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Coming up short – understanding the revenue shortfall

by | June 5th, 2009 | Posted in Blog, Budget | Comments (0)
Source: Tulsa World, June 5, 2009

Source: Tulsa World, June 5, 2009

On Thursday, Treasurer Scott Meacham declared a revenue shortfall for the current budget year, FY ’09, and announced that state agencies would be required to take an across-the-board cut in their allocations for June, the final month of the fiscal year. After five straight months of steeply declining revenues, General Revenue Fund (GRF) collections in May reached the point where they had fallen below 95 percent of the certified estimate upon which FY ’09 appropriations had been allocated.  Through May, GRF collections were at 94.9 percent of the estimate. This translates to a shortfall of $6.8 million.

The constitutional language related to revenue shortfalls is found in Article 10, Section 23.10; the relevant section states:

(T)he Legislature shall provide that all appropriations shall be reduced to bring them within revenues actually collected, but all such reductions shall apply to each department, institution, board, commission or special appropriation made by the State Legislature in the ratio that its total appropriation for that fiscal year bears to the total of all appropriations from that fund for that fiscal year.

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Oklahoma's new state budget–the first word

by | June 4th, 2009 | Posted in Blog, Budget | Comments (0)

Just a day after Governor Brad Henry signed the state budget for FY ’10, Oklahoma Policy Institute released its annual budget review. And the new fiscal year, which starts July 1, promises to be an interesting one:

all agencies face a tight and difficult year ahead as they wrestle with increases in mandatory operating expenses and, for some, rising caseloads in a downturn, with flat or reduced funding.

This year, the adoption of the budget is just the start of a process that will unfold over the next 13 months. Agencies must allocate appropriated  and other funds to their programs, figure out how they’ll cover all these built-in cost increases, adjust service levels and, in all probability, adjust again later in the year. We won’t know until next June or later how it all worked out.

But it does start at the beginning, and that’s where our budget review helps. It is the first comprehensive look at the budget process and the outcomes it led to. Here’s what you’ll find inside:

  1. Analysis of the speedy drop in available state revenue.
  2. Details of how federal stimulus money and state revenue changes allowed the overall budget to grow slightly.
  3. A rundown of how individual agencies fared and what that says about state priorities.
  4. Further analysis of problems to watch for as the year unfolds.
  5. A look ahead to the FY ’11 budget and beyond.
  6. Recommendations to improve budgeting processes and to increase funding of state services in the economic recovery.

Once you’ve read the budget brief, you’ll be caught up with us and ready to see the rest of the budget picture develop.

Do parties matter less than we think?

by | June 4th, 2009 | Posted in Blog, Capitol Matters | Comments (0)

In the heat and passion of the legislative session, the battles that divide the political parties tend to grab the spotlight. This year, for the first time in history, Republicans controlled both chambers of the Oklahoma legislature. The session featured the Republican majority pursuing a wide range of policy priorities that had long been out of reach while the Democrats controlled the Legislature (pre-2004) and, more recently when control of the chambers was divided (2004-08): examples include tort reform, prohibitions on embyronic stem cell research, education deregulation, voter ID requirements, and term limits for statewide officeholders. Many of these issues pitted  Republican lawmakers against their Democratic counterparts and/or Governor Brad Henry.

Yet without minimizing the legitimate and heartfelt differences that divide the parties on many issues, if you look at budget and tax policies, the story looks rather different. Here the Legislature and Governor reached an agreement that used over $640 million in federal stimulus dollars to maintain funding for vital state services while increasing overall spending by 1.5 percent. In the context of declining state revenues, no significant tax cut measures were adopted this session. It’s hard to imagine the outcomes being significantly different had Democrats been in control of one or both chambers.

As a very rough, preliminary attempt to measure whether party control affects budget decision, we went back through the appropriations history and compared the allocation of appropriated funds between the subcommittees  over the course of this decade as party control of the Governor’s office, House, and Senate has changed. Have funding decisions  changed significantly as Republicans have assumed the Chairmanships of the key appropriations committees?  What we found suggests not.

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Who are our most charitable givers?

by | June 3rd, 2009 | Posted in Blog, Poverty & Opportunity | Comments (1)

A number of papers ran an article over the Memorial Day weekend from the McClatchey Newpapers that analyzed data from the U.S. Census Bureau showing that the poorest Americans are the most generous in giving to charity. By far. When the population is broken down into income quintiles, the poorest fifth of American households, with an average income of just over $10,000, were found to give 4.3 percent of their income to charity, nearly double the national average, and more than twice what the wealthiest give.

charity-incomeAs this piece from Portfolio.com notes, these findings are consistent with an extensive series of studies and research showing the generosity of America’s poor.

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Federal grants in Oklahoma–the whole picture

by | June 2nd, 2009 | Posted in Blog, Budget | Comments (0)

Federal stimulus money has been in the news nationally and in Oklahoma. It has expanded or stabilized a wide range of public services. The recently-completed state budget for FY’10 used $641 million of stimulus funding to make up for over $600 million in lost state revenue. The stimulus, though, is just part of a significant federal contribution to state and local government services in Oklahoma. In 2007, we received $5.5 billion in total grants.

What does all this federal money do? Our upcoming Online Guide to Oklahoma Budget and Taxes has some answers. The guide is unique among the available sources of information on government finance in Oklahoma. It is broader than any other source, covering both state and local government and describing all sources of revenue and spending, not just taxes and appropriations. Here’s an extract that provides an overview of federal funding and what it helps us accomplish.

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Appointments we can believe in

by | June 1st, 2009 | Posted in Blog, Healthcare | Comments (0)

Anyone who has worked over the years to support access to health care for low-income children and families will be heartened to learn that the Obama administration has appointed Cindy Mann to lead the Centers for Medicaid and State Operations, which is the division within the Centers for Medicare and Medicaid Services (CMS) that oversees the Medicaid and CHIP programs. Cindy is a highly passionate, intelligent, and experienced health care expert. Most recently, she was founder and Director of the Georgetown University Center for Children and Families; before that, she was  Deputy Director of CMS (back in the days when it was still HCFA) in the Clinton administration.  There are few, if any, people more highly respected in the health care policy and advocacy world. You can read Cindy’s thoughts on her new appointment and on her stellar replacements at the Center for Children and Families, Joan Alker and Jocelyn Guyer.

As health care reform heats up, it is clear that the Medicaid program will be one of the pillars upon which a new system providing health insurance coverage to all Americans will be built.  While Medicaid faces many significant challenges in the years ahead, it will without question benefit from Cindy Mann’s strong leadership.

Cap and trade laws could change Oklahoma’s financial climate

Cap-and-trade limits of carbon dioxide emissions are burning up a lot of ink these days. Briefly, the idea is to set a limit on how much CO2 and other greenhouse gases could be created each year. Companies that create these gases–utilities, refineries, factories, and perhaps even ranches–would have to buy permits to do so. Permits would be traded on a market. The cost, of course, gets passed through the supply chain and ultimately to the consumer.

The White House has put its weight behind a market-based approach to emissions and a bill is starting its way through Congress. The New York Times suggests that this policy has broad enough support that it’s achieved the status of consensus. The approach

has been embraced by President Obama, Democratic leaders in Congress, mainstream environmental groups and a growing number of business interests, including energy-consuming industries like autos, steel and aluminum.

The Times apparently forgot to check with some Oklahoma elected officials. Rep. Frank Lucas (R-Cheyenn) has joined the Rural American Solutions Group in condemning cap and trade as unfair to rural residents:

On Tuesday 16 Republican members of the U.S. House, all members of the Rural America Solutions Group, spoke out against the American Clean Energy and Security Act of 2009. Choosing to call it “the Democrats’ national energy tax on rural America,” they said the bill would disproportionately spike rural American energy bills, harm agriculture production and threaten small businesses.

The Oklahoma House of Representatives has also weighed in against cap and trade.

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A year without tax cuts–almost

by | May 28th, 2009 | Posted in Blog, Taxes | Comments (0)

In the first year that Republicans fully control the Legislature, who would expect we’d have so little to report from the tax cut beat? The economy and a $600-plus million revenue shortfall, of course, were major factors in tax decisions. Legislators did not want to cut taxes and have to make the corresponding budget cuts in the same session.

We’re pleased our elected officials understood that state services are in a precarious position, even with our current revenue structure. We’re  even happier that they largely avoided the “easy” alternatives of making reductions that took place in later years or only affected local governments. Proposals to cut the income tax from 5.5 percent to 5.25 percent next year–regardless of the revenue picture–and to put more limits on the growth of property taxes, were both left on the shelf. So were elimination of the sales tax on groceries, reducing the 50-cent monthly 911 tax, and any number of sales and income tax exemptions.

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We're not like California–are we?

by | May 27th, 2009 | Posted in Blog, Budget | Comments (1)

Stateline.org is an indispensable–and free–source of news and analysis on just about every aspect of state government. Last week, staff author Pamela M. Prah provided an excellent analysis on the state of California’s budget crisis and–more importantly for us–what other states can learn from it.

California has always been a trendsetter. What happens in California often pops up elsewhere. Which raises this question: Are the perpetual billion-dollar deficits that haunt California state government unique to the Golden State or the harbinger of what other states can expect?

Here’s a quick rundown of what’s gotten California in trouble–a budget deficit left wide open by voters’ rejection of several tax and budget measures yesterday– and our take on how Oklahoma compares:

  1. California depends too much on a small group–wealthy taxpayers–for its revenue. In California, a higher tax rate for very high income families and businesses and a capital gains tax are great when the economy is strong, but revenue from the rich plummets when the economy turns down. Oklahoma doesn’t have this problem. If anything, we go too far in the other direction. We depend too much on lower-income taxpayers since our income tax applies at very low income levels.
  2. California’s budget has been gridlocked lately due to divided government. Republican Governor Arnold Schwarzenneger and a legislature dominated by liberal democrats disagree fundamentally on what government should be doing. The result is nasty partisan battles, short-term fixes, and a growing gap between revenues and promised spending. Oklahoma has divided government, too, though the parties are reversed. This year’s budget agreement–which took weeks to negotiate, helped some interests while cutting many core services, and ignored long-term problems and opportunities–shows we have a little California in us, too.
  3. California is one of 16 states that requires a super-majority vote to increase taxes. So is Oklahoma, thanks to State Question 640. According to Prah, this requirement makes it harder to modernize the tax code to keep up with the changing economy and growing public expectations.

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State Coverage Initiative: Will consensus be enough?

by | May 26th, 2009 | Posted in Blog, Healthcare | Comments (3)

Last week,  I attended a meeting of the State Coverage Initiative (SCI), an effort that has taken shape over the past two years under the leadership of Insurance Commissioner Kim Holland to develop a plan to extend health insurance coverage to a sizable segment of the 640,000 Oklahomans who are currently uninsured. The meeting reached a consensus on adoption of the SCI strategic plan, which lays out a blueprint for expanding coverage.

The cornerstone of the plan would be a gradual expansion of Insure Oklahoma, the public-private partnership which provides subsidized employer-based coverage for working adults, along with a public product for eligible adults without access to employer coverage. The program, which is funded by a portion of tobacco tax revenues approved by voters in 2004,  has now grown to cover just under 20,000 Oklahomans, which is about half of the capacity under existing revenues. The principal SCI recommendation is to generate new revenues by assessing a dedicated fee on all health insurance claims paid by health insurers in Oklahoma. It is estimated than an initial 1 percent fee would generate $78 million that, along with matching federal funds, could insure an additional 80,000 Oklahomans.  If and when 75 percent of the target population is reached, the assessment would increase.

The main argument advanced by the SCI leadership in favor of the new health care assessment is the need to confront the enormous cost-shifting that currently takes place in paying for health care for the uninsured. As Commissioner Holland stated in a recent op-ed:

One billion dollars each and every year. That’s how much it costs to provide health care to the citizens of Oklahoma who do not or cannot pay for the care they need and receive. That’s $1 billion that is added to the medical bills and insurance premiums of those who do pay. Imagine what would happen if this $1 billion hidden tax were eliminated — health care costs would be reduced, and health insurance premiums would be reduced.

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