OKLAHOMA CITY – Everywhere you look, people are talking about budget cuts in Oklahoma. This week, an Associated Press article reported that in the state Senate, there is a battle over the state’s $669 million budget shortfall and cuts that would need to be made to senior nutrition programs.

At the end of February, the Nelson A. Rockefeller Institute of Government reported Oklahoma was No. 1, with the fifth consecutive quarterly drop in tax collections.

Oklahoma, which had largely weathered the maelstrom, is starting to feel the effects.

And in a recent editorial in The Oklahoman, headlined “We’re No. 1: State’s fiscal dip leads other states,” they wrote: “Oklahoma’s personal income tax collections fell by 24 percent, which also led the nation. It’s corporate income tax collections fell by even more.”

Significantly, The Oklahoman editorial noted that “sales tax collections dropped by 15.4 percent, compared with 4.2 percent nationally.”

There’s a reason for these tumbles, says Ted H. Smith, an economic analyst from Norman, Okla., who has been watching these developments closely and referencing state budget documents available online.

Smith told Oklahoma Watchdog that in the mid-to-latter half of the 2000s, spending on programs went up while little was done to further cushion the state’s coffers with additional monies in the Rainy Day Fund.

“There’s a little history that is called for when looking at the budget and the position it is in here in 2010,” Smith said.

In the state, expenditures per person, per capita has increased by 95 percent, Smith noted as he did the calculations in his Norman office.

“As revenues to the state grew due to improved oil and gas prices and job growth in the state was increased …,” Smith said. “The revenues to the state continued to increase, but no additional monies were added to the Rainy Day fund above $600 million.”

Smith said that as oil prices were high and the economy was humming, the Oklahoma state legislature failed to act in a responsible way.

“As this revenue came in, they could have increased the Rainy Day Fund,” Smith said. “They could have reduced taxes or they could send the money back as a refund. They did two of those things – they sent back $90 and they did cut the income tax rate from 7.5 percent to 5 percent for individuals.”

Money, Smith said, “kept rolling in” and rather than socking it away, “they just grew programs. That’s why the budget went up 95 percent from 2004 to 2009. They kept passing and approving programs. Teacher raises, early childhood education and more.”

Smith also points to U.S. Census data that show how there has been a 5.6 percent increase in the state’s population.

“As the revenue increased, the legislature had three alternatives – increase the Rainy Day Fund,  put more money back for tough times and watch for wasteful spending, or increase programs, which is what they chose to do,” Smith said.

“Now, as revenues decrease, we’re faced with this tremendous shortfall,” Smith said. “If we’d put more money in Rainy Day Fund, and we didn’t start all these other programs, we wouldn’t be in all this trouble.”

“They expanded it to every program you can think of,” Smith said. “And as income grew for the state, expenditures per person exploded.”

And while the budget shortfall is significant, it’s better than where the state was in 2004.

“In 2004 we were somehow getting by on $5 billion,” Smith said.

Over at the Oklahoma Treasurer’s Office, Tim Allen, Deputy Treasurer, said the primary engine of the Oklahoma economy is the oil and gas industry.

“With energy prices low, that has impacted what we collect in gross production taxes,” Allen said. “And with people spending less in this economy, there in an impact on income and sales taxes.”

This, he said, “filters into other areas in revenue collections.”

And what is happening to the Oklahoma economy is “a reflection of what is going on in the overall economy.”

On the campaign trail for governor, some of the candidates are already commenting on the budgetary situation the state faces, although only one candidate replied by the time this story was published.

“Oklahoma is surely facing one of the most severe budget crises we’ve seen in recent memory,” said U.S. Rep. Mary Fallin, who is running for governor as a Republican. “The reasons for that are fairly obvious: as the national recession has eaten away at our economy and our job market, we’ve lost tax revenue; meanwhile, our budget has been growing at an unsustainable rate.”

Fallin told Oklahoma Watchdog that she would “force this state to take a hard look at its priorities and … eliminate those programs that do not provide essential services.”

Additionally, Fallin said she would “work to create the friendliest environment to business and job growth possible, so that we can create more jobs and more revenue to invest in services like education and public safety. Recruiting business and allowing the private sector to flourish — by pursuing initiatives like workers compensation reform and work force development — is essential to the health of economy, our families and our community.”

By Andrew W. Griffin

Oklahoma Watchdog, editor

Posted: March 9, 2010

andrew@oklahomawatchdog.org

Copyright 2010 Oklahoma Watchdog