As Oklahoma faces record budget shortfalls, the threat of massive cuts that would slow the state’s economic recovery and, in the Governor’s words, “have irreparable and damaging effects on our state services infrastructure,” looms large. This post is the third in a series that discusses some of the most promising policy ideas for a balanced approach to closing the budget deficit that includes new revenue sources.  Previous entries examined the vendor sales tax discount and the deduction for state income taxes.

The sales tax is the single largest revenue source for state and local governments in Oklahoma, providing more than one out of every four dollars that helps pay for such core public services as school teachers, police officers, environmental protection, and medical care. When purchases of taxable goods are made in-state, sales tax is collected directly by the retailer. When purchases are made of the same taxable goods out-of-state – whether via the Internet, catalogs or other sellers – taxes, in this case known as a use tax, are still legally owed by the purchaser. However, as a result of a pair of Supreme Court cases, the most recent of which was Quill vs. North Dakota, retailers who lack a physical presence, or nexus, in a state can not be required to collect and remit use tax owed to the state.  That has meant that an online retailer like Target.com, which has brick-and-mortar stores in Oklahoma, collects sales tax on online purchases from Oklahomans, while other online retailers, like Amazon.com, do not. Read the rest of this entry »

Last night my family was discussing the tough times facing public schools in Tulsa and elsewhere. My son, Noah, who’s in the 4th grade, offered one of his favorite jokes (from Jokes for Children, Marguerite Kohl and Frederica Young, 1963):

A little  boy had heard about how crowded the schools were in his city and was discussing the problem with his grade school principal. After listening to the little fellow for a few minutes, the principal said to him, “I think it’s very thoughtful of you, but I don’t really feel that your resignation is the solution to our crowded school problem.”

Noah wants the powers to be to know that should Tulsa Public Schools decide to go this route, he’d accept a very reasonable severance package of two Nintendo game cartridges and a new IPod.

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. Read the rest of this entry »

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. Read the rest of this entry »

Earlier this year, we put out an issue brief and blog post that identified the need for better budget forecasting as one of the lessons that should be learned from the state’s current budget woes to avoid crises of similar magnitude in the future. Rep. Ryan Kiesel has introduced legislation, HB 2796, that incorporates some of our suggestions. Rep. Kiesel put out a press release explaining his legislation: Read the rest of this entry »

We may never have expected to see the day when the announcement that monthly revenue collections had come in 16.7 percent below the prior year and 20.8 percent below the certified estimate would be taken as good news. But after the pummeling that revenue collections have suffered over the past 12 months,Treasurer Scott Meacham may be forgiven for putting a positive spin on January collections that were announced Tuesday:

Meacham said January’s numbers are somewhat encouraging, even though they remain below prior year collections and the official estimate.

“We’re not out of the woods yet, but we are seeing some positive movement,” he said.

Read the rest of this entry »

Last week I attended the Stand Up for Seniors advocacy forum which focused on the impact the state’s worsening economic and fiscal situation is having on programs serving seniors. State Treasurer Scott Meacham was among the elected officials who addressed the gathering. In laying out the budget challenges we are facing and the limited tools at our disposal for mitigating the severity of budget cuts, Treasurer Meacham shared a conversation he had a couple of months back with a friend who expressed frustration at the inability of state government to operate more like a business. Businesses in the downturn are responding by cutting back, reducing expenses and payroll, and simply doing whatever it takes to get through until the economy recovers. Why, asked his friend, can’t state government just do the same? Read the rest of this entry »

Just a quick post to let you know that the Oklahoman today ran an op-ed setting out the policy proposals we have developed for managing budget downturns. The op-ed was based on the full issue brief and 1-page summary we released last week, which was in turn based on the series of blog posts that we ran last month looking at forecasting, reserve funds, tax cuts and tax expenditures.  If you haven’t had the chance yet to take a look at what we’re proposing, we hope you’ll check out one of these pieces. No word yet on when our proposals will be released as a major motion picture with Happy Meal (TM)  tie-in.

As state leaders struggle with how to manage the enormous budget shortfalls the state faces this year and next, the focus is understandably on decisions that must be made over the coming weeks and months.  But while short-term challenges are the highest priority, this is also an opportune moment to draw some lessons from what has transpired during the downturn thus far that could leave us better equipped to manage the full length of the crisis and respond better the next time the economy takes a nosedive. This post will be the first of a series of blog posts and an upcoming issue brief that will recommend changes to our budget and tax system involving forecasting, reserve funds, multi-year revenue commitments, and tax expenditures. Our proposals are all intended to enhance the Legislature’s ability to respond to budget downturns without having to implement deep cuts to vital state services or enact tax increases. Read the rest of this entry »

During the last state fiscal crisis, from 2002 -04, funding for Oklahoma’s Medicaid program was hit hard. In FY ’02 and FY ’03, as revenues began to plummet, the Oklahoma Health Care Authority (OHCA) put coverage of almost all non-mandatory benefits and eligibility categories on the table for cuts. The agency ended up eliminating dental coverage for adults, reducing prescription drug coverage for seniors and persons with disabilities in home- and community-based waivers, limiting hospital in-patient coverage, and abolishing the medically needy eligibility program for individuals facing large medical bills, among other measures. Only an 11th-hour promise of supplemental funding by legislative leaders and some serious arm-twisting led OHCA’s Board to reverse a decision that would have eliminated eligibility for over 50,000 low-income children and pregnant women. Read the rest of this entry »

The Oklahoman had an editorial today about the increase in the numbers of Oklahomans needing assistance to get by. Food stamp usage has reached an all time high in Oklahoma. It is a sobering editorial, but an issue that needs to be acknowledged. As I read the article, I couldn’t help but think of some of the people I spoke to during the homeless count, an event organized by the Oklahoma City Homeless Alliance. The Homeless Alliance does this process annually and the numbers will be out in a couple of weeks to show the statistical data that was collected that day and night. However, it isn’t the statistics that will stick with those of us who participated in the process. It is the real people and their stories that will stick with me. More than once that night, I spoke to people who were recently homeless – for the first time in their lives. The stories were similar. Loss of a job and mounting bills eventually lead to the need to receive assistance from the government through food stamps and then, eventually, to the loss of a home. I talked to one gentleman for a while who had only been homeless for a matter of days. He had never received assistance before this downturn. His voice and demeanor didn’t express great sorrow, or anger, or much of anything. He just seemed somewhat numb, as if he could hardly believe he had gotten to this point. He almost seemed apologetic. Read the rest of this entry »

Last week I sat down with the editorial board of the Tulsa World to discuss the state’s worsening fiscal outlook. Julie Delcour’s column in today’s Opinion section sets out some of our main messages about the severity of the problem and the difficult choices for keeping the budget in balance.

“Budget shortfalls of this magnitude will lead to difficult and painful choices between cutting deeply into public services, raising new revenues, and tapping into budget reserves. If the downturn is of a similar magnitude to the one following the last recession of 2001,” Oklahoma could face shortfalls in the future of $2.4 billion,” warns Blatt, an economist and analyst who monitors the budget and state revenues with the precision of a surgeon.

Read the rest of this entry »