We're not like California–are we?

Paul Shinn // May 27, 2009 // Updated: September 23, 2026
OK Policy Articles & Research //

Stateline.org is an indispensable–and free–source of news and analysis on just about every aspect of state government. Last week, staff author Pamela M. Prah provided an excellent analysis on the state of California’s budget crisis and–more importantly for us–what other states can learn from it.

California has always been a trendsetter. What happens in California often pops up elsewhere. Which raises this question: Are the perpetual billion-dollar deficits that haunt California state government unique to the Golden State or the harbinger of what other states can expect?

Here’s a quick rundown of what’s gotten California in trouble–a budget deficit left wide open by voters’ rejection of several tax and budget measures yesterday– and our take on how Oklahoma compares:

  1. California depends too much on a small group–wealthy taxpayers–for its revenue. In California, a higher tax rate for very high income families and businesses and a capital gains tax are great when the economy is strong, but revenue from the rich plummets when the economy turns down. Oklahoma doesn’t have this problem. If anything, we go too far in the other direction. We depend too much on lower-income taxpayers since our income tax applies at very low income levels.
  2. California’s budget has been gridlocked lately due to divided government. Republican Governor Arnold Schwarzenneger and a legislature dominated by liberal democrats disagree fundamentally on what government should be doing. The result is nasty partisan battles, short-term fixes, and a growing gap between revenues and promised spending. Oklahoma has divided government, too, though the parties are reversed. This year’s budget agreement–which took weeks to negotiate, helped some interests while cutting many core services, and ignored long-term problems and opportunities–shows we have a little California in us, too.
  3. California is one of 16 states that requires a super-majority vote to increase taxes. So is Oklahoma, thanks to State Question 640. According to Prah, this requirement makes it harder to modernize the tax code to keep up with the changing economy and growing public expectations.
  4. California’s legislative term limits keep members from acquiring the budget knowledge needed to make the best long-term choices for the state. Oklahoma’s term limits are longer–12 years–but we run the same risk.
  5. California’s active citizen initiative process locks in money for some programs, leaving legislators to worry about the rest of state government. They must either raise fees and taxes or cut programs that may not be public favorites, but are still essential to the society and economy. Oklahoma has shown this same tendency. We have increased narrowly-based revenues like tobacco taxes and gambling and earmarked money for favored causes like health research and education. The upcoming State Question 744 will give us the opportunity to guarantee funding for education at great potential expense to all of our other public structures.
  6. California has an antiquated tax system that does not tax most services, which are the fastest growing part of the economy. So does Oklahoma. In both cases, this widens the gap between revenue collections and the cost of maintaining services like public safety, health and social services, and economic development.
  7. California rarely deposits money into its Rainy Day Fund and depletes it early in recessions. Oklahoma does the opposite. We filled our Fund up during the recent boom and now delay spending it during a serious economic downturn, preferring to cut essential services instead.

Are there lessons for us from California? Definitely. While we do better in some areas, we should be more careful about relying on short-term fixes, making policy through initiatives driven by special interests, and maybe rethink state question 640 and term limits.There’s another important lesson as well:

Scott Pattison, executive director of the National Association of State Budget Officers, said other states can learn from California’s mistakes by making sure they have flexibility in their financial management systems and “avoid walling things off” so that cash reserves can be tapped during a downturn.

Oklahoma has done a lot of walling off lately. We’ve created several special funds for education and carved out funding for scholarships and roads without regard to how the rest of our public services are affected. In the coming budget year and for several years after, Oklahomans will see many of these services decline. If we think to ask why, we’ll discover we did it to ourselves. So did California. Let’s hope we can learn from their mistakes.

ABOUT THE AUTHOR

Paul Shinn
Paul Shinn // Twitter @PaulinOKC // pshinn@okpolicy.org

Paul Shinn served as Budget and Tax Senior Policy Analyst with OK Policy from May 2019 until December 2021. Before joining OK Policy, Shinn 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 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.