COMMENTARY: For Oklahoma, the good news is the bad news from Kansas was wrong
Published: September 5th, 2013
OKLAHOMA CITY — Over the last three years, Oklahoma state-government spending of certified revenue and other revenue has increased over $800 million. Barring a change of Gov. Mary Fallin’s heart, that trend will continue.
The governor’s varied health-related proposals will grow government. The “America Works” agenda she is pursuing as chair of the National Governors Association will also grow government.
Fallin’s only pro-active tax reduction (as opposed to letting previously enacted cuts take effect) will not be implemented until January 2015.
Fallin will be a few days into her second term before the first tax-reduction legislation she has signed is in force.
This is disappointing. Nonetheless, the economy is doing well, with one of the lowest unemployment rates in the nation and record state tax receipts.
For a bit, let’s look north.
On Jan. 1, 2013, the largest personal income tax cut in state history took effect in Kansas. The measure passed in the spring of 2012. And, Kansas eliminated the income tax on small-business income.
The Kansas plan triggers slow-motion controls on spending. The glide path to zero income tax that Gov. Fallin championed once upon a time is a given in the approach under Kansas Gov. Sam Brownback, accelerating after July 2018.
When Kansas cut taxes, Oklahoma’s tax consumers predicted fiscal collapse or stress for our neighbors. Various Republican policymakers joined the chorus. But often, he or she who dares, wins.
There were some tradeoffs. Kansas sales taxes were reduced, but not as much as previously scheduled. Brownback’s priority is to take their income tax — now slightly below Oklahoma’s — to 3.5 percent soon, and then lower.
Despite tax rate cuts, Kansas general fund receipts increased around $29.9 million in FY 2013, and total tax revenue grew about $72.2 million.
Personal income increased 2.9 percent over 2011 — slightly better years are expected in 2013 (3.1 percent) and 2014 (4 per cent). Unemployment in the Sunflower State is slightly above Oklahoma’s, with both much lower than the national average.
Choose your preference: Steady spending growth with no new tax cuts (Oklahoma) or tightened spending and major tax cuts (Kansas).
To each his own, but: Kansas government is growing more slowly than Oklahoma’s, and their economy is strengthening. Brownback is proving that platforms both he and Fallin ran on in 2010 can succeed.
Steve Anderson, formerly an Oklahoma budget analyst, has told me about his experiences as Brownback’s budget director.
Anderson summarized for The Kansas City Star, along lines I heard from him in June, the situation Kansas faced when Brownback’s administration began:
• Cash balance for FY-2010: $876.05
• FY-2011 projected deficit: $500,000,000
• Unemployment rate: 6.9%
• Tax burden: 2nd highest in the region
• Population loss: 10% decrease in half the counties
Here is the current fiscal picture for Kansas government:
• Cash balance for FY-2013: $587,800,000
• FY-2014 projected surplus: $509,700,000
• Unemployment rate: 5.8%
• Tax burden: 2nd lowest in the region and going lower
• Job growth: 45,300
• Population growth: 27,068
Brownback’s intention was, as Anderson says, to unleash “the power of our small businesses, the heart and soul of our economy, by eliminating their income taxes to encourage and support business expansion and hiring. This was accomplished even as taxes were lowered and a “nip-and-tuck” of government took effect.
Anderson looks back on his three years in Kansas with satisfaction: “We have set the stage for the citizens of Kansas to compete in a global economy. Our primary competitors, surrounding states, have taken notice. And they should.
“The Kansas portion of the Kansas City Metro area gained 9,500 jobs from May 2012 to May 2013 while the Missouri side registered no change in total nonfarm employment over the year. Employment on the Kansas side of the metro area reached 454,800 and surpassed the all-time high of 452,800 recorded in June 2008. Those are real jobs for real Kansans, supporting real families.”
In Kansas, liberty is incrementally advancing. In Oklahoma, government is incrementally advancing.
As Jonathan Small, fiscal policy director at the Oklahoma Council of Public Affairs, told me:
“Fundamentally, Governor Brownback and many lawmakers in Kansas have determined they truly believe that more dollars left with their citizens is better than any government spending they may choose.
“So in Kansas, cutting taxes and minimizing the growth in state government spending is their number-one priority. In Oklahoma, as demonstrated by the last three legislative sessions, lawmakers and the governor’s actions show they would rather spend all of the growth revenue, and that they believe they are better at employing the fruits of their citizens’ labor than the very citizens who generated all the growth in the first place.
“Oklahoma lawmakers are prioritizing spending increases first, shunning limits on spending and revenue growth to let hardworking citizens escape the current penalty on the price of work, and putting off meager tax relief until the distant future.”
Oklahoma Republicans need to decide what they are for. If the agenda is to manage the growth of government in an Eisenhower approach to governance, then by all means act and speak accordingly.
On the other hand, if the agenda is to, over time, make government smaller and reduce the portion of income taken from individuals by taxation — look north.
This is adapted from an essay first published in Perspective Magazine, the monthly publication of the Oklahoma Council of Public Affairs. You may contact Pat McGuigan at Patrick@capitolbeatok.com.