OK Policy projects continued budget crunch, scrutinizes tax cuts, credits

CapitolBeatOK Staff Report

Published: 07-Dec-2010

New budget forecasts prepared by Oklahoma Policy Institute show that state revenue collections and funding levels may not return to pre-downturn levels until at least 2014, even as the state economy continues to recover.

The budget forecasts are laid out in an issue brief, “A New Fiscal Reality for Oklahoma: The State Budget Outlook, 2011-2014,” written by Paul Shinn, a consultant for Oklahoma Policy Institute (OK Policy). Using a number of forecasting techniques, OK Policy projects that in the absence of new revenue-generating measures, the overall budget for the upcoming year will be nearly $400 million less than this year and nearly $800 million, or 11 percent, less than in Fiscal Year 2009. Over the next several years, anticipated revenue growth will be offset to a great extent by revenue losses and spending obligations entrenched in law by decisions made by prior Legislatures.

“We know that two years of successive budget cuts have already hampered many state services that are vital to the prosperity, security, and health of Oklahomans, and that rising costs and growing needs are putting added pressure on agency budgets,” said David Blatt, Director of OK Policy. “The magnitude of the looming shortfall for the coming budget year, and the likelihood of prolonged fiscal distress, makes it urgent and essential that we develop a serious plan that protects essential public services and uses resources more wisely.”

The brief provides a series of recommendations to guide policy decisions in the new fiscal reality focused on revenue, spending and the budget process itself:

“Create a revenue structure that supports public services even in times of modest revenue growth by deferring or repealing additional income tax cuts; eliminating inefficient tax breaks; considering new revenue streams for health care, prevention and treatment; and making the tax base both broader and fairer; Make smarter expenditure decisions that reduce future costs by consolidating agencies and functions where savings can be expected, prioritizing prevention and surveillance over detention, and reforming the state pension system; and Create new budget processes and structures that supports responsible financial planning and management by developing long-range forecasting, adopting pay-go requirements, and continuing to improve reserve policies.”

Blatt said in a statement sent to CapitolBeatOK, “Knowing that we face a prolonged fiscal crisis presents us with a choice. We can continue to weaken our revenue system, spend on favored programs without demanding results, and try to scrape by one fiscal year at a time, as we have through many years. Or we can choose to reevaluate our environment and craft a new fiscal approach that values good planning, effective spending, and generating sufficient revenue to make Oklahoma smarter, safer, and more competitive.”

To see the full issue brief, a one-page summary, and a detailed technical memorandum explaining the methodology and result of the budget forecasts, visit http://okpolicy.org/new-fiscal-reality.