Meacham gives upbeat revenue report; critical of pension study
By Patrick B. McGuigan
Today (Tuesday, April 13), while delivering the rosiest state government revenue picture in recent months, Oklahoma Treasurer Scott Meacham was cautiously critical of a new national report contending that teacher retirement systems are in even worse shape than previously suspected.
Meacham said the big picture was improved enough that legislators and the governor might want to consider using up the $149 million left in “rainy day” reserves to ease some of the budgeting pains remaining in the fiscal year 2011 budget. Republican legislative leaders have responded cautiously to any consideration of bleeding the reserves dry.
The treasurer said revenues were sufficient to fund agency allocations at previously announced levels (10 percent below appropriations). For the month, actual collections were slightly ($6.4 million, or 1.6 percent) above last year, and 25.5 percent higher than the estimate.
Meacham said the news led him to encourage Oklahomans to “go to the store, rejoin your health club – go out and spend money.”
Gross production tax revenues on natural gas and oil continued to increase, but personal income tax collections also rose. Sales tax collections continued to concern the state’s top financial officer, “but we are hoping to see improvements as public confidence increases.”
Meacham stressed that many challenges remain with revenues nearly $1 billion below the prior year, and nearly 20% below the estimate.
Before this month’s regularly scheduled encounter with reporters, CapitolBeatOK had provided the treasurer information on a new study from the Manhattan Institute and the Foundation for Educational Choice.
Analysis from the groups, released today at the National Press Club in Washington, D.C., concluded gaps in funding for teacher retirement systems nationwide are worse than previously estimated.
The group specifically said Oklahoma’s teacher retirement system is operating at only 34-38% of funds needed to finance promised benefits.
The new reports come in the wake of studies from another organization concluding Oklahoma’s unfunded debt amounts to $14,600 per family.
Earlier this year, the Pew Center on the States issued a sharp critique of retirement fund shortfalls, placing Oklahoma among the nation’s worst.
Asked about the Manhattan/Friedman analysis, Meacham said he had read our story summarizing the study. Based on that, he was carefully critical of the reported conclusions. Meacham said reports such as this “are always about the assumptions.” Speficallly, he thought the assumptions on stock market assumed rates of return were too negative.
However, Meacham added issues raised in the report “reasonable questions. Assumptions about market returns are definitely things that need to be looked at” for pension planners and policy makers.
Further, Meacham repeated his past contention that Oklahoma has one of the worst-funded teacher retirement systems in the country, in some studies ranked as second or third worst.
The politics (and revenue implications) of water were also covered briefly at Meacham’s session. Responding to questions from CapitolBeatOK concerning suggestions the governor had named a negotiator for water negotiations with the state’s Indian tribes, Meacham told CapitolBeatOK that attorney Lindsay Robertson “is not the governor’s representative to the tribes,” but an advisor on Indian tribal legal matters. Meacham noted that Robertson played a similar role in Gov. Frank Keating’s administration.
Treasurer Meacham said he was not aware of any firm offer from Tarrant County, Texas, for possible purchase of Oklahoma water.
Meacham said due to litigation, a $5 million installment to the U.S. Army Corps of Engineers is due July 1 and that state officials do not yet know how they will pay for it.
On the broader budget and finance picture, Meacham cautioned that further reductions in spending are assured. However, he said, he is hopeful the picture for 2012 will be better than it has been in FY 2010 and 2011.
Meacham said discussions continued about possible revenue enhancement measures, but that no tax increases will be on the table. Concerning the revenue impacts of some tax credits, the treasurer said, “I’m joining up with Rep. [David] Dank in concern over some business tax credits.”
Soon after Meacham’s press conference, President Pro Tem Glenn Coffee commented, “The revenue collections for the month of March are indeed encouraging, but the reality is we have farther to go on this road to recovery. Fiscal responsibility of taxpayer dollars will continue to be a priority, as well as funding for core functions of government. The Legislature will keep track of revenue numbers as we work to draft a balanced budget and complete the people’s business.”
In response to one question from a reporter at his revenue briefing, Treasurer Meacham said due to the improving financial picture, a case could be made to access the $149 million that presently is expected to remain in the constitutional reserve, better known as the Rainy Day Fund.
House Speaker Chris Benge appeared to address that issue in his own statement on the revenue news, issued this afternoon. Benge said, “The last couple of months of collections have shown some improvement, and I am hopeful that we have reached the bottom of this revenue decline.”
He continued, “We still have a certified shortfall for FY11 of $1.2 billion, so any improvement likely will not influence the writing of the 2011 budget. We still have many tough decisions ahead of us and will continue to work in a bipartisan and fiscally responsible way as we work to equalize expenditures with reduced collections.
“In order to replace stimulus and Rainy Day funds spent in FY10 and FY11, we would need to have record revenue growth to fill a huge hole in our state budget for FY12. Today, Treasurer Meacham laid out a very optimistic financial picture for our state, based on a few months of improved revenues.”
Benge concluded, “Unfortunately, natural gas prices have not rebounded and there is no clear sign that they will anytime soon, which will continue to heavily impact our collections. It is our job as appropriators to plan for the worst and hope for the best.”