For anyone who thinks that balancing the state budget in the midst of an economic downturn and declining revenue collections isn’t a tough enough challenge already, just wait to see what happens if Oklahoma voters approve State Question 744. Because of the way the ballot measure is constructed, legislators are likely to be obliged to fund large budget increases for common education even during years of the most acute revenue shortfalls.
Under the language of SQ 744, the annual mandated change in the Oklahoma per pupil expenditure will be based on changes in education funding in Oklahoma’s six neighboring states in the most recent year for which data is available. Typically there is a four- to five- year lag in the availability of education funding data: as we approach FY ’12, the National Center for Education Statistics has just recently released state-level funding data for FY ’08. This means that Oklahoma’s spending formula will be tied to spending patterns in our neighboring states that occurred several years before, in what may have been entirely different economic and budgetary circumstances.
We know that in the past two years, Oklahoma’s revenues have fallen by over 20 percent. State appropriations for the current year are 5.8 percent less than they were two years ago – and cuts would have been significantly greater but for the availability of federal stimulus dollars and state reserve funds. More than half of all state agencies have been cut by more than 15 percent compared by FY ’09. Common education funding has been protected better than most agencies, but still absorbed an $85 million (3.4 percent) cut in FY ’10 and an additional $71 million (2.9 percent) cut in FY ’11.
But what if SQ 744 had been fully in effect the past two years? (We assume that the three-year phase-in period had ended). There is no provision under SQ 744 that would allow the formula to be suspended or modified in light of economic or budgetary circumstances. The State Board of Equalization would have determined the Oklahoma Per Pupil Expenditure based on the regional per pupil expenditure and multiplied that by the number of pupils in the state to arrive at the “minimum amount of funds that the Legislature shall provide and designate.” For FY ’10, the most recently available per pupil expenditures of the surrounding states (FY ’06) would have shown an increase of $433 per student from the prior year. With a school population of some 650,000, the mandated increase in education funding for FY ’10 to stay at the regional average would have been $281 million. For FY ’11, the regional average per pupil expenditure for the most recently available year (FY ’07) would have increased by $420, translating to a mandatory spending increase for Oklahoma of $275 million.
Rather than absorbing a $176 million cut these past two years, funding for Common Education would have increased by $556 million had State Question 744 been fully in effect. This would have required huge and devastating additional cuts to the remaining non-protected part of the budget, including higher education, human services, Medicaid and corrections – or the need to get three-quarters of the Legislature to give its support to a tax increase under the terms of SQ 640 (a vote of the people can only be held at the time of the next General Election).
At a recent press conference, former state Budget Director Alexander Holmes eloquently made the case against SQ 744 by stating, “The constitution needs to have in it fundamental principles. It should not have in it mathematical formulas.” If that wisdom doesn’t seem immediately evident now, just wait until the next time revenues begin to falter.