How do you boost support for education in a year when the state faces a massive budget shortfall? Several bills to provide teacher pay raises have gained initial committee approval, but these bills are unlikely to make it into law given the grim budget situation. The best chance for success for education advocates seems to be a proposal by House Speaker Pro Tem Lee Denney (R-Cushing) that provides a multi-year $600 million increase in education funding, but not for another three years. Yet even this proposal is far from a sure thing.
HB 1682 creates the Securing Education Excellence Fund. The bill is designed to increase funding for common education by $59.7 million annually beginning in fiscal year 2019. The funding increase would come from income tax revenue that is take off-the-top before legislators appropriate budgets for other state services.
After the Fund receives its initial $59.7 million deposit, the next deposit will be made only if revenues for the next year are projected to grow by at least 1 percent; there will then be annual $59.7 million increases until the Fund reaches a $600 million cap. Each time the Fund grows by $120 million, the annual school year will be increased by one instructional day, so that by the time the Fund reaches its $600 million cap, there will be an additional five instructional days.
HB 1682 is modeled closely on the ROADS (Rebuilding Oklahoma Access and Driver Safety) Fund, which allocates tax revenues for the maintenance and repair of state highways and bridges. Currently, the ROADS Fund receives a guaranteed annual increase of $59.7 million each year from income tax revenues before any other funds are allocated. This year the ROADS Fund is at $416.8 million; it will increase to $476.5 million in FY 2016 and by an additional $57.9 million until it reaches its statutory cap of $575 million in FY 2018.
By deferring deposits to the Securing Education Excellence Fund until the ROADS Fund reaches its cap, HB 1682 addresses a primary concern with a similar proposal authored last year by Rep. Denney. Last year’s bill, HB 2642, which would have diverted half the annual increase for ROADS to education, generated heated opposition from transportation interests. HB 2642 was amended in the Senate but ultimately died in conference committee.
Even if this year’s proposal averts a head-on collision with supporters of roads and bridges, it still faces an uphill climb. Even before the recent drop in revenues associated with falling oil prices, chronic funding shortfalls had led to growing concern over the increased share of state tax revenues that are allocated “off-the-top” to various dedicated purposes, rather than deposited to the General Revenue fund for appropriation by the Legislature.
We all know Oklahoma currently faces substantial budget challenges.
This is not because of a stagnant economy or declining tax receipts.
Rather, it is because the General Revenue Fund – the primary source of discretionary spending set by the Legislature each year – is growing smaller.
It is shrinking, both in dollars and as a percentage of overall collections, due to the increasing cost of mandatory off-the-top apportionments.
The Governor included a chart showing that the General Revenue Fund received just 46.2 percent of total gross state collections in FY 2014 compared to 55.8 percent in FY 2016.
As we’ve discussed, there are other contributors to the declining share of revenue going to GR, including growing tax refunds and tax rebates, but off-the-top apportionments certainly play a role. Even among those at the Capitol genuinely favorable to increased education funding, there will be strong reluctance to add a $600 million commitment to new off-the-top funding. Yet education advocates can make a strong case that if the legislature is willing to prioritize transportation funding, as well as higher education scholarships, Medicaid programs, and other areas that have been allotted dedicated tax revenues, it’s about time that education again receive similar preference.
While targeting off-the-top spending is a worthwhile aspect of budget reform, the larger problem is that state revenues are not growing at a pace that keeps up with the increased cost of providing core government services. Unless we begin to address the growing fiscal gap caused by numerous tax cuts, tax breaks, and a narrowing tax base, all core areas of government will continue to wrestle over pieces of a shrinking pie.