Don’t save – Invest!

Earlier this month, Gov. Kevin Stitt released his executive budget proposal for the budget year that begins July 1. The Governor’s appetite for spending in this budget is limited. Rather than using the available revenue — or arguing for more — to meet the state’s many challenges, he proposed spending only part of the available revenue while further adding to the state’s savings. 

As the state cut costs during the past decade, many state services were reduced or eliminated. Today, overall state spending is 10.2 percent below the 2009 level, adjusted for inflation. More than half of the state agencies have smaller budgets now than they did 11 years ago, even without adjusting for inflation. 

The Governor is to be commended for thinking about the future. His vision, however, is incompatible with his often-repeated vision of making Oklahoma a Top Ten state. We cannot save our way to better education, health, and economic outcomes. Prosperity comes from wise investments based on actual need.

Savings: Are we there yet?

According to the National Association of State Budget Officers, Oklahoma’s Rainy Day Fund amounted to 11.5 percent of state expenditures in 2019, the most recent year the state reported. This was higher than both the national median, 7.6 percent, and the median of neighboring states, 6.8 percent. Oklahoma’s savings are actually even higher since these figures exclude $229 million in other savings accounts, for a total savings balance of $1.03 billion as of April 2019.

It is certainly possible that a downturn will require more than $1 billion to keep the state from having to cut services if another downturn occurs. But it is not likely in the near term. The State Board of Equalization in February lowered its revenue estimate for the coming year by $85 million but still forecast growth over the current year’s budget. Concerns about winter drops in oil and gas prices and the short-term economic impacts of the coronavirus drove down those estimates. However, these concerns could be over before the next budget year even starts.

Expert analysis suggests growth is a more likely scenario than any further revenue shortfalls in the coming few years. Professional forecasters expect the national economy to continue growing through 2022, and the U.S. Department of Energy forecasts modest oil and gas price increases during the next two years. If either of these predictions is accurate, the Rainy Day Fund and Revenue Stabilization Fund will keep growing automatically. In a growth period, even if lower than the last couple years, the state would be better off investing in services. 

Savings: At What Cost?

Keeping money in the bank has what economists call opportunity costs, which is what is lost when the money is not spent. In Oklahoma’s case, such opportunity costs were identified in agency budget presentations made at the Capitol the week before the Governor’s budget was released. Here are just a few identified needs where we know investment pays off: 

  • State Superintendent of Public Instruction Joy Hofmeister requested $4 million for SoonerStart to serve 1,000 more families with children under age three who have developmental delays. North Carolina found that every $100 invested in its comparable program reduced the odds of a child needing special education in the third grade by one percent. A national study showed these programs, formally known as IDEA Part C, help children achieve greater than expected growth. The majority of children leave the program with the skills expected for their age.
  • The Department  of Education also proposed an increase of $19 million to start bringing our core of school counselors up to the number recommended by national experts. Schools with  an adequate number of counselors have been shown to reduce student dropouts and suicides, close achievement gaps between student groups, and increase college readiness and attendance. 
  • Chancellor of Higher Education Glen Johnson requested $7 million in funding so that all eligible high school juniors could participate in concurrent enrollment. Such programs allow students to attend college courses while still in high school. The state already pays for senior-year concurrent enrollment. Graduation rates for students taking concurrent enrollment classes are 16 percentage points higher than average rates at regional colleges. For those at two-year colleges, the rate is even higher at 21 percentage points.
  • Department of Human Services Director Justin Brown requested $16 million for in-home and community-based services for developmentally disabled adults and children. Gov. Stitt recommended $6 million. DHS’s request would serve all who have been waiting since 2013 and before. Failing to make this investment deprives thousands of the opportunity to live safely and be active in their communities. It also can keep family caregivers from working full-time and taking advantage of career opportunities. One study shows that each dollar spent on community services for intellectually and developmentally disabled adults and children produces $41 in economic benefits.
  • Department of Mental Health and Substance Abuse Services Interim Commissioner Carrie Slatton-Hughes requested funding to continue progress made in recent years. One request, $35 million for expanding misdemeanor diversion programs, would provide treatment to decrease future involvement with the criminal justice system.

These needs are just examples of wise investments the state can make to change our trajectory. We also need to promote work and better health by restoring refundability of the State Earned Income Tax Credit and by reforming the criminal fines and fees that trap too many Oklahomans in a cycle of incarceration and poverty.

While we stand still, our neighbors keep moving ahead

The Top Ten states are a moving target, and in our region, other states are moving faster than Gov. Stitt proposes. Like Oklahoma, many of our neighbors lag behind the rest of the nation in economic development. Many both tax and spend less than the rest of the nation. Yet all are working toward a brighter future by addressing their needs in education, infrastructure, and health care.  They then craft a state budget that meets those needs.

In Kansas, Gov. Laura Kelly recommended more funding for higher education institutions, for full Medicaid expansion, and for pay raises for correctional employees..The state still ended the year with eight percent of one year’s revenue in savings. In New Mexico, Gov. Michelle Lujan Grisham proposed expanding early childhood education, expanding health care, making college tuition-free for in-state residents, and increasing pay for teachers, faculty, and state employees. Missouri Gov. Mike Parson’s budget included significant increases in public safety, infrastructure, and behavioral health services. He further proposed serving more of the developmentally disabled, fully funding schools, and increasing investment in education from early childhood through workforce readiness.

Your future is whatever you make it. So let’s make ours a good one.

In emphasizing the need to keep saving, Gov. Stitt seems to accept our current government services as good enough after the reinvestments made during the past two years. This is the wrong outlook for a state that can do better educating our children, making people healthier, growing our economy, and competing with the rest of the nation. Oklahomans should demand that their elected officials invest wisely, so our state can live up to the future we deserve. 

Policy Intern Emma Morris contributed research and data analysis for this post.

ABOUT THE AUTHOR

Paul Shinn

Paul Shinn is a Budget and Tax Senior Policy Analyst with OK Policy. Shinn has held budget and finance positions for the Oklahoma House of Representatives, the Department of Human Services, the cities of Oklahoma City and Del City and several local governments in his native Oregon. He's also taught political science and public administration at the University of Oklahoma, University of Central Oklahoma, and California State University Stanislaus. While with the Government Finance Officers Association, Paul worked on consulting and research projects for the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and several state agencies and local governments. He also served as policy analyst for CAP Tulsa. He holds a Ph.D. in Political Science from University of Oklahoma and degrees from the University of Oregon and the University of Maryland College Park. He lives in Oklahoma City with his wife Carmelita.

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