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

This week at OK Policy we reviewed the state’s FY ’12 budget agreement on our blog.  We applaud leadership for protecting our most vulnerable populations by targeting available funds for Medicaid, human services, and mental health, but ask if state agencies facing a third consecutive year of budget cuts are being provided enough resources to continue to perform their core missions.

OK Policy has long called for a balanced approach to the state budget and we urged leaders to avoid further cuts to key public services by choosing among an array of fiscal tools for closing the budget shortfall.  Click here for our spreadsheet tracking state agency appropriations from FY’09 to FY ’12.  Click below to watch OK Policy Director David Blatt discuss the state budget on ONR (Oklahoma News Report) this week on OETA:

continue reading The Weekly Wonk – May 13, 2011

On Tuesday, Governor Fallin and the Republican leadership of the House and Senate announced an agreement on the FY ’12 budget. Total state appropriations for next year will be $6.511 billion, which is $254 million, or 3.8 percent less than this year’s final budget.

To make the budget balance and limit the magnitude of cuts, the agreement includes some $370 million more revenue than what was certified as available for appropriation by the Board of Equalization in February. Although full details have not been spelled out, the main revenue enhancements appear to be: $120 million in cash balances that have accumulated this year; some $100 million from the final round of federal stimulus money approved by Congress last summer; and a $100 million transfer from the State Transportation Fund that will be partly made up for by a $70 million bond issue for the Department of Transportation. Additional revenues include transfers from the Unclaimed Property Fund and agency reserve funds, increased tax compliance efforts, and diversion of tax revenues slated for the ROADS program to the General Revenue fund.

continue reading The FY '12 budget agreement: Playing your best hand with only half your cards

In two years of recession and slow recovery, Oklahoma’s public services have struggled to get by with less. Oklahoma families, businesses and communities are feeling the impact in far-ranging ways, including increased class sizes, higher tuition rates, fewer mental health treatment services, critically understaffed correctional facilities, and more. Even as revenues recover, they remain far below pre-downturn levels, and another large budget shortfall is looming for next year’s budget. Legislative leaders are now warning of cuts from 3 to 7 percent for all agencies, with some agencies facing cuts as high as 10 percent.

Governor Fallin has has made some efforts to minimize cuts to state agencies, especially the core public services of education, law enforcement, health, transportation and corrections. After some of her revenue proposals did not find traction in the legislature, Fallin stated, “If they have a different way of being able to fund the budget and make up for the $500 million budget shortfall, I invite them to bring those ideas forth. There’s room for all kinds of ideas.”

continue reading New OK Policy report lays out options for protecting Oklahoma public services

The state budget crisis has put nearly all public services under intense scrutiny. With most state agencies taking cuts of 15 percent or higher, and more cuts expected, public officials have been forced to streamline operations, eliminating both waste and many useful programs.

With states hurting everywhere, they are also beginning to look at holes in the tax code that lack any good rationale. One glaring example is sales tax collections for online purchasers. Many states, including Oklahoma, require residents to pay taxes for online purchases, but they put the burden on individual taxpayers to identify how much tax is owed when filing their tax return.

Collecting in this way is highly inefficient, and it subsidizes large online retailers like Amazon at the expense of Main Street businesses who directly employ Oklahomans. Since they aren’t required to include sales tax in their prices, online retailers are able to undercut local business and move more money out of the state. Untaxed remote sales also starve state and local governments of resources – an estimated $92.7 million for Oklahoma in 2009, rising to $156.3 million in 2012.

continue reading More states push to end the Amazon tax loophole. Will Oklahoma join them?

When we discuss government budgets, direct spending receives the most attention by far. Less noticed is the substantial expenditure on tax credits and incentives, what some have called the “submerged state.”

That inattention may have allowed several unconstitutional measures to sneak through in Oklahoma. At the end of 2010, outgoing Attorney General Drew Edmondson issued an opinion on the constitutionality of Oklahoma tax credits. The opinion was requested by Rep. David Dank, R-Oklahoma City, who chairs the House Revenue and Taxation subcommittee. An AG opinion does not have force of law–only a court can legally determine constitutionality–but it can provide guidance to lawmakers and the courts.

continue reading The three part test for tax credits – and the fourth part we should be asking

Each year, the State Board of Equalization meets three times to review and approve projected revenues for the upcoming fiscal year – in December, February and June. At this year’s June meeting, which took place earlier this week, the Board approved a packet that included revised revenue projections that are extremely important for the new fiscal year set to begin July 1st.

continue reading New certification: Law changes led to $305 million of revenue enhancements for next year

In their efforts to find additional revenues for the upcoming budget year, legislative leaders and Governor Henry took some strong and politically risky steps to suspend tax credits for various forms of economic activity. But when it came to tax incentives for the oil and gas industry, expected to amount to some $150 million in FY ’11, it was the industry that seemed to have the upper hand. HB 2432, which passed in the final days of session, allowed the state temporarily to defer incentive payments to oil and gas producers – but only in return for some permanent and questionable concessions to the industry.

continue reading Over a barrel: HB 2432 makes a flawed system of oil and gas tax subsidies even worse

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.

continue reading An expert's take on Oklahoma's new sales tax compliance law

Legislative leaders and the Governor yesterday announced their agreement on the FY ’11 budget. We’ve posted the press release here and the document that was provided comparing appropriations for each agency for this budget year and next, and listing the additional revenues that were agreed on in addition to the $5.4 billion in state revenues certified by the Board of Equalization in February. The Oklahoman’s Paul Monies has created a nifty visual breakdown of where the money is going  using a program called Many Eyes.

continue reading Inital thoughts on the FY11 budget agreement

Last week, the Oklahoman published a “Tax Day” editorial addressing OK Policy’s recent contributions to the debate on the state budget crisis. They began by emphasizing our common ground:

Along with the Oklahoma Policy Institute’s David Blatt, we’ve been urging lawmakers to use the downturn to find sensible new sources of revenue (such as ending or capping ineffective tax credits) and to better prepare for the next downturn.

This is a meaningful and much-appreciated acknowledgment, as the need for new sources of revenue is a contentious principle  at the Legislature and around the state these days (See this insightful article by Patrick McGuigan on how this issue divides the state’s two policy think-tanks, us and the Oklahoma Council of Public Affairs). But the Oklahoman proceeds to reject one of our main proposals for bridging the budget gap, doing away with the exemption that allows taxpayers who itemize their returns to also claim the deduction for state income taxes from their state taxes. The exemption costs the state an estimated $118 million on income tax revenue annually, which at a time of drastic budget scenarios, could make a major difference in preserving critical public services.

We have noted that the exemption for state income tax benefits only the minority of taxpayers, about one in four, who claim itemized deductions. Their editorial states:

That alone is reason to urge caution — especially considering that some states (most notably Texas) have no income tax and Oklahoma’s maximum personal income tax rate is uncomfortably high at 5.5 percent.

continue reading Citizens for Tax Justice questions Oklahoman's defence of state income tax break