Remember Mikey from those old cereal commercials? He was the picky eater whose siblings foisted a bowl of Life cereal in front of him saying, “It’s supposed to be good for you. But he won’t eat it. He hates everything”. As Mikey gobbles up his cereal, they exclaim, “He likes it!” (The commercial is, of course, available on You Tube).
When it comes to the state questions on this November’s ballot, Tulsa World editor Wayne Greene has been playing the role of Mikey. This summer he penned a series of columns (you can read a couple of them here and here) that explored the eleven constitutional changes that Oklahoma voters will decide this election. His verdict:
…I haven’t found much to like. Most of the questions on the ballot range from the vaguely obnoxious (reconfiguring the membership of a state commission that has not met one time in state history) to the truly malignant (requiring voters to show government-issued IDs in order to vote). If you’re an all-or-nothing kind of person, the best choice clearly would be to simply go down the line and mark “no” on every question.
However, Greene’s “Life (cereal) – changing moment” came with the eleventh and final proposal on the November ballot, SQ 757, which would increase the cap on the state’s Constitutional Reserve Fund, or Rainy Day Fund, from a maximum of 10 percent of General Revenue Fund collections to 15 percent. Somewhat grudgingly, Greene concedes:
But there is one referendum – State Question 757 – that is a pretty good idea.
We agree that SQ 757 is a good idea. Rainy Day Fund deposits are made whenever General Revenue Fund collections exceed 100 percent of the certified estimate for the year. As we argued in an issue brief from earlier this year that tried to identify the lessons we should be learning from the current budget crisis, the current 10 percent cap is too low to sustain state services through the revenue downturns that accompany even a mild recession, much less the major economic dislocation we’ve experienced the past two years. Increasing our budget reserves will provide future policymakers a means of averting deep budget cuts that affect essential public services and are economically harmful during a downturn. Right now, the maximum cap is $514 million; SQ 757 would increase that to $771 million.
As Greene points out in his column, there is an unavoidable trade-off involved in putting surpluses into savings during years when revenue growth exceeds estimates: there is less money to spend during good times. Between FY ’04 and FY ’08, strong economic growth created revenue surpluses that not only allowed the RDF to grow to its maximum level, but also generated “spillover” of $725 million that was appropriated for one-time and ongoing expenditures over several years. If and when the state finally emerges from the current downturn, there will be urgent demands to allocate additional funds on worthwhile purposes just to restore services to prior levels. And should SQ 744 pass, mandating annual increases in funding for common education regardless of the revenue situation, the competition for available resources will become especially intense. However, in our view, the benefits of increasing our reserves so as to cushion the magnitude of cuts and layoffs when the inevitable next downturn hits outweighs those of catching up on spending when times are good.
We should also note that, in addition to increasing the cap on the Rainy Day Fund by passing SQ 757, there are other policy changes that should be considered in the years ahead that would make our annual budgets less vulnerable to extreme fluctuations and prepare us for future downturns. One promising idea would be to create a second reserve fund specific to gross production tax revenues, our most volatile and unpredictable revenue source. Legislation to create an Energy Stabilization Fund was approved last year by the Legislature but vetoed by Governor Henry. In addition, the current rules which tie RDF deposits to revenues exceeding estimates also merit rethinking. Essentially, the Fund now depends on faulty budget forecasting; an alternative, which we will lay out more fully at a later time, would tie RDF deposits to annual changes in revenue growth.
For now, the bottom line is: Try SQ 757. It will be good for you, and you might just like it.