Oklahoma not alone in facing budget woes

T O hear some activists tell it, the fiscal challenges of Oklahoma state government are a national anomaly. The National Association of State Budget Officers’ latest “Fiscal Survey of the States” report suggests otherwise.

According to the report, revenue collections in 33 states came in below budget projections in the current fiscal year. At least 23 states, Oklahoma among them, made mid-year budget cuts that totaled a net $4.9 billion nationally.

Nationally, the report reveals that states “have experienced two consecutive years marked by sluggish revenue growth …”

Based on the budget proposals of the state governors, the association predicted the combined general fund spending of all 50 states would increase just 1 percent in 2018.

Put simply, the sluggish growth of the Obama era has been hard on many state governments. The situation in Oklahoma was made worse by falling oil prices, given the large role of the energy industry in state job creation.

So Oklahoma wasn't alone in facing state financial challenges. Where Oklahoma did stand out was in the proposed response. When the association reviewed governors’ budget proposals for the 2018 fiscal year, they concluded that Oklahoma was more reliant on tax increases as a proposed remedy than almost any other state. This runs counter to many liberal activists’ portrayals.

The association found that 15 state governors proposed net tax increases of $4.9 billion, while 12 governors proposed net decreases totaling $1.2 billion, resulting in a net tax increase of $3.7 billion.

“This net change is driven primarily by tax increases recommended by the governors of Oklahoma, Pennsylvania, and Washington State totaling $3.2 billion combined,” the report stated.

In Washington, the governor’s budget called for business and occupation and sales tax changes that would have increased taxes by $1.2 billion. Pennsylvania's governor sought elimination of various sales tax exemptions, limiting a corporate income tax break, and other tax changes that would have generated a $1 billion increase. In Oklahoma, Gov. Mary Fallin called for broadening the sales tax base, a cigarette tax hike, and a gas tax increase partially offset by elimination of both the sales tax on groceries and the state’s corporate income tax, generating a net increase of $985 million in taxes.

Oklahoma was one of nine states whose governor endorsed an increase in cigarette taxes this year. The combined increase in the cigarette tax in all nine states was $791 million. The proposed increases in Ohio and Oklahoma “accounted for most of the total estimated revenue impact” nationwide, the association report notes.

Oklahoma was also one of four states whose governor called for raising the fuel tax.

Admittedly, there many differences in the way states finance government and their spending practices, so state-to-state comparisons are somewhat imprecise. And it has to be noted that Fallin’s proposals were mostly rejected, aside from a $1.50-per-pack "smoking cessation fee” that may not pass constitutional review.

Ultimately, Oklahoma wasn't an outlier in facing financial problems, although it was an outlier in the degree to which tax increases were presented as the solution.