Governor’s budget shows how bad Oklahoma’s fiscal health has gotten (Capitol Update)

Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1991. He currently practices law in Tulsa and represents clients at the Capitol.

Looking at Governor Fallin’s FY-18 budget proposal makes one realize how poor the fiscal condition of the state is. If the Legislature and the governor were to dedicate themselves to doing everything necessary to work our way out of the current budget dilemma, it still would take years. Our recent practice of patching things together with tax cuts and budget cuts, robbing various funds, borrowing, and betting on the come that there will be a quick turnaround in the Oklahoma economy has only dug the hole deeper. At least the governor and many in the Legislature have concluded that will no longer work.

This year’s budget hole is $868 million, so far. The governor proposes tax increases which, after working in some tax cut proposals, total about $768 million. She also proposes moving some revenue in and out of the general revenue fund which she counts as producing more money. This is a bit of a slight of hand. The biggest single tax increase would be taxing services under the sales tax. The best thing that can be said about that is that it seems to have been the starting point for every tax increase discussion for the past 40 years or maybe more. At least it’s a start.

Adding the sales tax to services is where economic theory collides head on with practical politics. Everyone knows the economy for decades has moved toward services as opposed to commodities. So, it seems like sound economic theory to move the tax base to the growth part of the economy. But who wants to add sales tax to the cost of everything from your gas and light bill to the cost of paying your realtor to find a new house and to sell your old one? And the biggest users of lawyer, accountant, engineering and architectural services, etc. is business. No doubt, business will show up at the Capitol. This proposal in the past has always landed with a big thud. It’s easy to be skeptical that this year will be different, but we’ll see.

The good thing is the discussion has begun. After everyone gets a proposal out on the table, maybe a serious discussion will continue. If our leaders are serious, they’ll come up with a balanced approach that will get both Democratic and Republican votes in the legislature or a proposal that will pass a vote of the people. Let’s hope.