Editor’s Notebook: Pension reform nears, economic hopes, budget prospects

As the pace picked up at the Oklahoma state Capitol in the annual rush to legislative adjournment, more substantive legislation completed a journey through the legislative process. Among measures CapitolBeatOK has regularly covered are sweeping – and potentially transformative bills touching government pensions and state corrections policies.

In a skull session with reporters, state Treasurer Ken Miller was – to use popular stock market analysis terms — quite bullish for Oklahoma’s economy, but a bit bearish about the potential impact of high fuel prices. 

On the budget, meanwhile, it seems the coming week may bring formal announcement of an agreement among the “Big Three” – Speaker Kris Steele, Senate President Pro Tem Brian Bingman and of course Governor Mary Fallin. Supporting that accord will be Rep. Earl Sears and Senator David Myers, key budget players in the respective legislative chambers.
Significant government pension shift now seems assured

Speaker Steele, main author of House Bill 2132, said it was gratifying to get the pension reform measure through the pipeline and onto the governor’s desk. The bill passed 64-25. In a prepared statement sent to CapitolBeatOK, he distilled the significance of the measure:

“For too long, Oklahoma has written its pension system checks the state can’t actually cash. With the system now facing $16 billion in unfunded liabilities, we are acting quickly this year to address some of the causes of this problem. This bill simply says that logical accounting principles – like having money to pay for what you’re buying – should be used to fund the pension system. This common-sense reform will knock $5 billion off of our unfunded liability. I am thrilled with the Legislature’s willingness this year to take the first step toward putting our pension system back on fiscally responsible ground.”

Rep. Randy McDaniel of Oklahoma City, chairman of the House Economic Development, Tourism and Financial Services, commented, “The best way to get out of debt is to stop spending resources we do not have to spend. H.B. 2132 is a financial responsibility bill that will make a significant difference in the fiscal soundness of our pension plans.”

Crowding in correctional facilities may (or may not) eventually ease

Another of Steele’s priorities, House Bill 2131, was originally conceived as began as a sweeping transformation of Oklahoma corrections policy. It evolved into a less dramatic proposal when the Senate removed the originally envisioned switch to concurrent sentencing as the state’s “default setting.” 

Consequently, Oklahoma will retain consecutive sentencing inclinations for most serious crimes. Thus, it is unlikely there will be any dramatic short-term impact on the 99% capacity problems facing corrections. 

Nonetheless, Steele told several news organizations, including CapitolBeatOK, the measure could bring significant savings and greater rationality to crime and punishment in the sooner state. 

Thursday, he told Capitol reporters, “I anticipate corrections reforms will be signed into law by Governor Fallin early next week. This establishes a solid foundation for us to work from, and in the interim, before next year’s session. I hope we can study ways to produce even better outcomes, saving taxpayers’ money and improving public safety.” 

In dialogue on the issue, Steele said, he believed the bill achieved a lot by revising the governor’s role in the pardon and parole process when it comes to non-violent crimes, and enhancing eligibility for community release efforts. He said, “We should study in particular what Texas has done.” He predicted, “Over time, this bill will lead to significant savings” for the state.

Miller hopeful on economic trends

This week, Treasurer Ken Miller told the Capitol press corps he was upbeat about the direction for state government finances and, more importantly, continued jobs growth and business expansion. In a statement accompanying his monthly economic analysis, Miller’s office said:

“Broad measurement of Oklahoma’s economy in April shows growth over the prior year in spite of rising gasoline and diesel fuel prices. … During April, receipts to the State Treasury totaled $1.074 billion. That is an increase of $94.23 million or 9.6 percent over April of last year. In the past 12 months, gross collections were $9.992 billion, an increase of $579 million or 6.2 percent over the previous 12 months.”

Miller contends, “We see promising signs of continued economic growth. Income and sales taxes continue to outperform. Income tax collections show strong growth as Oklahoma businesses add jobs and the unemployment rate continues to dip. Sales tax collections continue to be solid, indicating families remain confident in the direction of the state’s economy.”

The potential, perhaps likely, fly in the ointment are the high prices consumers are absorbing for the automobile fuels. 

Miller told reporters at the briefing that $4 a gallon fuel “might be a break point” for consumers. Bottom line, the high prices at the pump “have to be a concern, going forward.

Miller reflected, “Core inflation is still at a safe level,” but pointed to federal monetary policy as a possible additional spark for inflation. 

In response to a question from CapitolBeatOK, Miller said he still believes the traditional view among economists that 4-5% unemployment is,  essentially, “full employment.” The challenge is that even as state government revenues recover, reflecting a positive economic trend, unemployment in much of the country remains quite high by the standards of recent decades. 

A budget this coming week?

Meanwhile, Rep. Sears, a Bartlett Republican and chairman of the House Appropriations and Budget Committee, meanwhile, he was “quite confident” a budget accord can be fashioned soon. David Myers, a Ponca City Republican who is Senate peer to Sears, has been ill. That has slowed but not ended negotiations, sources have told CapitolBeatOK. 

Speaker Kris Steele cautiously echoed Sears projected timing, telling reporters on Thursday that he and President Pro Tem Bingman had presented their budget outline last week, and the governor has responded Wednesday. 

To sum up, after several weeks in which it has been hard to discern even an outline of a budget agreement, elements of new clarity emerged late this week. 

Speaker Steele anticipates a budget agreement early next week, perhaps even on Monday. The speaker said some agency cuts will be closer to the 10% range, rather than the 5-7% hopes expressed in past weeks. He repeatedly declined to give more specifics, and stressed most agency cuts will fall in the lower range discussed previously. 

Not quite explicitly stated by the Speaker but understood by his listeners is the reality that holding certain agencies “protected” or at least comparatively harmless will drive the budget cuts up for smaller government agencies.

Another fresh nugget came when Steele told reporters he does not link getting to a budget agreement to passage of all the reforms touching consolidation, purchasing systems and Information Technology for which the governor has pressed this session. 

In any case, the Shawnee Republican said, those will have relatively modest implications for this fiscal year, and bring more meaningful savings in F& 2013 and beyond.