More old sayings that don't make sense

Misery loves company? Really? That one doesn’t apply to the state and local governments of Oklahoma. More and more of them are revealing bleak budget pictures for the coming fiscal year, yet none seem to be enjoying the company.

We’ve spent a lot of time watching and writing about the state’s budget outlook. Our blog post earlier this week gives a pretty good idea of what to expect as legislators finalize their spending plan in the next two or three weeks.

Since the Capitol gets plenty of coverage, let’s have a look at what faces our local governments. After all, they provide the services we rely on every day and they represent more than 40 percent of all Oklahoma government spending.

In the City of Tulsa, Mayor Kathy Taylor is proposing significant cutbacks and an increase in water utility fees. Her recommendation represents a 1.4 percent reduction, which she would achieve by eliminating some positions and by furloughing all employers for four days, meaning a 1.5 percent salary cut. City Councillors are resisting the idea of furloughs, at least for uniformed employees.

Over in Oklahoma City, City Manager Jim Couch’s budget plan takes 1.5 percent out of most department budgets to cope with essentially flat revenue projections. Some departments will have to make small staffing and service cuts.

Over the next few weeks, the bad news about local government budgets will spread across the state. Just about every local government will face standstill budgets or modest (0 to 5 percent) cuts. Many will turn to residents to make up some of the lost tax revenue through higher water bills, fines, and fees.

In some ways, Oklahoma local governments have it better than the state during downturns. Their primary funding bases–sales and property taxes–tend to be a little more stable than some state sources like income, motor vehicle, and oil and gas taxes. They have a less contentious lobbying environment to work in; except for employees, road contractors, and chambers of commerce, few people know or care what their local governments are up to. Cities also have water, sewer, and garbage monopolies; most of them make profits on these services and can use them to pay for other public services. If you read about sales tax drops for a couple months in a row, expect to feel it a few water bills down the road.

In other ways, however, the budget problem is harder for local governments than the state. Except for law enforcement, stimulus money that flows to cities and counties will be for additional spending on roads and community development; it can’t be used to make up for falling local revenue. Except for water bills and other fees, which don’t generate a lot of money, local hands are tied when it comes to raising revenue. Tax increases have to be approved by voters, many tax and fee options are prohibited by the state, and even fines are subject to state limitations. Worst of all, local governments face built-in personnel costs that dwarf the problem at the state level. Most city and school district employees are unionized; they have contracts that guarantee most employees an annual pay increase and they have bargaining power to get across-the-board raises even in tough times. Add that to the rapidly escalating costs of health insurance and retirement fund contributions, and it takes at least five percent revenue growth just to pay the built-in cost increases. A break-even budget, or a small decrease thus means a very real decline in local services. Most of us can expect to see fewer auxiliary services and maybe some larger classes in school. Counties will reduce road repairs and cities will cut back on street maintenance and parks programs. Normally it takes several years of revenue growth until the lost services are restored; some are lost for good.

This recession, like all of them, just keeps on taking from our public services. The fact that we all have company does nothing to relieve the misery.

ABOUT THE AUTHOR

Paul Shinn

Paul Shinn is a Budget and Tax Senior Policy Analyst with OK Policy. Shinn has held budget and finance positions for the Oklahoma House of Representatives, the Department of Human Services, the cities of Oklahoma City and Del City and several local governments in his native Oregon. He's also taught political science and public administration at the University of Oklahoma, University of Central Oklahoma, and California State University Stanislaus. While with the Government Finance Officers Association, Paul worked on consulting and research projects for the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and several state agencies and local governments. He also served as policy analyst for CAP Tulsa. He holds a Ph.D. in Political Science from University of Oklahoma and degrees from the University of Oregon and the University of Maryland College Park. He lives in Oklahoma City with his wife Carmelita.

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