Oth­ers are track­ing the Leg­is­la­ture’s work

The Oklahoman - - OPINION -

AS the Leg­is­la­ture wres­tles with ways to fill a $215 mil­lion bud­get hole cre­ated by sloppy law­mak­ing, oth­ers are watch­ing — and not just Ok­la­homans who have grown ac­cus­tomed to, and weary of, the dis­tress­ing go­ings-on at NE 23 and Lincoln.

In New York City, the na­tion’s largest bond rat­ing agen­cies are look­ing askance at our Leg­is­la­ture’s con­tin­u­ing prac­tice of us­ing one-time funds and other gim­micks to re­pair holes in the state bud­get has. That’s not good.

Moody’s In­vestor Ser­vice re­cently is­sued a “credit neg­a­tive” warn­ing for Ok­la­homa’s credit rat­ing. The de­vel­op­ment got buried some­what be­cause it came as leg­is­la­tion de­signed to bring an end to the spe­cial ses­sion was be­ing nois­ily de­feated, tweaked, and de­feated again.

Moody’s said the Leg­is­la­ture’s “in­abil­ity to pass a com­pre­hen­sive and per­ma­nent so­lu­tion is credit neg­a­tive.” In other words, it sets up the pos­si­bil­ity that Moody’s could down­grade the state’s credit rat­ing. Stan­dard & Poor’s has al­ready done that, in March low­er­ing Ok­la­homa’s rat­ing on gen­eral obli­ga­tion bonds and ap­pro­pri­a­tion debt to AA from AA+.

The lower a state’s credit rat­ing, the more ex­pen­sive it be­comes to bor­row money. For years, the rat­ing agen­cies have crit­i­cized Ok­la­homa for not in­vest­ing enough in it­self, for in­stance by not ap­prov­ing bond is­sues to pay for in­fra­struc­ture up­grades. Now the mess that is the state bud­get is a point of con­sid­er­able con­cern.

State Trea­surer Ken Miller high­lighted the Moody’s com­men­tary in his lat­est eco­nomic re­port. Moody’s noted that the spe­cial ses­sion im­passe high­lighted the “eco­nomic and in­sti­tu­tional weak­nesses that have led to a per­sis­tent struc­tural bud­get im­bal­ance since 2015.” Among the in­sti­tu­tional con­cerns, Moody’s said, was the 75 per­cent su­per­ma­jor­ity needed to ap­prove tax in­creases.

Ok­la­homa vot­ers placed that thresh­old in the state’s con­sti­tu­tion and don’t seem in­clined to change it. Thus, law­mak­ers are charged with bal­anc­ing the bud­get with avail­able rev­enue. A down­turn in the econ­omy, driven largely by lower en­ergy prices, helped pro­duce the large bud­get gaps in re­cent years, and law­mak­ers have ad­dressed those by draw­ing down the state’s Rainy Day Fund and us­ing one-time funds.

The Leg­is­la­ture’s re­jec­tion of var­i­ous tax in­crease pro­pos­als leaves the like­li­hood of more of the same to try to cover the ex­ist­ing bud­get hole. Those pro­pos­als, Moody’s noted, do “noth­ing to ad­dress the on­go­ing struc­tural im­bal­ance, which in­creases the dif­fi­culty of draft­ing a 2019 bud­get.” Shrink­ing cash re­serves only fig­ure to com­pound fu­ture bud­get chal­lenges, the agency said.

In March, Stan­dard & Poor’s said it could lower rat­ings fur­ther if the state doesn’t come up with “mean­ing­ful struc­tural re­forms that align rev­enues and ex­pen­di­tures and that do not ma­te­ri­ally de­pend on one­time bud­get so­lu­tions.”

It also said at that time that it could raise Ok­la­homa’s rat­ing if eco­nomic in­di­ca­tors and state rev­enues im­proved and if re­serves grow due to struc­tural changes. Miller noted that the state’s econ­omy and rev­enues are on the uptick, but “there is no mean­ing­ful fix for the struc­tural im­bal­ance in sight and re­serves con­tinue to be de­pleted.”

Put sim­ply, law­mak­ers must make spend­ing and rev­enue align. The state can’t af­ford for law­mak­ers to con­tinue to ig­nore that fact.

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