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Budget Hole Dilemma

Lawmakers face tough budget decisions because of the dramatic decline in oil and gas tax receipts.
Budget Hole Dilemma

Budget Hole Dilemma

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Show Details

Show 1545: Budget Hole Dilemma
Air Date: November 8, 2015

 

Transcript

Rob McClendon: Well, if you have any doubt of the economic impact of the energy industry, look no further than the state budget. When lawmakers reconvene next February, they’ll be facing a budget hole of close to a billion dollars thanks to the dramatic decline in tax receipts from oil and gas. And exactly what to do about that was a focus of a forum sponsored by the non-profit group Oklahoma Watch. The forum featured Republican Speaker of the House Jeff Hickman and the House Democratic Minority Leader Scott Inman and was moderated by the executive editor of Oklahoma Watch, David Fritze.

David Fritze: Early predictions, I’ll just start out saying, are about gaps next fiscal year that could run anywhere from $600 million like last year to over a billion dollars. In the meantime, our prisons are overcrowded, we’re scrambling to put teachers in the classroom, we’re trying to fix the foster care system. So I would like to ask Speaker Hickman, “Are we looking at hard times here?”

Jeff Hickman: Well, we are, and we are looking at hard times across the state. We have 10,000 Oklahomans who’ve been laid off in the last several months, particularly the energy sector. The good news, you’ve seen the coverage lately, 85,000 jobs available in Oklahoma but there’s 10,000 people who work in the oil field at good salaries that are no longer an employee that are trying to figure out how to feed their families. And those are 10,000 taxpayers that are no longer remitting income tax every month out of those good paychecks. So the state does face challenges but they’re not unlike the challenges that many Oklahomans are facing in their family budgets or personal budgets or unlike what Oklahoma businesses go through each and every day as they make decisions. The good news is, and what we continue to try to work through is, we don’t have a revenue problem in Oklahoma, we have a budgeting problem in Oklahoma. Our shortfall last year was $611 million. I think it’s likely to be more this year. I think it could be, you know, $700 to $800 million. I’m not ready to, uh, and nobody knows at this point, they’re all guesses, so for anyone to say it’s gonna be a billion dollars, it’s a guess. Could it be? Sure, it could be, but I don’t think that, uh, I don’t think I’m seeing any right now that would lead me to believe that that’s the case. But here’s the real issue with our budget, and this is something that Rep. Inman and I have looked at and worked on for, for many years, not always necessarily on the same side but we’ve discussed it for many years: we have $3 billion every year of off-the-top money, money that doesn’t come in for Rep. Inman based on what his constituents tell him or what my constituents tell me or anybody that you would like to get to talk, it’s called off-the-top money, earmarked money. And there’s probably a game to go around because the Democrats put some of it in place when they were there, and we’ve added to it since we’ve been there. There’s $3 billion there that doesn’t come through the state budget process no longer. It automatically goes to agencies, and those are important programs, they are popular programs, and there’s a reason that they are there, but that’s $3 billion that we’ve earmarked for certain things. So you can take $3 billion off the table. There’s another $1.7 billion in tax credits, incentives and exemptions each and every year. Add that up, that’s $4.7 billion that we don’t have to work with, and you’re talking about a budget hole this year of $611 million. We have some issues that we continually need to work on. We’ve made great progress this on tax credits. We will finally have a system in place to evaluate tax credits. Every credit will be evaluated once every four years. So we will finally have information that we have long needed to make educated decisions. But that’s $4.7 billion that Scott Inman and his constituents or Jeff Hickman and his constituents or anyone else that, around the state who sent someone to the Capitol, no longer have a say in how those dollars are spent in the state budget now.

Fritze: Rep. Inman, what’s your sense? How deep will this budget hold be and what do you think the impact will be?

Scott Inman: I think that’s a great question. I think the speaker, the speaker hit it on the head – it’s gonna be big, more than likely it would be bigger than the budget hole we had last year. But the impact of this particular budget year doesn’t necessary have any sort of outsized effect on what we’ve already seen the last five or six years. Because make no mistake about it, you’ll hear excuse after excuse from some of the folks in power that says, “Well, the price of oil has gone down to 40-something dollars a barrel and therefore we must cut public education or higher education.” Well, make no mistake about it, this legislature and this governor, when the price of oil was a $100 a barrel, we cut public education funding deeper in Oklahoma than any other state in the nation when it was a $100 a barrel. Right. So what you have is, is you have a fiscal irresponsibility problem coupled with the fact that I think what has come to fruition as we see what I like to call our core functions of government, the average agency in the state of Oklahoma, more half the agencies have seen 25, 30 percent cuts, some deeper than that over the last five or six years. You look at our four core functions of government, those being education, health care, public safety and transportation, and you try to just look at what’s happened in the last five or six years and you realize when you’ve cut higher education funding, you’ve cut funding for common ed – matter of fact, we’re about $320 million below where we were in 2008 when you adjust for inflation. We’ve got hospitals on the verge of bankruptcy, and we refuse to bring our federal dollars home, refuse to properly fund them. You’ve had cuts for DOC, you’ve had cuts to DPS and then just this year, they decided to take $75 million out of the county improvement for roads and bridges fund that would have gone to help fund a lot of our country roads and bridges issues that were being washed out because of the floods. They took that money out of it. And you see what you’ve got is a fiscal irresponsibility problem that can be, that can be summed up in one phrase in my opinion and that is: We are learning the painful and hard way that you cannot cut your way to prosperity.

Hickman: Scott has some numbers there that were accurate and several that weren’t, and the truth is, when you look at the education funding you go back since the recession started in 2008 and you look at those numbers forward, he’s right – the state appropriations is off, and it’s only off 2 percent compared to several other entities being cut 20 to 30 percent of their budgets. Higher ed about 5 percent, CareerTech about 12 percent. The record just doesn’t match up on where the priorities have been put in place. The other thing that we have to do as those that are asked, the governor, is look at the entire picture, you know. The numbers that are tremendous aren’t just the state appropriation, the part that goes through our process. There’s also the House Bill 1017. That off-the-top money goes to education. There is local property tax money; everyone in the room probably has had an increase in their local property tax money, and rarely is that a decrease at each and every year. When you look at all of those numbers added up together, you have more money available to public schools today than we ever have in the history of our state. The problem that we have is it’s not getting to the classroom. It’s not getting into the teachers’ salaries. And that’s the issue that we’re looking at, is why do we have more money than we’ve ever had and paid to those schools and yet our numbers aren’t where they need to be in teachers’ salaries and other issues. And I think that’s gonna be a real focus this year, is keeping those dollars where they need to be which is in the classroom.

Inman: What I struggle with is this: The solutions that are being proffered are more cuts – more cuts. When you say, well we’ve got $3 billion dollars in off-the-top money so what is that saying to you? That’s saying those monies go to OHLAP, Oklahoma’s Promise. They tried to cut that a couple years ago. I asked the attorney general for an appendix, and he couldn’t do that. But they tried to cut OHLAP, Oklahoma’s Promise, for middle class and lower middle class families to go to college. There’s money that goes into transportation funding because we did such an abysmal job, the Democrats did, I’ll be honest with you, before I got here. We did such an abysmal job of funding transportation and our infrastructure so that money’s gone off the top. So the solution that you’re hearing is this: We’ve cut income taxes because those go into effect in January, and the way we’re gonna make up for those income tax cuts is we’re gonna cut more money out of OHLAP and transportation funding to send it someplace else. We cannot, folks, we cannot continue to cut our way to prosperity. If you want to grow the state of Oklahoma, you’ve got to invest in those core functions of government. That’s why businesses want to come here. Poor schools, poor roads, poor health care and poor public safety – companies won’t come, and they won’t fill those jobs, and we’ll continue to get what we’ve always got.

Hickman: But what we can do is, is the journey we started last year on tax credits is continue to look at the off-the-top money and look at reforms to get control of that $4.7 billion that this state doesn’t have to spend in our budget every year because it’s either earmarked directly to state agencies or it’s being given away in credits and exemptions, some of which is beneficial to the state, others which are gonna be costing us more than the benefit returned to the state as taxpayers.

Rob: Now, if you would like to see the entire evening of what was a lively and sometimes intense debate over the state budget, we do have a link under our value added section to the Oklahoma Watch Forum.