Lessons of Our History, Part 2: Our challenge for today

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<< Go back to Part 1: What we’ve accomplished as a state

These examples from our history shows that Oklahomans can come together to solve big problems through state government. From humble origins at statehood, together we built the institutions and policies that form the essential foundations of our modern economy.

The achievements of our past are remarkable, but the work is not finished. Especially in recent years of economic turmoil and state budget shortfalls, those foundations have begun to crack. This section of the report examines the big picture of Oklahoma’s budget trends over the past decade and the specific impact of these trends on our communities.

Oklahoma taxes and spending on a downward trend

Modern-day Oklahoma is a low-tax state. In 2013, Oklahomans paid 24 percent less in state and local taxes per person than the national average. While the state has relatively high sales taxes (15th highest in the nation), we have a low individual income tax (35th) and very low property taxes (49th).¹ Since the 1990s, the share of Oklahomans’ personal income going to state and local taxes has been on a consistent downward trend, and today it is near a 30-year low.²

Declining taxes have coincided with declining spending. Combined annual state and local government spending in Oklahoma is 17.2 percent below the national average, and we spend much less than the national average for all government services except transportation.³ The largest cuts to state services have happened since 2009, when the Great Recession reached Oklahoma. Adjusted for inflation, state appropriations fell an average of 5 percent annually in fiscal years 2010 through 2012. Spending then increased by an average of 1 percent annually in fiscal years 2013 through 2015, but the increase wasn’t nearly enough to recover to pre-recession levels before Oklahoma began cutting again in FY 2016 and FY 2017. Over the full decade from fiscal year 2007 to 2017, Oklahoma’s state appropriations dropped by nearly 15 percent after inflation — a decline of about $1.16 billion.⁴

This year Oklahoma confronts yet another large budget shortfall. State officials have certified $748 million less revenue available for FY 2018 compared to FY 2017’s initial appropriation. Without new revenues, Oklahoma will not be able to avoid deep cuts to state agencies, over half of which have now been cut by 20 percent or more since FY 2009.⁵

What cuts have meant for Oklahoma communities

To evaluate how these cuts are affecting Oklahoma communities, we distributed a survey in October 2016 to leaders of state agencies, school districts, non-profits, health care providers, and others working directly to provide state-funded services to Oklahomans. The survey collected 385 responses from a variety of sectors, including education, social services, health care, public safety, economic development, and the arts. Organizations that responded ranged in size from fewer than 10 to more than 500 employees. While not a scientific sample, the responses provide insight about the impact of state budget cuts from a broad range of perspectives.

Among all responses, “employee morale” and “employee recruitment and retention” were ranked as the factors most harmed by state budget cuts (respectively scoring 4.28 and 4.06 out of 5 for how much harm budget cuts had done in these areas). These were followed by harm to the “range of services you can offer” (4.01), “ability to address problems before they become crises” (3.82), “ability to operate in a cost-effective manner” (3.79), “ability to perform your core mission” (3.63), and “quality of service to your clients/customers” (3.57).

These results suggest that state workers and contractors have borne the worst brunt of state budget cuts. When making difficult decisions about what to cut, state agencies have tried to avoid direct cuts to client services — but that means instead making cuts to amenities and resources of their workforce. Of course, harming retention and morale of the workforce is still likely to have negative effects on the quality of services Oklahomans receive, and no area, including fulfilling an agency’s core mission and providing quality services to clients, scored below 3 out of 5 for how much it had been harmed by budget cuts.

Respondents also shared specific examples of how budget cuts were affecting their organization. Themes emerging from these comments include an overstretched staff with low morale; inability to afford new equipment or perform needed maintenance of buildings and equipment; and wage stagnation and employee benefit cuts contributing to high attrition among staff and an inability to recruit qualified staff to fill open positions.

Next this report examines how cuts are affecting some major areas of state services and the communities that depend on them.

Health care cuts are threatening entire communities

Health and social services are accepted as a core focus of government. Oklahomans expect state government to improve access to physical and mental health care, combat disease outbreaks, and protect those with disabilities, seniors, veterans, children, and others who cannot meet their basic needs without help.⁶

[pullquote]“The hospital in our community is hurting; they own the nursing home and it has affected them as well. Overall, it is killing the community as cuts come, jobs have to be eliminated…”[/pullquote]

Oklahoma has made progress on some measures of health and well-being in our recent past — such as our success in reducing the uninsured rate among children discussed earlier in this report. However, our overall health ranks near the bottom of the country. It wasn’t always this way. When the United Health Foundation began ranking states’ health in 1990, we placed a respectable 32nd.⁷ But in the most recent report, we’ve fallen all the way to 46th.⁸ While many factors contribute to poor health outcomes in Oklahoma, including poverty rates and lifestyle choices, for the lack of resources being put towards public health hasn’t helped.

The Oklahoma Health Care Authority (OHCA) operates Oklahoma’s Medicaid program, which pays for the care of hundreds of thousands of Oklahomans throughout the state. As state funding has not kept up with need, OHCA has been forced to cut the rates paid to doctors, hospitals, nursing homes, and others in its network of health care providers. A representative from OHCA wrote: “In FY 2009, OHCA paid 100% of the Medicare rate. Due to budget restrictions, the rates were reduced in FY 2010, FY 2015 and FY 2016. Currently, OHCA pays 86.57% of the Medicare fee schedule. Providers have also been impacted by the reduction or elimination of crossover payments and co-insurance.”

Survey Respondents in the health care sector emphasized how these cuts are creating a domino effect of increasing needs and draining local resources even as services are shrinking. One respondent who directs a rural community health center wrote, “We are in an underserved area. Many of our patients are uninsured, others have Medicaid only. Cuts impact those individuals. In addition, the hospital in our community is hurting; they own the nursing home and it has affected them as well. Overall, it is killing the community as cuts come, jobs have to be eliminated, thus there is less taxes for the county. Thus, the county is struggling to survive as well.”

Since 2011, at least nine rural hospitals have filed for bankruptcy in Oklahoma — in some places this means that emergency responders now travel three hours for a single call. Roberta Jeffrey, CEO at Holdenville General Hospital, told The Oklahoman that they have already burned through cash reserves to remain in operation and if they close, the next closest care for residents would be an hour away. “And a lot of times, time means lives,” she said.⁹

Even in areas where more local resources may be available, providers have struggled to cover for state cuts. The director of an urban behavioral health care provider wrote, “We have had a significant increase in our clients, but have only received cuts in our service dollars. We are now spending $21,000 per month more than we are reimbursed for to help pay for medications. We have had to put in a plan to triage the care our clients receive in the event the state cuts mental health services further this year.”

Schools are cutting corners big and small, with bad implications for our economic future

Article 13 of Oklahoma’s Constitution declares: “The Legislature shall establish and maintain a system of free public schools wherein all the children of the State may be educated.” It’s a commitment we have made since statehood, and education is broadly acknowledged by citizens and the business community as key for economic growth and job creation. In multiple surveys, businesses in Oklahoma and nationally rank the presence of a skilled workforce as more important than state and local tax rates when considering where to create new jobs; and with few exceptions, the states with the most college graduates are where average families earn the highest wages.¹⁰

Unfortunately, our state’s funding of education hasn’t matched its importance to our economy. Oklahoma’s per pupil funding of the state aid formula for public schools is down 26.9 percent after inflation since FY 2008. These are the deepest cuts to general school funding in the nation. On a percentage basis, we’ve cut nearly twice as much as the next worst state, Alabama.¹¹ The state aid formula is not the only source of revenue for schools. However, Oklahoma is also among the worst states for cuts to total state funding (down 14.4 percent, 11th worst in the U.S.) and combined state and local funding (down 11.8 percent, 12th worst in the U.S.).¹²

These cuts have happened in a state where education funding was already relatively low compared to other states. As a result, Oklahoma has now fallen to lowest in the nation for teacher pay and near the lowest for overall per pupil spending by schools.¹³

Despite limited funding, Oklahoma’s education system has accomplished a lot. Our schools serve all children regardless of background and are more equally funded than in many states. We have a nationally-praised universal preschool program with high standards for teachers. We also have one of the most affordable higher education systems in the country and a Career Tech system that works closely with businesses and communities big and small to meet workforce needs across the state.¹⁴

[pullquote]“In a nutshell, the things that kids can become interested in and explore deeper that can possibly lead to career choices are dying on the vine.”[/pullquote]

Unfortunately, a funding crunch is putting large stresses on this system. The largest number of responses to the survey came from those working in K-12 education, and these educators reported numerous problems created or made worse by budget cuts. These include: textbooks that have not been updated in seven years; fewer teachers; larger class sizes; fewer course offerings; delayed maintenance on school buses and buildings; eliminated AP courses, drama, music, and sports programs; reduced professional development; teachers paying for their classes’ school supplies out of already meager paycheck; high anxiety and attrition among staff; and very low staff morale.

Several respondents emphasized that schools are losing any programs beyond the basic curriculum that had helped students explore who they are and what they want to do with their lives. A small town school superintendent wrote, “[Our] biggest loss is AP Classes. We can no longer afford to hire part-time retired teachers to teach, which allowed us the ability to offer AP Classes to our more accelerated students that are preparing for College. Trying to add Calculus and Trigonometry classes is a challenge when we can barely get Algebra I and II and Geometry covered. … Expanding our STEM/Robotics/Aeronautics activities is another victim. … In a nutshell, the things that kids can become interested in and explore deeper that can possibly lead to career choices are dying on the vine.”

Another superintendent wrote, “Overall, although we are working to maintain the quality of instruction in the classroom, besides Child Nutrition services, all other student support services have been cut. These cuts have altered the educational environment for students, shifting an Oklahoma child’s school experience from a holistic experience to a very narrow focus on core academics. This is not a formula for economic growth and quality of life.”

Districts and individual schools are cutting corners wherever they can. An assistant principal at a suburban elementary school wrote that they had gone so far to cut costs that, “Teachers have been required to take all non-essential electrical items home. They are not allowed to have microwaves, dorm refrigerators, etc. They are also not allowed to have classroom pets that require electricity (fish tanks, warming rocks, etc).” At this same school, the district has limited the use of substitute teachers. Instead they combine classes when a teacher is out. The assistant principal wrote, “This results in an educational disruption for two classes instead of one.”

Public safety cuts will cost Oklahoma much more on the back end

Oklahoma has made some progress on public safety recently. One of the best examples is Tulsa County’s Family Drug Court, recognized as one of the best in the nation.¹⁵ The state’s violent crime rate dropped 21 percent between 2006 and 2014, though it still exceeds the nation as a whole.¹⁶

The core public safety services are also very popular. A 2014 poll by Global Strategy Group found just 14 percent of Oklahoma voters favored cutting funding for public safety to get a tax cut, compared to 84 percent who disagreed; this was the strongest support out of any of the core services of public safety, higher education, common education, and health.¹⁷

Nevertheless, public safety has not been spared the budget cuts of recent years. Between FY 2009 and FY 2017, overall funding to public safety agencies fell 8.3 percent, a total loss of about $668 million. Some individual agencies fared even worse — the Indigent Defense System was cut by 10.6 percent; the District Attorneys Council by 19.5 percent; the Oklahoma Supreme Court by 20.3 percent; and the Bureau of Narcotics and Dangerous Drugs was cut 58.4 percent.¹⁸

In the Oklahoma Department of Corrections, Oklahoma’s inmate population grew by over 31 percent between 2000 and 2015 while the correctional officer workforce declined by 22 percent.¹⁹ With a starting salary for corrections officers of around $26,500 – just above the poverty level for a family of four — even funded open positions often go unfilled and staff turnover is about 35 percent per year.²⁰ The tragic result is that we are unable to maintain order and safety in Oklahoma prisons, where the homicide rate is more than three times the national average and a growing number of inmates in need of mental health care go untreated.²¹

Cuts are being felt outside prisons, too. In our survey, one Oklahoma District Attorney reported that she had to lay off her office’s only investigator, and excessive caseloads are causing burnout and high turnover. She wrote, “you should not hand a murder case over to an attorney with a couple of years’ experience, yet that is the situation we all find ourselves in.”

Another DA wrote, “I replaced two attorneys with combined experience of around 50 years with two attorneys with combined experience of 4 years. … I have held off on updating our vehicle fleet for two years (I have concerns about the safety of my investigators driving police cars with nearly 200,000 miles). … With all this being done, I still worry every day about whether we can make it through the fiscal year without going into the red.”

While state prosecutors struggle with staffing issues and caseloads, cuts to the Indigent Defense System may be even worse. Based on maximum recommended caseload standards, Oklahoma public defenders have gone from doing the work of 1.21 attorneys in 2007 to doing the work of 2.07 attorneys in 2015. Besides the harm to defendants who must rely on severely overburdened attorneys to defend their case, the state is at risk of facing a legal crisis and being forced to release defendants accused of serious crimes if we cannot fulfill our constitutional duty to ensure the right to an attorney.²²

Other cuts to public safety have eliminated gang and delinquency prevention programs, shut down community shelters and group homes for at-risk youth, and even cut treatment and prevention programs shown to be more effective and less expensive than incarceration. By under-investing at the front end, Oklahoma is creating much larger costs in prisons and doing serious damage to people’s lives that could have been avoided.

Go on to Part 3: Oklahoma can invest in our communities with smart policy choices >>