January 28, 2016
The Oklahoma state budget has a projected downfall of $900 million dollars.
The Oklahoma Policy Institute hosted a summit Thursday to discuss and find a possible solution for the deficit.
OPI director David Blatt began the summit with a presentation of the deficits in the budget and what can be done to fix it.
“Our budget is reflection of our values,” said Platt. “We need government as a strong … partner. Energy prices are having a bit of a rough time. When energy plummets it’s going to affect the state. If projections continue to go downhill we might be facing another revenue failure mid-year.”
He continued his presentation stating revenues for the state had fallen by 900 million when compared to last year and the rainy day fund is being depleted.
“There is almost $300 million that were used this year, very little of that will be available for next year,” said Blatt. “Nobody knows how bad it’s going to get but nobody expects it to get better.”
Budget cuts to education, according to Blatt, can have serious repercussions on students in the state.
“We’re facing a crisis with teachers and retention,” he said. “Oklahoma teachers are the third lowest paid in the country. This has an impact on students. We know that when students are taught by less experienced teachers they do poorly.”
One of the main problems the budget faces, according to Blatt, is tax cuts, which cost the state almost $1 billion a year and mostly benefit the wealthy.
“Our top income tax rate was 6.65 percent in 2014, today it is 5 percent and there is another cut that is scheduled to take effect in 2018,” he said. “The most recent tax cuts … is $29 a year to the medium household and 40 percent of those … they’re going to get nothing because none of their income is on the top bracket.”
Blatt continued by stating removing the tax cuts would not be an immediate solution, but it would’ve helped during tough times.
“Without question, when oil and gas prices tumble we are always going to face downfalls in Oklahoma,” he said. “Without those tax cuts over the past dozen years, we would’ve approached the downfall from a far stronger starting point. We could’ve used those revenues to pay our teachers a more competitive salary, to ensure the prisons are properly staffed, to limit college tuition increases or to provide medical services for those suffering from mental health and disabilities.”
After speaking about the problem, Blatt offered six solutions to help with the budget.
“There are solutions,” he said. “We need to adopt combined corporate reporting. We need to do the double deductions.
“We need to do more to enhance collections. We need to accept federal funds to expand health insurance. We also need to look at one time revenue. You need to reach out to your legislators. The odds of our elected official to do the right thing are zero unless we ask them to.”
The summit continued with a panel that included University of Central Oklahoma Dean of College of Business Mickey Hepner, Cherokee Nation Secretary of State Chuck Hoskin Jr., Oklahoma State Representative Scott Inman (D-Del City), Oklahoma State Representative Clark Jolley (R-Edmond), State Auditor Gary Jones and Norman Mayor Cindy Simon Rosenthal. The panel was moderated by OPI Advocate Damario Solomon-Simmons.
The first question presented to the panel was a cause for the deficit.
“The real cause is because of the downfall of oil prices,” said Jones. “We’re at the point where we are not willing to afford the government that we have. We need to set priorities. Everybody is going to have to sacrifice.”
“It’s a combination of multiple factors and we’re going to need several solutions,” said Jolley. “We need a multi-faceted approach to get out of it.”
“The full impact of the budget has not been felt yet,” said Hepner. “We missed the picture that for a decade this crisis was coming. We could’ve seen all this but we didn’t. The crash of the state budget is coming up.”
“We as a state were content to send leadership to Oklahoma City that (thought) if we cut taxes low enough it would sprout growth – that’s a fiction,” Hoskin Jr. said. “Those kids deserve more education, not less. We balanced our budget on their backs. We don’t need to cut income taxes, we need to go on the opposite direction.”
“The reason we are where we are is because … during the last decade we cut down income taxes, we’ve seen an explosion in income tax credits and exemptions, and our legislatures in their infinite wisdom, they decided that the wealthiest industry in the entire world, which does great things in Oklahoma in terms of creating jobs … they decided to give (the oil industry) the lowest production tax in the country.”
The second question for the panel was asking if raising taxes would helped the state of get out of the crisis
“The legislature has been completely hamstrung,” said Jolley. “We’re prevented from doing that. It’s going to be a huge challenge to get there. Having those handcuffs on there really kills us.”
Rosenthal said, “A comprehensive tax reform is needed. It has to be done. I think you should see lower rates if you broaden the base.”
“They are aware of governments we can cut and areas we need to increase,” said Jones. “I propose we suspend all tax credits until they are reviewed.”
The panel continued answering questions about accepting Medicaid funds from the federal government and making legislators accountable for their actions.
The subject of tax cuts was extensively reviewed during the summit. Kansas Center for Economic Growth senior Fellow Duane Goossen and KCEG Executive Director Annie McKay gave a presentation about how tax cuts decimated the Kansas economy.
“That was done on the premise that such a large income tax … would bring about dramatic economic growth,” said Goossen. “It’s a tremendously seductive argument. Our legislators bought that. Income tax revenue dropped like a rock. We’ve had our expenditures completely squeezed. In the first year of that Kansas … spent half (of the reserves) to cover the gaps. We pulled money from the highway fund and pretty much from every other fund the state had. That didn’t fix the problem. It covered it for one year.”
McKay said in order to recover, the state raised property, sales and cigarette taxes but is still in deficit.
“We’re broke even after the highest tax hike in history,” she said. “We’re living paycheck to paycheck month to month. We don’t have a rainy day fund. We’re headed into another slow down with no cushion whatsoever. We don’t have the recurring revenue due to the tax cuts to match our recurring expenditures. We still face a deficit. Even after we cleaned it all up. We raised the sales tax twice. The last thing we have remaining in Kansas is the earned income tax credit. Low income folks in Kansas don’t have the money to pay for that. We had to raise sales tax again.”
The summit concluded with a panel of people that suffer from the budget cuts and told their stories.
The panel included 21 speakers representing nonprofits, indigent fund defense, health care, student loans, education, teachers, substance abuse, Department of Corrections, veterans and substance abuse. Each person spoke on their behalf and did not represent their employers or organizations.
“Hospitals in Oklahoma have lost Medicaid services for the past years,” said Jimmy Leopard Chairman of the Oklahoma Hospital Association. “We should repel the income tax cuts and look for other funds to help us.”
Jerry Needham, President for the Oklahoma Association of School Administrators, said, “55 percent of our budget comes from the state. We’re a poor school district. When you receive cuts and we don’t have other options, we have to reduce personnel. We eliminated all elementary school teachers’ assistants. We’re our own worst enemies. We have done very well at surviving the cuts and making do with less. We’re balancing our budgets on the backs of those people that can afford it the least. Let’s not seek the Republican answer or the Democratic answer, but the right answer.”
Substance abuse counselor in Tulsa Shay White said the substance abuse department is facing a $20 million cut.
“When I learned about the nature of the budget crisis I was alarmed as a health professional and a citizen of Oklahoma,” said White. “We deserve accountability from our legislators. What are we doing to help our people. We are so caught up with who is in the White House that we can’t even help our neighbors.”
Mike Rodgers, Unit Manager at the James Crabtree Correctional Center in Helena, said they haven’t been fully funded during his 26 years there.
“During my career, I have been furloughed, I have received pay cuts and I went for eight years without a pay increase,” Rodgers said. “Each year we are asked to do more with less and every year it gets harder and harder. Nobody wants to come to work for the Department of Corrections. When people in our starting positions can qualify for food stamps, that should tell you something. The staff to offender ratios are alarming across the state. I don’t now what the answer is, I just know that what we’re doing is not working.”
Read more from the Duncan Banner here.