Ericcommando89 / Flickr
Ericcommando89 / Flickr
On the surface, 2012 looks like a pretty good year for Oklahoma’s state budget.
Relatively speaking, that is.
But even with a best-case flat budget scenario, funding cuts are coming, warn the leaders of the Legislature’s two biggest budget committees.
Hit the jump for a Q&A on Oklahoma’s upcoming budget battle.
Last year, Gov. Mary Fallin and the state Legislature faced a $500 million shortfall, and responded with across-the-board agency budget cuts, which ranged from 1 to 9 percent. Public schools and higher education bore the biggest cuts those agencies had seen in years.
Right now, Oklahoma is facing a $150 million budget gap, but finance officials and legislative budget leaders seem confident that higher-than-expected tax revenues will fill most — if not all and more — of the hole.
StateImpact Oklahoma asked the two lawmakers tasked with leading budget and appropriations discussions to weigh-in on 2012 and the upcoming legislative session.
Q: Beyond those now-unavailable one-time funds Oklahoma enjoyed last year, what’s different about the FY 2013 budget? Any other changes likely to affect appropriations?
Jolley: While all state agencies are much leaner than they were before the economic downturn, the ‘easy’ savings measures have been achieved and the work will be more difficult. While many people are stating they hope for a ‘flat’ budget, that doesn’t take into consideration increased health benefit costs or other inflationary items. We will be working even harder to become more efficient in state government.
Sears: There’s a big difference with our budget: Instead of being down, we’re up. But on the same token, we have will have to use that surplus to go back in and fill some holes. There still may be some cuts that are before us because we do have some supplements that we’ve agreed that we would address, one of them being about $33 to $34 million in regards to the flex benefits for education.
Q: OK is facing a $150 million budget hole, which finance officials hope will be filled by the continued growth of tax revenues. How optimistic are you that the gap will be filled?
Jolley: Even if the gap is covered, some agencies will still experience a cut in funding. It is vital for us to make sure government spending is prioritized and that state government is operating at the most efficient level possible.
Sears: I’m very optimistic that our revenue trend is going to continue to go up. I even think we’ll be looking at even more additional money to help us with these holes. I don’t know that for a fact, but the way the economy is moving: I don’t think our hole is going to be as bad.
Q: Let’s say the gap is filled: Any chance of restoring services/programs that have been cut? If so, which ones would you prioritize?
Jolley: If the state were to have additional revenues, I would want to make sure we first addressed lowering income taxes to promote and stimulate additional growth overall in our economy and in personal wealth growth for Oklahomans. After that, I would want to make sure that we were spending adequate amounts for core services, such as education, public safety and to begin paying for repair of deteriorating public assets, such as our highways and the State Capitol.
Sears: Even though we are doing quite well in Oklahoma, we still have looming on the national level a huge uncertainty in our national economy, and I just don’t think we need to be into growing budgets. There’s no question to what my biggest job is going to be this year: People are going to rush back in to try to make themselves whole, and I am not of the opinion that we just need to go back to growing government without a serious discussion and debate.
Q: Beyond touted “core services” like education, health and human services, public safety and transportation, what are your budget priorities for FY 2013?
Jolley: My priority is to reflect the shared values of the Senate majority caucus. We believe that income taxes should be as low as possible and spending shouldn’t be more than needed. We are strong proponents of public safety, transportation and a quality education for every child. My personal priorities are to lower the income tax and thereby stimulate more growth in both the urban and rural economy and secondly to begin addressing the Capitol and its dire condition.
Sears: We have not had a Highway Patrol academy in quite some time. We passed some legislation last year — it was a fee — for two years that would generate funds to allow us to have a Highway Patrol academy. If we want to continue to have a well-trained Highway Patrol on our highways protecting the good people of Oklahoma, I think it’s imperative that we have those ongoing training programs. We also may have to come up with some money to help (state Rep. Randy) McDaniel with pension issues — that’s a very high priority. Also the healthcare authority. There’s issues there to make sure they have enough money to keep federal matching funds in place.
Q: The rumor mill has higher education in the crosshairs for next session. Have you noticed any recent increased scrutiny or activity when it comes to state spending on higher education?
Jolley: It is perfectly appropriate for higher education and all other agencies to be under scrutiny. Higher education receives about one-seventh of the entire state appropriation. They should welcome the scrutiny and make sure that they are operating as efficiently as possible. Remember over 90 percent of the money appropriated by the Legislature goes to 12 out of 78 agencies. It is impossible to balance the budget without scrutinizing the larger agencies.
Sears: Yes I am. There are several members (of the legislature) that have identified higher education as a place that could see some cuts. There are some members that are frustrated with the formula used to determine where the money they receive goes in the state. I support higher education, I think it’s an economic driver for our state. Does that mean we just need to continue to grow higher education? No. Higher education should always have an open and honest debate among the elected officials in regards to how that money is being spent. Are we gaining more graduates? Are our programs strong?
Q: As per the tax credit task force’s recommendations, are there any particular credits/incentives you expect to be eliminated? In your opinion, which ones offer the least return on the state’s investment?
Jolley: I’m not sure which tax credits will be eliminated, although I’m sure there will be some that get more attention than others. I do believe that we have to look at things from a modern economic perspective — that not everyone is in manufacturing widgets. If we are going to have a tax credit, we need verifiable data that proves economic viability of the credit. Oklahoma’s Quality Jobs program has been touted nationally as the ‘gold standard’ in how to do a tax credit right. The job for us is to make sure the other credits meet the same level of review and can be quantitatively and qualitatively measured.
Sears: They haven’t all been completely identified. I am personally in favor of eliminating a lot of the tax credits, but we will approach each on a one-to-one basis. We will have some members that support transferable tax credits, which are working in their districts. It’ll be a lengthy battle and an uphill fight. Quality Jobs isn’t going anywhere. That’s a quality program with a good track record. I expect coal credits to be scrutinized and discussed at great length, as well as the capital investment credits — the meetings where we discussed those were the ones I got most frustrated at.
Q: Do you think efforts this session to reduce the income tax will be successful?
Jolley: I certainly hope so! It is my sincere belief that Oklahoma’s income tax inhibits growth in our state that would propel us to a larger and more successful populace. But there are many people who are scared that we can’t pay for essentials in government if we don’t tax the successful people on their earnings. Clearly we have to have taxes to pay for roads, prisons and teachers. But we have an obligation to make that level of taxes as low as possible.
Sears: I don’t know if we’ll have the plan in place, but I truly believe we’ll make strides to put things in place to move towards either eliminating the income tax or reducing the income tax rate. At this point in time, I’m for reducing the income tax rate. But I’m still very concerned. We still want roads, bridges, schools and public safety programs — you just can’t take $2 billion out of the budget. If you (add taxes) to the service industry, that’ll be a lengthy debate.