The first part of this week I am attending the annual State Fiscal Policy Conference organized by the Center on Budget and Policy Priorities. While most of the conference sessions focus on the fiscal challenges facing state governments – and the need to pursue balanced and fiscally responsible approaches to preserving core public services in these difficult times – the opening plenary featured an informative and convincingly-argued talk on the prospects for the national economy by Mark Zandi, the chief economist for Moody’s Analytics and one of the nation’s most perceptive and widely-respected economic policy analysts. In recent years. Zandi has gained particular prominence both as an adviser to the McCain campaign during the 2008 Presidential election and as co-author, along with former Federal Reserve Vice Chairman Alan Binder, of an important report this past summer that found that federal stimulus measures had a huge and positive impact in turning around the economony and averting a full-scale Depression.

Zandi’s talk, which he titled “Struggling to Hit Escape Velocity,” made three major points about  the economy. The first was that the economic recovery, which had been gathering steam in late 2009 as a result of the spending and tax cut provisions of the stimulus bill passed by Congress in February 2009, has lost momentum over the past six months. Real GDP, which grew 3.3 percent in the second half of 2009, slowed to 2.7 percent in the first half of 2010 and is on pace to grow just 2.0 percent in the second half of this year. This is “painfully slow growth” which will not be enough to forestall further increases in the unemployment rate, which he expects to creep back above double digits in 2011. Zandi identifies two main culprits for the slackening economy: the declining economic impact of the stimulus package and the European debt crisis of earlier this year, which battered stock prices,  reversed growing business and consumer confidence, and slowed private sector hiring.  Although the European crisis now seems to be over, Zandi believes it set back the American recovery by a good six to 12 months. Read the rest of this entry »

We’re nowhere close to being out of the woods. That’s been our message of late on the state’s budget outlook (you can take a look here at our blog post analyzing of the most recent monthly revenue collections and here at the memo (PDF) on the budget we distributed to candidates). While revenue collections over the past 8 months have rebounded 5 to 10 percent from the previous year, they remain well below pre-downturn levels. And even though revenues are recovering, the use of over $1 billion in non-recurring revenues from the federal stimulus bill and state Rainy Day Fund  in this year’s budget to avert catastrophic budget cuts ensures that Oklahoma policymakers will face substantial shortfalls in building next year’s budget. Read the rest of this entry »

The U.S. Census Bureau today released its annual report on income, poverty, and health insurance coverage for 2009 based on its March Current Population Survey.  The data reflected the severity of the recession throughout 2009: the national poverty rate rose from 13.2 percent to 14.3 percent, as an additional 3.7 million Americans in 2009 lived in households with income below the federal poverty level (just over $22,000 for a family of four).  While acknowledging the extent of the hardships facing millions of Americans families, the White House emphasized the important role that increases in unemployment insurance benefits and Social Security payments that were part of the 2009 Recovery Act played in keeping millions of Americans out of poverty – indeed, the poverty rate for seniors actually declined this past year.  Meanwhile, the Center on Budget and Policy Priorities noted that if low-income tax credits and non-cash benefit programs, such as food stamps, had been included, the rise in the poverty rate would have been considerably smaller.  (A new Supplemental Poverty Measure, which we discussed in this recent post, will include these benefits).

The national health insurance data showed a continuation and acceleration of long-term trends: an overall decline in the percentage of Americans with health insurance, with progress in increasing the ranks of insured children through expanded access to public insurance (Medicaid and CHIP) being more than offset by the erosion of employer-sponsored insurance, leading to growing numbers of uninsured adults. Overall, the number of Americans without health insurance increased by 4.3 million to 50.7 million, bringing the rate of uninsured to 16.7 percent. Read the rest of this entry »

July 1st marks the start of the new state fiscal year in most of the country – but as glad as state Governors, fiscal directors and legislators will be to see the end of the annus horribilis of 2010,  don’t expect to hear the sound of Champagne bottles being uncorked or bands striking up “Happy Days Are Here Again” to usher in the new year.

As noted in a new report from the Center on Budget and Policy Priorities:

Dismal state revenue collections caused by the severe recession are setting the stage for a new round of state budget cuts as fiscal year 2011 begins in most states on July 1. The states’ cumulative budget shortfalls will likely reach $140 billion in the coming year, the largest shortfall yet in a string of huge annual gaps that date back to the beginning of the recession. Read the rest of this entry »

The state’s deep and prolonged budget crisis has taken a serious toll on public services in Oklahoma.  We have seen rate cuts to providers of community-based health services, elimination of violence prevention programs for at-risk youth, closures of facilities for persons with mental health and addiction problems, and layoffs of hundreds of teachers and public employees, to cite just a few examples (see our updated compilation of state and local cuts). Overall, as we laid out in our FY ’11 Budget Highlights fact sheet, state appropriations have been cut by almost $400 million, or 7.2 percent, compared to FY ’09, and more than half of all appropriated state agencies must absorb state funding cuts of at least 15 percent.

Yet the impact of the downturn would have been genuinely catastrophic had Congress not provided substantial fiscal relief to the states as part of last year’s stimulus bill.  Formally known as the American Recovery and Reinvestment Act,  the stimulus bill provided states money in two basic forms – a State Fiscal Stabilization Fund, intended primarily for common and post-secondary education, and enhanced federal matching funds for Medicaid. Over the past two years, the Legislature approved the use of $1.375 billion in stimulus funds, allocated as follows:

Read the rest of this entry »

One measure adopted this session to mitigate the extent of budget cuts was HB 2359, which aims to increase the collections of taxes owed on purchases made over the Internet or by other remote retailers. After opposition emerged, the final enrolled version of the bill dropped a controversial provision that would have required online retailers to report annual sales by each customer to the Tax Commission. Michael Mazerov, a Senior Fellow at the Washington-based Center on Budget and Policy Priorities, is one of the leading national experts on state taxes and a staunch proponent of state efforts to collect taxes on remote sales. He discussed Oklahoma’s new bill, which awaits final action by the Governor, in a phone interview with OK Policy’s Director, David Blatt.

David Blatt: Remind us of why a bill like HB 2359 is needed? What’s the problem that this legislation is trying to address?

MM: Legislation like this is needed because, like every state with a sales tax, Oklahoma is losing a significant share of revenue because it can’t collect sales taxes from many purchases made from internet sellers, catalog companies, and other so-called ‘remote sellers’. In fact, the best estimate is that Oklahoma is losing over a hundred million dollars a year in potential sales tax revenue from uncollected taxes on remote sales. This is revenue that is already due under existing state law. The state’s failure to collect this revenue makes its budget gap that much bigger and undermines the ability of state and local governments to maintain basic public services. It also makes the sale tax more regressive because most of the people that are avoiding paying this tax are relatively affluent people who have computers and Internet access account and can buy things tax-free online, while low-income people have to pay tax when they shop in stores. Read the rest of this entry »

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 »

Our friends at the Center on Budget and Policy Priorities (CBPP) have put out a new paper addressing the acute fiscal crisis facing states across the nation. As shortfalls reach a level where they are seriously compromising the ability of state government to provide core public services, the Center calls for a balanced approach that “ensures that no one segment of residents and businesses bears the brunt of recession-induced deficits.” Their seven components of a balanced approach are:

• Efficiency – focusing on the goals of expenditures and whether there are better ways to reach those goals;
• Using all available resources – employing reserves, rainy day funds, and federal fiscal relief funds responsibly and wisely;
• Scrutinizing all spending, not just what is appropriated through the budget – including programmatic expenditures made in the form of tax breaks;
• Improved collections – aggressively seeking taxes due that are not being paid;
• Tax increases – particularly those that have a more positive impact on the economy than spending cuts;
• Prioritization – making careful decisions based on goals and effectiveness when budgets must be cut; and
• Paying close attention to future impact while fixing today’s problems.

Read the rest of this entry »

In writing about the state’s current budget woes, I’ve tended to say that Oklahoma is in the midst of its worst fiscal crisis since the oil bust of the 1980′s. Whether we were around during those days or not, I think most of us have a sense that the situation back then was genuinely catastrophic for state finances. So it came as something of a surprise to go back through historical data on state revenue collections and discover the following: Read the rest of this entry »

In Oklahoma, who pays the highest percentage of their income in taxes? Those with the lowest incomes do, according to the Institute on Taxation and Economic Policy (ITEP). The state’s sales, excise and property taxes, which fall disproportionately on the lowest income families, are the primary cause of low- and middle- income households paying a higher proportion of their income in taxes.

ITEP’s newly updated study, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, measures state and local taxes paid by different income groups. The study reveals that families with incomes over $400,000 pay just over 5.5 percent of their incomes in state and local taxes, while families with incomes under $50,000 pay between nine and 10 percent. Read the rest of this entry »

An interesting new report from our friends at the Center on Budget and Policy Priorities looks at whether families with income below the federal poverty level (FPL) in each state are subject to state income taxes. It finds that for Oklahoma, the threshold at which a two-parent family with two children owes state income tax made it above the federal poverty line for the first time in 2008. The income tax threshold for a two-parent family of four was $23,500 in 2008, which is 107 percent of the FPL of $22,017. The report shows that back in 2000, the state’s income tax threshold for a family of four was several thousand dollars below the poverty line. Read the rest of this entry »

Yesterday, the U.S. Census Bureau released its annual report on income, poverty and health insurance coverage for 2008  from its Current Population Survey. You can or click here for fact sheets and links to all the data or click here to read the 72-page PDF report. Read the rest of this entry »