OK Policy Forecasts Show Continued Tough Budget Times Ahead

Contact: David Blatt, Director

Office: (918) 794-3944; Cell: (918) 859-8747

OK Policy Forecasts Show Continued Tough Budget Times Ahead;

“Incomplete Recovery” Calls for Fresh Perspectives and New Strategies

(Tulsa, November 21, 2011): New budget forecasts prepared by Oklahoma Policy Institute show that state revenue collections and funding levels are unlikely to return to pre-downturn levels until at least 2014, even as the state economy continues to recover.

The forecasts are laid out in an issue brief, “An Incomplete Recovery: The State Budget Outlook, 2012-2015”, authored by Paul Shinn, Ph.D., a consultant for Oklahoma Policy Institute (OK Policy).After three successive years of budget cuts, OK Policy projects that the overall budget for the upcoming year will be just $161 million, or 2.5 percent, above this year’s budget. The budget will remain more than 6 percent below pre-downturn levels without adjusting for inflation or population growth. Over the coming years, anticipated revenue growth will continue to be offset to a great extent by revenue losses and spending obligations entrenched in law by prior Legislatures.

“Our budget outlook is improving, but all signs point to an incomplete recovery,” said David Blatt, OK Policy’s Director. “It looks like it will be at least FY ’14 or even FY ’15 until budgets return to nominal pre-downturn levels. The state will effectively have lost five years in its efforts to support a safe, healthy, and economically secure population.  At the same time, the cost of just standing still is increasing. Given higher operating costs, increased population and caseloads, and new responsibilities, many state agencies will need additional state funding to maintain existing service levels.

The brief recommends changes in revenue and expenditure decisions and in fiscal management that can help Oklahoma meet its obligations and navigate the challenges ahead:  

• Create a revenue structure that restores and improves public services. To ensure that state revenues can meet our obligations, policymakers should preserve the income tax, reduce inefficient tax credits and exemptions, modernize the sales tax, and adopt combined corporate reporting.
• Implement current services budgeting to establish funding needs and make budget choices clearer. A current services budget projects the cost of maintaining existing programs over a five-year period.
• Improve state budget discipline by adopting a PAY-GO policy that requires any program increase or tax cut to be fully offset over a five-year period.

“Knowing that we face prolonged fiscal challenges presents us with a choice,” said Blatt. “We can keep on emptying the revenue stream, spending on favored programs without demanding results, and taking life one fiscal year at a time, as we have through many years. Or we can reevaluate our environment and craft a new fiscal approach that values good planning, effective spending, and sufficient revenue to make Oklahoma smarter, safer, and more competitive.”

To see the full issue brief, a one-page summary, and a detailed technical memorandum explaining the methodology and result of the budget forecasts, please visit: https://okpolicy.org/incomplete-recovery-budget