Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1991. He currently practices law in Tulsa and represents clients at the Capitol. You can sign up on his website to receive the Capitol Updates newsletter by email.
According to State Treasurer Ken Miller, last month’s gross tax receipts were the smallest for the month of December since 2010. In December 2010 we were in the midst of FY-2011 which was a budget year with a shortfall that approached $1 billion. But the 2010 legislature had the benefit of $540 million in federal stimulus money to help relieve the shortfall. They used the money, together with rainy day funds, to protect funding for education, higher education and the agencies that match federal Medicaid funding. In that way legislators were able to keep some agencies at level funding with an overall cut of 4 percent.
In December 2010 the entire U.S. economy was in the Great Recession, not just oil and gas states like Oklahoma. President Obama and Congress passed the stimulus package to bail out the states, protecting state government services and the economy from massive state government cuts. In Oklahoma our leaders were wise enough to accept the money, though some were cursing the President and the federal government all the way to the bank. FY-2011 was the second of a three-year span in which the legislature used about $1.3 billion in federal funds to help balance our budget.
But the answer to this year’s nearly $1 billion shortfall will have to be different. The U.S. economy has slowly recovered, but we find ourselves on the downside of cyclical oil and gas prices. Between the recession and the current downturn we opted to cut taxes. Federal policy may help Oklahoma in the long term by allowing oil exports, but unfortunately we’ll feel the brunt of the downturn next year without direct federal help. Our future is in our own hands.
The legislature will attempt to find more savings and efficiencies in state government, and no doubt some will be found. Whether the consequences are good or bad is arguable. But any reasonable interpretation of the facts says we also need more revenue. If we want a productive future it’s not a good plan to ask teachers, state employees and service providers to continue subsidizing our state budget. Some say the shortfall presents an opportunity. That may be true, but it’s going to be quite a challenge to responsibly get through this without long lasting harm.