Energy slump, policies contribute to state’s budget shortfall (Examiner-Enterprise)

By Emily Droege

Holiday cheer may be in the air, but the long-term forecast for the state’s budget looks bleak, according to David Blatt, executive director for the Oklahoma Policy Institute.

Speaking to the Monday Rotary Club, Blatt explained Oklahoma’s “structural budget deficit” is a significant problem that state lawmakers and residents will deal with not only in the upcoming fiscal year but well beyond unless basic changes are made.

Blatt said Oklahoma’s budget shortfall this year is the result of the stalled activity in the oil and gas industry, as well as the past policy choices that have weakened revenue collections and left less money available for appropriation by lawmakers.

“Oklahoma has already gone through an extended period of budget shortfalls and cuts. This began in 2009-2010 with the onset of the Great Recession, and in some ways, we never really recovered,” said Blatt.

When the state’s legislature goes into session in February, lawmakers will once again struggle to balance the budget, said Blatt, with the state facing a revenue shortfall of at least $600 million and likely more.

The state’s fiscal woes have multiple causes, Blatt explained, and some stem from economics and demographics while others have been aggravated by policy choices made by state leaders in recent years.

“In basic terms, our budgets no longer balance. We have an outdated 20th century tax system trying to keep pace in the 21st century economy,” said Blatt.

“The single largest tax in state and local government in Oklahoma is the sales tax. Our sales tax is based on the purchase of goods in stores, but our economy is increasingly based on services and the purchase of goods online. So our tax system isn’t keeping pace with economic changes.”

Even more significant, according to data compiled by the Oklahoma Policy Institute, has been the impact of a series of income tax cuts that began in the mid-2000s. These actions, which included reducing tax rates, raising the standard deduction and other measures, have reduced tax collections by more than $1 billion.

Blatt stressed that the state tax system is no longer generating the revenue needed for basic public services such as education.

“Oklahoma has experienced the deepest cuts in the nation to funding for public schools. Our teachers have gone eight years without seeing a raise in the state salary schedule,” said Blatt. “And if you look at Oklahoma teachers compared to the rest of the nation, our average teacher salary is the third lowest in the nation.”

School districts across the state are facing a severe teacher shortage, which has led to large class sizes, unfilled teacher vacancies and emergency teacher certifications. Numerous unfunded mandates are also draining time and resources from the classroom.

Equally troubling, Blatt said that state prisons are staffed at less than 65 percent even though they’ve reached well beyond inmate capacity.

Despite mostly weathering budget cuts, the Department of Mental Health and Substance Abuse Services is unable to meet treatment needs of Oklahomans, he added.

“Oklahoma has the highest rates of mental illness in the nation. We know that with proper treatment and proper medication, many at-risk people can become healthy and lead stable lives, but we just don’t have the resources,” said Blatt, adding that the Medicaid agency cut reimbursement rate for most providers by nearly eight percent, restricted benefits and hiked co-payments on participants.

The Oklahoma Policy Institute was founded in 2008 and is based in Tulsa. According to its website, OK Policy “promotes adequate, fair, and fiscally responsible funding of public services and expanded opportunity for all Oklahomans by providing timely and credible information, analysis, and ideas.”

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