Archive for 2011

Good times don't last forever

by | October 11th, 2011 | Posted in Blog, Budget, Taxes | Comments (3)

Highway 51 Bridge between Wagoner and Coweta. Photo by flickr user doug_wertman used under a Creative Commons License.

Last week, Gov. Fallin announced a plan to fix the state’s decaying bridges by 2019. The proposal involves putting more money in the ROADS fund, which receives a portion of income tax revenues that would otherwise go to the state’s General Revenue Fund.

OK Policy released a statement on the Governor’s plan that was mentioned by both The Oklahoman and The Tulsa World:

We welcome Governor Fallin’s focus on fixing Oklahoma’s crumbling bridges. However, we must note that her proposal would be paid for entirely by diverting more income tax revenues from an already cash-strapped state budget. At the same time, Governor Fallin and other state leaders are promoting further cuts or outright abolition of the income tax. This should remind us that the income tax remains vital for funding Oklahoma’s needs and that we cannot meet our obligations to pay our bills while undermining our revenue base.

The Oklahoman included a response from the Governor’s spokesperson that the effort to fix bad bridges “does not reflect a lack of commitment to other areas of government.” Fallin’s office told The Oklahoman, “much of the additional transportation funding would come from growth revenue, and Oklahoma has enjoyed nice growth in revenue this fiscal year.”

continue reading Good times don't last forever

Read This: Can the middle class be saved?

by | September 5th, 2011 | Posted in Blog, Economy | Comments (2)

Anyone concerned about the impact that long-term and short-term changes in the American economy are having on the working families that form the pillar of the American middle class should read the cover article in this month’s Atlantic monthly, “Can the Middle Class Be Saved”?

The article, by features editor Don Peck, provides a powerful and sobering look at how economic opportunity and financial security are increasingly out of reach for a growing segment of the American population. He argues that:

Arguably, the most important economic trend in the United States over the past couple of generations has been the ever more distinct sorting of Americans into winners and losers, and the slow hollowing-out of the middle class.

While Peck provides lots of data about widening income inequality and the ever-greater concentration of wealth in the hands of the few, his essay is most compelling in its focus on the fading fortunes of the majority of Americans who are without a college degree and who make up the ranks of the non-professional middle class.

continue reading Read This: Can the middle class be saved?

Quick Take: Revenues rebounding but still way down from pre-downturn levels

by | June 15th, 2011 | Posted in Blog, Budget | Comments (2)

This week, State Finance Director Preston Doerflinger announced General Revenue (GR) collections for May.  For the month, GR was $36 million, or 9.5 percent, above May 2010 and $25.4 million, or 6.5 percent, above the certified estimate. May collections would have been even higher but for the Legislature’s decision to allocate $21.4 million in oil revenues as supplemental funds for common and higher education. For the eleven months of FY ’11, revenues are $409.1 million, or 9.9 percent, above last year and $153.2 million, or 3.5 percent, above the certified estimate. In this blog post, we go a little deeper into the numbers with a series of brief observations and charts.

  • May marks the 13th straight month that revenues showed improvement compared to the same month for the prior year. In each of the last seven months, revenues have come in at least 9 percent higher than the prior year.

Budget cuts are a choice

by | May 10th, 2011 | Posted in Blog, Budget | Comments (5)

In a recent article on state budget negotiations, House Speaker Kris Steele said he and other state leaders are “doing our best to minimize the cuts” to core agencies. He contrasted the treatment of core agencies to the larger cuts that would be made to other areas of government.

This is a red herring. Perhaps education will be cut 5 percent, compared to, say, a 10 percent cut to the Department of Environmental Quality. But those areas identified as core services (education, health and human services, public safety, and transportation) already make up almost 90 percent of state appropriations.

The real issue is not how the vast majority of the budget is treated compared to a few of the smallest state agencies. Speaker Steele and other lawmakers cannot claim in good faith to be protecting core services while ignoring revenue options and voting to make the problem worse.

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Cutting the top income tax rate: Who benefits?

by | March 3rd, 2011 | Posted in Blog, Taxes | Comments (13)

[UPDATE: You can download ITEP’s analysis here.]

Yesterday the Senate voted to abolish the state income tax after Sen. Tom Adelson (D-Tulsa) introduced the measure as an amendment to another bill. With public services heavily dependent on income tax and no immediate revenue prospects to replace it, the language will likely be removed before the bill is finalized. Democrats introduced the amendment (which they do not support) in an attempt to show that the tax cut rhetoric of the Republican majority is not compatible with responsible budgeting and the needs of public services.

While that is a political fight that will not have immediate repercussions on policy, it mirrors the trend of successive smaller cuts that have significantly reduced the income tax over time. From 2004 to 2006, the top income tax rate was cut from 6.65 percent to 5.5 percent. Unless the legislature acts to stop it, another state income tax cut will take effect January 1, 2012. The cut, which was triggered when the state projected that revenue will rise by more than 4 percent next year, would reduce the top rate to 5.25 percent.

continue reading Cutting the top income tax rate: Who benefits?

Quick Take: Revenues rebounding – – except for the income tax

by | February 15th, 2011 | Posted in Blog, Budget | Comments (2)

The latest monthly report of General Revenue (GR) collections announced by Treasurer Ken Miller provided the strongest indications yet that state revenues are on a firm path to recovery. For the 11th time in the past 12 months, monthly revenue collections surpassed those of the same month a year ago; as the first chart shows, January’s growth of 19.5 percent was easily the strongest we have yet seen:

continue reading Quick Take: Revenues rebounding – – except for the income tax

New issue brief: Let's focus on more than "this year's shortfall"

by | December 7th, 2010 | Posted in Blog, Budget, Taxes | Comments (0)

Today OK Policy released “A New Fiscal Reality for Oklahoma: The State Budget Outlook, 2011-2014,” our second annual multi-year budget forecast. Click here for the full 10-page brief or here for the 1-page summary. Dangerously nerdy readers also can check out the 17-page technical memorandum that describes our assumptions and methods.  If you just want the elevator speech, here it is:

We can choose to keep on emptying the revenue stream, spending on favored programs without demanding results, and taking life one fiscal year at a time, as we have through many years. Or we can choose to reevaluate our environment and craft a new fiscal approach that values good planning, effective spending, and generating sufficient revenue to make Oklahoma smarter, safer, and more competitive. We must choose wisely.

continue reading New issue brief: Let's focus on more than "this year's shortfall"

Play it again: Why government can't be run more like a business

by | November 12th, 2010 | Posted in Blog, Budget | Comments (1)

Note: As the economy continues to struggle and revenue collections remain well below pre-downturn levels, we thought this a good time to repost a blog we first ran in January of this year challenging an argument we continue to hear about the need to just keep cutting public budgets.

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?

The Treasurer’s response, which he echoed in this Oklahoman article,  is worth sharing and elaborating upon, because it gets to the very heart of why the state fiscal crisis is so difficult and why this matters so much. Businesses are driven by supply and demand, and by the obligation to maximize profit for shareholders. To use the proverbial private sector example, if demand for widgets declines in a downturn, then Acme Widget company will produce fewer widgets. This may mean laying people off or even going out of business, which will have an unfortunate impact on employees, their families, and communities.  But there is no obligation on any widget maker to  produce more widgets than can be profitably sold.

continue reading Play it again: Why government can't be run more like a business

Chart of the Day: Economy has lost over 9 million full-time, year-round jobs

by | September 28th, 2010 | Posted in Blog, Economy | Comments (2)

Today the U.S. Census Bureau will release a new set of income, poverty and health insurance data based on the American Community Survey. This survey is the one recommended for state-level analysis, and we will be analyzing its data carefully for what it tells us about the impact of the recession on Oklahoma households.

In the meantime, thanks to a long plane ride and my recurring tendency to pack novels in the wrong bag, I had a chance last week to look more closely at the Census Bureau’s other report on income, poverty and health insurance, the Current Population Survey, released two weeks ago (I can’t help but think of the show Newhart: “This is my Census Bureau survey Darryl, and this is my other Census Bureau survey Darryl”). The report included findings on work experience and earnings over the past year, along with historical comparisons. Despite having followed the path of the Great Recession closely over the past two years, I was astonished to read the following:

Between 2007 and 2009, the number of males working full-time year-round with earnings decreased by 6.9 million; the number of females working full-time year-round with earning decreased by 2.4 million.

continue reading Chart of the Day: Economy has lost over 9 million full-time, year-round jobs

State revenue forecasts: Looking backward

by | September 15th, 2010 | Posted in Blog, Budget | Comments (1)

Last year at this time, OK Policy began a revenue forecasting project. Our efforts stemmed from the limitations of official revenue forecasting efforts, which are limited to two annual forecasts prepared for the Board of Equalization, issued in December and February, each covering only the remainder of the current year and the year ahead. In stepping into this void, we had several goals:

  1. To help state leaders, agencies, and citizens better understand and prepare for the impacts of the FY ’10 budget shortfall;
  2. To encourage the legislature and governor to develop a cohesive plan for managing the shortfall while minimizing impacts on  services that Oklahomans depend on;
  3. To better understand how long the revenue downturn would last and the path back to normal revenue levels; and
  4. To encourage the state to build better forecasting and financial planning into the budget process.

Our forecasting brief summarized our forecasts and recommendations. This post looks back at how well those forecasts worked.

The graph below suggests that our efforts were generally on target. The graph shows our six forecasts, along with the “middle scenario” and the actual revenue the state received. (Our technical memorandum describes how each forecast was devised.)

continue reading State revenue forecasts: Looking backward

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