Good times don't last forever

Last week, Gov. Fallin announced a plan to fix the state’s decaying bridges by 2019. The proposal involves putting more money in the ROADS fund, which receives a portion of income tax revenues that would otherwise go to the state’s General Revenue Fund.

OK Policy released a statement on the Governor’s plan that was mentioned by both The Oklahoman and The Tulsa World:

We welcome Governor Fallin’s focus on fixing Oklahoma’s crumbling bridges. However, we must note that her proposal would be paid for entirely by diverting more income tax revenues from an already cash-strapped state budget. At the same time, Governor Fallin and other state leaders are promoting further cuts or outright abolition of the income tax. This should remind us that the income tax remains vital for funding Oklahoma’s needs and that we cannot meet our obligations to pay our bills while undermining our revenue base.

The Oklahoman included a response from the Governor’s spokesperson that the effort to fix bad bridges “does not reflect a lack of commitment to other areas of government.” Fallin’s office told The Oklahoman, “much of the additional transportation funding would come from growth revenue, and Oklahoma has enjoyed nice growth in revenue this fiscal year.”

It’s true that state revenues are increasing, and there is a broad, bipartisan consensus that the state needs this growth to meet all of our obligations. In a discussion of Oklahoma’s long-term water infrastructure needs, which are estimated to cost $81 billion over the next 50 years, Sen. Brian Crain (R-Tulsa) said:

I absolutely believe that the Waters Resources Board needs this additional money. We need more money for monitoring and to gather data. … The problem is we also need more money for health insurance for our teachers; we need more money for our mental health system in order to provide some alternatives to incarceration; we need more money for our roads and bridges.

That is on top of large, unfunded pension obligations and increasing costs due to an aging population.

We don’t disagree with the Governor that decaying bridges are a serious problem for Oklahoma, and we’re glad she has decided to make them a priority. We’re also glad that the Governor recognizes bridges are just one of several areas that need government support. Increasing revenues give lawmakers breathing room to make some of these longer-term investments.

However, we should also remember that the growth is only a partial recovery from historic shortfalls. Budgets have been cut for three successive years, and almost every state agency has seen funding reductions of at least 10 percent. Per-pupil K-12 education spending has gone down 18.7 percent, the 5th largest drop in the nation. Far from having extra money, we’re still playing catch-up.

Meanwhile, increasing revenue brings another temptation: tax cuts. We’ve been here before. During the last boom economy in the mid-2000s, Oklahoma passed large, permanent income tax cuts. These were an easy sell when we had plenty of funds to go around. But when the recession hit, the tax cuts contributed to huge revenue shortfalls.

Then as now, we shouldn’t expect revenue growth to last forever. We need a tax system that is adequate to our state’s needs in both good years and bad. Unfortunately, we don’t seem to have learned from recent history, and the tax cut refrain has begun again. Our constitution and politics make it much easier to lower taxes than to raise them, so tax cuts tend to be permanent. But “growth revenue” never is.