OK Policy Memo: Expect Budget Shortfalls to Continue; Balanced Approach to Bridging the Budget Gap is Urged

Whoever wins the elections in November will face difficult choices in filling large budget holes and balancing the budget in the years ahead, according to a memo to candidates and elected officials released today by Oklahoma Policy Institute, an independent non-profit policy organization.

 “After two years of significant budget cuts, most agencies have already pared services and programs to the marrow,” stated David Blatt, OK Policy’s Director, who authored the memo.  “However, our analysis leads us to expect that revenue collections will continue to fall considerably below what is needed to maintain state services at existing levels and that our elected officials will continue to face the challenge of managing substantial budget shortfalls. We hope this memo will offer policymakers a clearer understanding of the budget situation they will face, while suggesting some guiding principles and specific recommendations for addressing these challenges.”

 According to OK Policy’s analysis, the state has tapped over $2 billion over the past two years in non-recurring revenues from the federal Recovery Act, state Rainy Day Fund, and other sources to balance the budget. While these revenues have averted the most devastating cuts to essential education, health, social, and public safety services, they have created a situation where some $1.1 billion, or 17 percent, of this year’s appropriated budget consists of non-recurring revenues. This amounts to a major hole in the budget for the coming years and virtually ensures that a serious budget crunch will continue into FY ’12 and likely FY ’13, even assuming healthy growth in the state economy. If voters in November approve SQ 744 – the ballot measure to peg education funding to the regional average of per pupil expenditures – the budget outlook will become exponentially more daunting.

 The memo notes that, “The cuts of the past two years have weakened the ability of agencies and schools to fulfill their core missions and have contributed to a corrosion of the public structures and institutions that Oklahomans rely on to promote our well-being and invest in our future.”  Rather than rely exclusively on deeper budget cuts,  ” A balanced approach of targeted cuts of direct expenditures and tax breaks, selected new revenues, and more efficient use of public dollars will be needed to navigate the perilous fiscal straits over the next few years. “

 Among OK Policy’s specific policy recommendations are to:

  • Defer additional tax cuts until revenues recover;
  • Seriously review tax credits, deductions and exemptions;
  • Consider new revenue streams for the Medicaid program;
  • Consolidate agencies and functions where duplicative or unnecessary; and
  • Prioritize prevention, diversion and surveillance over detention.

At the same time as short-term challenges demand immediate attention, the memo urges policymakers to be aware of a longer-term horizon marked by a growing misalignment, or fiscal gap, between the cost of providing core public services and the revenues generated by our tax system.   “There is no single or simple answer to our long-term budget challenges”, Blatt stated. “But we must at least begin to engage in serious and honest thinking about how to align our revenue system with our funding commitments not just for next year or the year after, but for ten and twenty years down the road.”

 Components of this structural realignment should include:

  • A serious review of our tax system;
  • Expanded use of budget and revenue forecasting;
  • Mechanisms along the lines of federal pay-go rules;
  • A plan to shore up the state’s pension systems;
  • Greater emphasis on program review and evaluation;
  • Restoring full authority and accountability to our elected officials for decisions on revenue and spending.

To see the full memo to candidates and for other information on the state budget, please visit:https://okpolicy.org/candidate-memo-the-state-budget-outlook-and-recommendations


Oklahoma Policy Insititute (OK Policy) advances equitable and fiscally responsible policies that expand opportunity for all Oklahomans through non-partisan research, analysis, and advocacy.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.