the start of 2011,  that shows itemized expenditures for each school district, including information on the amount of funds expended on each purchase, type of transaction, and descriptive purchase of the funding action or expenditure. Both these measures, supported by everyone from the Oklahoma Education Association to Oklahomans for Responsible Government, also won unanimous passage in their houses of origin on their way through the legislative process.

As the unanimous votes suggest, government transparency is a rallying cry that generates broad and bipartisan  support. Similarly, at the federal level, then-Senator Barack Obama and Senator Tom Coburn famously joined together to author the Federal Funding Accountability and Accountability Act of 2006. However, the transparency movement does have its skeptics. In an interesting article in The American Prospect, editor Mark Schmitt suggests that the campaign to publicize government spending in ever-greater detail is rooted in and further feeds a sense of cynicism and distrust of government:

This brand of micro-transparency is based on an assumption of corruption and waste. A blizzard of tiny data points, without context, does not improve government or help citizens make decisions… At a time of economic and fiscal crisis, when states have to make bigger decisions about spending cuts and tax increases, a focus on small items, along with the assumption that government is wasteful and corrupt, hardly increases citizens’ ability to think about the choices ahead.

Schmitt makes some good points about the dangers of data, shed of context, being brandished as weapons in a game of “gotcha”.   Ultimately, however, knowing how and where public dollars are being spent helps promotes accountability and healthy scrutiny of public officials, and provides part of the basis for the truly vital discussions of  whether those dollars are being wasted or spent efficiently. To those ends, the measures being considered this session are likely to be further steps in the right direction.

As revenues have come in significantly below estimates this year, funding to state agencies was cut 5 percent a month from August to November and 10 percent each month since (see our updated fact sheet). OK Policy’s intern Matt Gardner has been tracking media reports of the ways that cuts in state funding over the course of the downturn. He provides this report of some of what’s transpired in recent months.

Budget cuts in recent months appear to have affected Oklahomans from all walks of life. Many agencies have been forced to cut jobs, offer bailouts, or implement furlough days, but cuts have required agencies to go further and eliminate services altogether.

Some examples:

• The Bill Willis Community Mental Health Center faces more cuts, despite having eliminated its 20-bed men’s substance abuse program. That was to save $1.2 million. Now, the center has been asked to trim $300,000 more. According to Executive Director Margaret Bradford, “without this type of treatment you’re going to see more and more people end up in the criminal justice system,” costing the state more money than the treatment.

• Cuts to the Medicaid program will be hitting kidney dialysis providers hard. According to the Tulsa World, payments to dialysis centers are set to be cut 40 percent for diabetic supplies and 75 percent for patients with Medicaid as their secondary insurance as of April 1st. The result may lead some dialysis centers to close and patients will have to travel much farther to get life-sustaining treatment. According to a spokesman for Fresenius Medical Care, a major dialysis provider, the need to travel further for treatment will end costing the Medicaid program more in transportation and hospitalization costs.

• Ongoing budget shortfalls at the Department of Corrections have left staff levels  at 1,411 fewer than the authorized level of 5,895. Board of Corrections member David Henneke warned that the Department can’t continue to lose employees and keep the public safe. “Someone at the Capitol has got to understand we can’t continue the way it is, or someone is going to do,” he said.

• Closure of the Norman  Alcohol and Drug Treatment Center has been among the consequences of 7.2 percent cuts to the budget of the Department of Mental Health and Substance Abuse Services. Adult substance abuse treatment beds, transitional housing, children’s mental health beds and the jobs of about 100 employees have been lost this year. “These are horrible choices we’re having to make”, said Commissioner Terri White. “Every decision we make is a loss of services to someone.”

• Budget shortfalls affected teachers when about 2,600 nationally certified school teachers received $350 less in bonuses than promised. The Oklahoma State Department of Education was short $4.6 million to pay for certified teacher stipends, and left it up to districts to cover the shortfall. “We are not supposed to assume any portion of the state’s obligation to fund this. We are quite upset that the state shorted the teachers, but it was the state who shorted the teachers, not the school district,” said Debra Jacoby of Union Public Schools.

• The state Health Department has offered 15 percent of its workforce a buyout option, hoping that half  will accept the buyouts in order to save $8 million in payroll costs. The department expects to lose $5.5 million in funding. Health services are in great demand, according to Health Commissioner Terry Cline. “Right now we are having to cut services and programs to Oklahoma citizens,” said Board of Health President Barry Smith.

• The Boynton-Moton School District in Eastern Oklahoma may not survive a $100,000 cut to its budget. School board member Albert Joe Cherry worried that the school may not even finish the year. Superintendent Shelbie Williams said, “we cut salaries, services without going to the bone and marrow. Last month, we did all we can do to make payments.”

• Domestic violence and sexual assault victims’ programs have faced an additional 10 percent cut.  These programs were already facing monthly 5 percent cuts since July. While demand for services is up according to the Victim Services Unit, programs like the Women’s Resource Center in Norman is having to halt counseling and prevention programs. As the Executive Director of the state Coalition Against Domestic Violence observes, “they’re cutting staff, cutting benefits, doing away with outreach services. In most cases, they are doing everything they can to keep the most essential services open, which are the shelters.”

• The Office of Juvenile Affairs cut funds to gang-prevention services like the Tulsa Youth Intervention Project, which have boasted a 61 percent decrease in drive-by shootings. According to Alice Blue of the Community Service Council of Greater Tulsa, “My fear is that once the program is dismantled, it will have to be re-created over a period of time. You lose all the accumulated knowledge of working on the Tulsa streets.”

• Broken Arrow schools have been advised to cut their budget by about $3.6 million dollars. If this is not achieved, the schools will lose 91 teaching jobs. Superintendent Gary Gerber has been reviewing several solutions, including 1,100 suggestions made by district employees. Teacher furloughs are being considered, even though many teachers are adamantly opposed to  this solution.

• In response to dwindling tax revenue, Sapulpa police are expected to take four furlough days. According to City Manager Tom DeArmann, the city is down in tax revenue by $371,000, which is expected to climb to $600,000. The furloughs are expected to save the city $38,000 through June.

Unfortunately, this may all just be the tip of the iceberg. Next year’s shortfall is in the range of $800 million to $1.55 billion, depending on one’s calculations.  As Speaker Chris Benge grimly noted last week, “agencies are currently facing significant additional cuts if revenue projections prove true.”

With Oklahoma facing a gaping budget hole for the upcoming fiscal year of anywhere from $850 million to $1.6 billion,  depending on one’s calculations, the search for new revenues to fill the gap and avoid devastating cuts to services has assumed real urgency. The Governor in his FY ‘11 Executive budget proposed a long laundry list of revenue enhancing proposals that were estimated to generate over $700 million in additional revenue for FY ‘11. His proposals ranged from appropriating unused balances in agency revolving funds and issuing bonds to raising fees, eliminating tax credits, and collecting taxes on online purchases.

But what about SQ 640? Few discussions of revenue options in Oklahoma get very far before being met with: “But what about SQ 640″?. Last week, for example, House Democrats tried unsuccessfully to argue that a bill containing a fee increase should be ruled out of order due to SQ 640. But while the specter of SQ 640 casts a giant shadow over policy discussions, its actual scope is not always well understood.

» continue reading Of tax increases, revenue bills, SQ 640… and ducks

From time to time, we use the OK Policy blog to post submissions we receive from Oklahomans who have interesting perspectives on important policy issues for the state. This entry is from Tom Daxon, an Oklahoma City CPA who served as State Finance Director from 1995 – 2001 under Governor Frank Keating and is a noted conservative voice in Oklahoma. The opinions stated below are not necessarily the opinions of OK Policy, its staff, or its board. This blog is a venue to help promote the discussion of ideas from various points of view and we invite your comments and contributions. To see our guidelines for blog submissions, click here.

State government spends too much money.  It should spend less.  However, even this strong conservative realizes some government is necessary and further, we should pay for it currently.  As former Chief Justice Oliver Wendell Holmes observed, “Taxes are what we pay for a civilized society.”

Good tax policy dictates that when we tax, we should impose the tax on the largest possible base to keep the rate to a minimum.  Unfortunately, all the tax credits, exclusions and preferences that riddle Oklahoma’s tax code have led some to note that our tax code resembles Swiss cheese.

Perhaps we should consider a “TRACC” – tax realignment and credit commission – modeled after BRACC that successfully closed unneeded military bases at the federal level.  TRACC would be a bipartisan committee including both House and Senate members with participation from the Governor’s office.  TRACC would prepare a list of tax expenditures for elimination.  The legislature would then consider the list in a straight up or down vote, without amendment.

» continue reading Guest blog (Tom Daxon): Putting tax expenditures on the right TRACC

The latest state revenue collections announced today provided mixed news:

State revenue collections in February exceeded the official estimate for the first time since December 2008, but fell short of prior year collections for the same month, State Treasurer Scott Meacham announced today.

Preliminary reports show General Revenue Fund collections in February are $220.6 million. That amount is:

• $17.3 million, or 7.3 percent below the prior year; but,
• $0.8 million, or 0.4 percent above the estimate.

February collections were buttressed by $25 million in gross production taxes on oil that were allocated to the General Revenue Fund and by stronger-than-expected income tax collections. After tax refunds, the state took in net income tax collections of $10.7 million in February, whereas the official estimate was for a net loss of $9.1 million in income tax payouts.

» continue reading Ambidextrous revenue report: One the one hand…on the other hand…