Potential solutions to Oklahoma budget crisis struggling to find legislative support (OU Daily)

By Emma Keith

Oklahoma’s state budget crisis and falling tax revenue are squeezing education at all levels, and ideas to raise revenue are struggling to gain traction in the legislature.

Though countless other sources support education funding, state taxes are significant contributors to education. Income tax, sales tax and gross production tax, which comes from oil and gas production, are the three biggest contributors, said Gene Perry, policy director with the Oklahoma Policy Institute. 

“Revenue has gone down pretty significantly,” Perry said of state education funds from taxes. “For a combination of reasons — most recently it’s gone down very dramatically as the economy has struggled with the downturn in oil and gas prices.”

But Perry also said education funding struggles began before oil and gas revenue plummeted. 

“We passed a series of fairly large tax cuts to the income tax especially,” said Perry. “We passed a very large cut to the gross production tax. The revenue from oil and gas drilling went down very significantly compared to prior times when gas prices were high.” 

Even this year, Oklahoma has ignored the education crisis to cut taxes simply because the tax cuts were scheduled in previous years, Perry said.

According to numbers from OK Policy, 2016 brought a cut to the state income tax that lowered the tax’s top rate to 5 percent. This rate has steadily decreased since 2004, when the tax’s top rate was 6.65 percent. This rate drop, while only affecting the income tax, has now cost the state $1.022 billion total in revenue loss, according to OK Policy.

Oklahoma’s education budget crisis is a result of purposeful government agendas, said Alexander Holmes, an OU economics professor who served as budget director for Oklahoma from 1987-1991. 

“I don’t call it a crisis because it’s what they wanted it to be. It is the result of thoughtful behavior on the part of the administration of the government,” Holmes said. “They don’t want to spend money on public services. It is worthy of congratulations that all government services will receive less money — they have met their goal.“

Holmes also noted tax cuts’ significant contribution to the downturn in education funding.

“We’ve been giving away the personal income tax, we’ve been giving away the gross production taxes,” said Holmes. “This is the result of very careful planning over a decade.”

Oklahoma faces some serious financial challenges in the year to come, Perry said, and not just in education. 


“Right now, Oklahoma is looking at a massive shortfall for next year,” said Perry. “It’s estimated at $1.3 billion, and if nothing is done to find revenue to close some of that shortfall besides just cutting budgets, that would mean about 14 percent across the board cuts to education and every other area of government.”

But Perry also said there are plenty of proposed solutions to ease education funding cuts, including OU President David Boren’s proposed penny tax initiative

“A lot of people are arguing for rolling back or at least delaying the most recent cut to the income tax,” Perry said. “OK Policy has suggested an increase to the gas tax just while gas prices are low. People can pay a little bit more at the pump because gas prices are so low anyway, and it would help counter-balance the plunging revenues from oil and gas production when those prices are low.”

Holmes said the avoidance of solutions to close the budget gap is part of the plan.

“They gave the tax base away over and over again, even in the face of a billion-dollar deficit. This is their goal,“ Holmes said.

“They knew exactly what would happen, and they wanted it to happen,” Holmes said.

“There are ideas out there, but at least so far, there’s been not any action at all by the legislature to adopt any of these ideas,” Perry said.  “As of now, the legislature does not seem to be taking seriously the situation and does not seem to be looking at the kinds of real revenue options that we would need to avoid some very harmful cuts to education and a lot of other areas.”


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