OUR VIEWS Surplus state revenue unlikely to last for long

LAST month, the state Board of Equalization certified that an additional $214.6 million in revenue will be available for appropriation this year. That’s nice, but don’t break out the bubbly yet.

An extra $214.6 million isn’t pocket change. For most Oklahomans, it’s a sum beyond imagining. Yet that amount is just a morsel when it comes to the voracious appetite of government. Jonathan Small, fiscal policy director for the free-market Oklahoma Council of Public Affairs, recently noted state agencies have already requested combined appropriation increases of $1.06 billion.

That’s not going to happen, but those figures show the challenges facing lawmakers, the need for careful prioritization, and the necessity of reining in government to preserve fiscal sanity. Otherwise, the old rule is true: Government spending will increase to match or exceed available revenue.

Other states face similar challenges. Indiana has a $500 million budget surplus and $2 billion in reserves. Iowa has an $800 million surplus, Florida has one of more than $400 million, and Michigan has an additional $1 billion. But in spite of the extra money, Stateline.org reports that states “say that much of their surpluses will cover sweeping cuts anticipated in federal funding later and increases in Medicaid costs.”

Medicaid in particular is starting to gobble up an increasing share of state funds nationally. At least $61 million of Iowa’s surplus will go to Medicaid for existing obligations. Texas has an $8.8 billion surplus and more than $8 billion in its rainy day fund, but it may need $4.3 billion to address a Medicaid budget hole.

In Oklahoma, Gov. Mary Fallin’s office anticipates Obamacare will generate a much higher bill for Medicaid starting in 2014. The federal law imposes penalties on individuals without insurance, which will drive many currently eligible people onto the Medicaid rolls who don’t use the program today. Fallin’s office esti- mates the addition of those individuals will require more than $200 million in increased Medicaid spending through 2020.

We’re not talking here about people added through the Medicaid expansion that Fallin rejected, but those already eligible. The program’s growth will chip away at dollars for other areas of government, such as schools, roads and public safety. In fact, Medicaid has already played a significant role in diverting money from the education budget in recent years.

When Texas officials rejected Medicaid expansion, they estimated it would cost $27 billion in additional state funding over a decade. That’s roughly equal to the two-year shortfall facing Texas lawmakers in 2011, which forced cuts of $5.3 billion from schools and the draining of $3.2 billion from the state’s rainy day fund. Does anyone doubt a similar-sized bill for Medicaid expansion would not have the same impact over time?

Ironically, some seeking new funds for Oklahoma schools also endorse Medicaid expansion. Financial reality and past experience suggest those two goals are largely incompatible. Achieving the latter makes the former all but impossible.

Without meaningful policy changes, we’re nearing the point where most growth in state revenue will be consumed by Medicaid/welfare spending rather than schools, roads and public safety. This would benefit the low-income only so long as they don’t need to read or write to apply for aid, travel a road to the hospital, or need help after being mugged on the way.