In a recent editorial, the Tulsa World questioned the call that is frequently heard to ‘right-size’ state government. After three successive years of deep cuts to public services, the editorial asked ‘where does it end?’:

But how do we define right-sizing? Is government the right size if there aren’t enough correctional officers to handle prison unrest? Is it right-sized if children are crowded into classrooms? Is it the right size if sex offenders cannot be properly supervised? Is it the right size when DHS caseloads are so high that the vulnerable slip through the cracks?

The chart below provides numerical support for the idea that state government has shrunk dramatically in recent years. As a share of state personal income, state appropriations are at their lowest level in at least three decades. In FY 2011, the state appropriated budget of $6.77 billion represented just 4.9 percent of  state personal income ($137.8 billion). This is almost a full percentage point below the historical average of 5.8 percent over the past 25 years. This year, with appropriations having been cut by a further 2.4 percent and state personal income rising, the share will fall even further.

Source: Bureau of Economic Analysis (State Personal Income), OK Policy (State Appropriations)

As we showed in an earlier blog post, state tax collections are also at an historic low and are failing to keep pace with growing costs and growing needs. Rather than being bloated and in need of right-sizing downward, the question we must now face is whether years of underfunding have shrunk state government to the point where it is no longer capable of performing the core functions that Oklahomans expect: educating our children, training our workforce, maintaining our infrastructure, protecting our communities, and aiding our most vulnerable family members and neighbors

What’s up this week at Oklahoma Policy Institute? The Weekly Wonk is dedicated to this week’s events, publications, and blog posts.

While tax day is still over a month away, the state tax structure got some serious attention this week from OK Policy.  Gene Perry made the case for sales tax reform in an Okahoman op-ed this weekend, citing a new issue brief that the sales tax doesn’t raise enough revenue to fund core public services and fails to evenly distribute the costs of governing.  The state income tax is set to be slashed again in January 2012; our new fact sheet, Cutting Oklahoma’s top income tax rate: Who benefits?, reports that the bulk of the cut goes to the top 1 percent, while forty-three percent of Oklahomans receive no tax cut at all.  Unless the legislature acts, the cut will reduce available revenues for FY’12 by $38 million, and when fully phased-in, by $120 million.  OK Policy’s perspective was also included in a Tulsa world editorial chastising state leadership for a top rate tax cut in a time of budget distress.

State spending as a share of the overall economy will reach a 30-year low in 2011, according to a fact sheet released on Wednesday.  While many in the state have cautioned that government shouldn’t be allowed to grow faster than the economy, the data reveals that the exact opposite is occurring, as 2011 marks the lowest percentage of state appropriated spending as a share of personal earnings in thirty years.  In fact, we may have reached a point where we are not making the investments in the core public services that support Oklahoma families, businesses, and communities.  An editorial in the Oklahoman on Thursday contends, “Not everyone will find this as alarming as does Blatt, but his point is well taken.” Read the rest of this entry »

The recent history of state appropriations, displayed here from our FY ’11 Budget Highlights fact sheet, shows a  series of successive ups and downs:

We see that the state appropriated budget for the current year, FY ’11, is 5.8 percent less than two years ago and slightly less than the budget in FY ’07.  With revenue collections having plummeted by more than 20 percent compared to pre-downturn levels, only the  adoption of various revenue enhancements and the injection of almost $2 billion in non-recurring revenues from the federal stimulus bill, Rainy Day Fund and other sources have averted more drastic cuts to agency budgets. Still, over half of all appropriated state agencies will have absorbed funding cuts of at least 15 percent, and across state government, shortfalls have forced agencies to eliminate programs and services, reduce hours of operation to the public, cut payments to private providers, and lay off or furlough employees (our online budget presentation runs through the full story).

Some have drawn a different conclusion from these numbers.  If you look at the period prior to the downturn, you see a substantial increase in the state budget – about $1.9 billion in growth between FY ’04 and FY ’08. Doesn’t that suggest that state government grew too big, and that the current period represents more of a healthy correction that a crisis? In addition, even with the cuts of the last two years, state appropriations remain 8 percent higher than they were in FY ’06.  If the state could operate with a $6.2 billion budget six years ago, surely it should be able to manage with a $6.7 billion budget in FY ’11? Read the rest of this entry »