State Faces Budget Shortfall

The Oklahoma Policy Institute has issued a policy brief that outlines some ways the state might handle its $600 million budget shortfall this upcoming legislative session.

The brief argues the state has three ways to approach the shortfall: (1) Tap into its Rainy Day Fund, the state's savings account, which has approximately $600 million in it, (2) increase revenues from new or increased taxes or fees, which is always a “formidable” political task in Oklahoma, and (3) cut agencies’ budgets, which “is economically harmful in a downturn, even compared to raising taxes.”

The brief also argues the state might benefit from a federal fiscal stimulation bill if it includes money to help states.

David Blatt, director of public policy for OK Policy, writes:

Although Oklahoma managed to stave off the national economic downturn longer than most states, the impact of plummeting energy prices and a slowing economy is now clearly being felt on the state budget. Oklahoma has now joined the vast majority of states that are projecting shortfalls for the upcoming budget year. Most analysts are predicting that the current recession will be relatively long and deep, ensuring that the state fiscal crisis will continue beyond the upcoming budget year.

OK Policy is a think-tank organization based in Tulsa that advocates for the poor and working families. Read the brief here. Read a one-page summary of the brief here.

In recent years, Oklahoma leaders handed out huge tax breaks to the state’s richest citizens setting up the immediate shortfall, though some expect this new economic downturn could last for years. The state essentially squandered its moment when it was flushed with cash to improve its educational and health systems and infrastructure. Instead, it rewarded its richest citizens, who were also enjoying huge tax cuts from the federal government.

The “trickle-down” theory of economics was finally repudiated under the President George Bush administration, which left the country with its worst economic crisis since the Great Depression. Let me repeat this: Tax cuts given to rich people don’t stimulate the economy; they simply make rich people richer. The economy always does better when government invests in its people and infrastructure.

As the economy worsens here, it’s important to realize the state’s current power structure—and this includes its corporate oligarchy, which made off with the cash in tax breaks in recent years—will never adequately fund education, its health systems and social services programs. It doesn’t matter if the state is facing shortfalls or surpluses. The needy will go without, and our education systems will remain underfunded. The fight goes on.

Oklahoma native Will Rogers famously put it this way, “Be it pestilence, war or famine, the rich get richer and the poor get poorer.”

Then again, maybe there’s room for some hope. The billionaire George Kaiser, a Tulsa oilman and longtime state philanthropist, recently argued before the House Appropriations and Budget Committee the state should end subsidies for oil and gas companies and give the money to health care and educational systems.

Perhaps ending the subsidies would help meet the shortfall, save some jobs, and give our education systems at least a standstill budget.

Will Kaiser’s suggestion get some traction or at least some discussion? Let’s hope so.