, Muskogee, OK

Oklahoma News

April 22, 2014

Oklahoma faces budget crisis despite growing economic boom

OKLAHOMA CITY — Oklahoma’s oil patch is booming, its capital city is thriving and the unemployment rate is falling through the floor, testifying to the state’s roaring recovery from the recession.

But even though revenue is pouring into the state treasury, the legislature is wrestling with a self-inflicted budget crisis that could prompt cuts to education, public safety and health care.

The problem is that lawmakers over the last decade have created and expanded so many tax breaks and earmarked so much money for special projects that there’s no longer enough for basic services.

Thus, in a bizarre scene of crisis in the midst of plenty, 25,000 angry teachers and parents thronged the statehouse recently to protest the prospect of more cost-cutting in classrooms as lawmakers were preparing to consider a new income tax give-back responding to the boom conditions.

“The left hand has no idea what the right hand is doing in Oklahoma. It’s absolutely ludicrous,” said Republican state Rep. David Dank, a critic of the legislature’s pattern of approving new tax breaks without calculating the budget impact first.

“If I handled my business like they do out here, I’d be riding a bicycle to work.”

Nevertheless, Republican Gov. Mary Fallin, who is pushing to cut the top personal income tax rate from 5.25 percent to 5 percent, said a basic strategy of lower taxes and more incentives will pay off in the long run.

This approach “is an important way to stimulate the economy, create jobs and help middle class families,” Fallin said defending her plan.

Many of the two-dozen state legislatures controlled by Republicans have increased business tax incentives in recent years, arguing that resulting business growth would make up the difference. Especially during the recession, the lost tax revenue led to layoffs and funding cuts for schools and social programs.

But many states later began easing up. Indiana’s House Republicans restored some education and road funding in 2013 instead of approving all of the income tax cut Gov. Mike Pence proposed.

In Oklahoma, though, the diversion of tax revenue has been continuous and dramatic, with new breaks approved piecemeal without projecting how much money would be left.

According to the state budget office, only 44 percent of revenue now goes into the General Revenue Fund, which supports most major state programs like schools, prisons and child welfare. Seven years ago, the share was 55 percent.

The tax breaks granted range from tiny slices of the state’s roughly $7 billion annual budget — like the $47,000 a year in sales tax forgiven for purchases by the Boys and Girls Clubs— to hundreds of millions of dollars for the burgeoning wind industry and oil and gas producers.  The state pays wind farms’ local property taxes for the first five years, at a cost of $28 million annually, and grants credits covering most of the taxes owed for selling the energy produced.

“It’s very easy for somebody who lives in western Oklahoma to look at those industries and see how they’re benefiting our state,” said Republican Rep. Mike Jackson of Enid, whose rural district is dotted with wind farms, citing the jobs that both industries create.

Fallin’s proposed personal income tax cut would cost about $147 million annually.  The legislature is also considering new tax credits for rural housing construction, fundraising by cheerleaders, and chapel building. Already, Oklahoma has about $188 million less to spend on state programs than last year.

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