Tuesday, February 27, 2018

OCPA column: Too Much State Revenue?

Too Much State Revenue?
by OCPA President Jonathan Small

State revenue keeps rising. This is good news for many Oklahomans, but not for those wanting higher taxes.

The State Board of Equalization has adopted revenue estimates for the next fiscal year. The board meets three times a year to provide revenue estimates. According to the Oklahoma Constitution, the February numbers set the parameters for the next budget.

Last Tuesday, the board released this revenue certification along with updated numbers for the current year. For context, actual general revenue collections in 2017 were $5 billion. The board now predicts that general revenue collections for 2018 will be nearly $5.8 billion. And for the next fiscal year? The estimate is nearly $6.1 billion.

Some revenue growth from 2017 to 2018 comes from tax increases, but most is the result of economic recovery. This is one of those inconvenient truths: Government revenues depend most on a healthy economy, not increasing tax burdens.

Consider the sales and use tax: 2017 collections were $2 billion but are projected to exceed $2.5 billion next year. Personal income tax collections for 2017 were $1.8 billion but projected to be $2.1 billion for next year.

Despite the increases, Tuesday’s meeting confused many. Real revenues and projections keep going up, and now exceed prior appropriations, yet the state still has a projected “shortfall” of $168 million.

The “shortfall” comes from a new, unvetted wish list from the executive branch that makes it look like lawmakers have less to spend when they have much more. The largest of these is the emergency bailout of $141 million to state university medical centers. Like the Health Department, federal money has been used improperly for 15 years and, once discovered, the federal funds cease. Most of those funds – $110 million – will come from next year’s budget. And, let’s not forget the bailouts of unaccountable executive branch agencies totaling at least $172 million in the past few months. These and other items turn the would-be surplus into a “shortfall.”

Despite all this, the state’s Byzantine system of revolving funds and dedicated accounts mean that there will be plenty of money to build the next state budget. And pending reforms, like improving enrollment fraud checks in our Medicaid program, better using future tobacco settlement payments and eliminating wind subsidies, mean that even a teacher pay raise is now possible without damaging tax hikes.

There are plenty of policy goals for 2018: criminal justice reform, expanding education opportunities to the most vulnerable, judicial reforms, and teacher pay to name a few.

But, before anything else can be accomplished, we need an open, honest, and, most importantly, transparent discussion about state finances.

Jonathan Small serves as president of the Oklahoma Council of Public Affairs.


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