Okla. Budget Crisis Could Lead To Major Changes

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Updated: 12/11/2010 10:56 am Published: 12/11/2010 10:54 am

OKLAHOMA CITY (AP) — Oklahoma is bracing for a third straight year of cuts in its already reduced state budget, and a hole that could reach $400 million or more could give Gov.-elect Mary Fallin sufficient cover as she attempts to "right-size" state government.

While legislators and Gov. Brad Henry used bandages, as one analyst put it, to cover shortfalls where tourniquets may have been appropriate, Fallin has an opportunity to change Oklahoma government altogether. In her campaign, she spoke of consolidating state agencies and functions, and the change in administration and continuing budget problems give the state a chance to re-tool spending so it can keep fund prisons, schools and pensions sufficiently.

To maintain current spending in all areas, Oklahoma would have to raise taxes. To funnel money to key programs, the alternative is to trim costs elsewhere and divert the savings.

"The majority of it will have to come from cuts," said incoming Senate President Pro Tem Brian Bingman, R-Sapulpa. "We're certainly not going to raise taxes, so I don't know where else the money will come from."

The 2011-2012 budget takes effect July 1, and outgoing Democratic Treasurer Scott Meacham suggests the gloom-and-doom fiscal forecast could be premature.

"I think the first recommendation is: 'Don't rush to make any decisions yet, because you don't have all the information,'" said Meacham, who has served as Henry's budget advisor for years. "It's good to be thinking about things you can do, but it's way too early to actually start talking about doing those things."

Lawmakers will get their first peek at the preliminary budget figures on Dec. 21, when the Board of Equalization meets to approve early projections prepared by the Oklahoma Tax Commission. That number will be used by Fallin's office to prepare her recommendation to lawmakers for a balanced budget, but the final figures won't be certified until February.

The Oklahoma Policy Institute, a Tulsa-based think-tank, last week projected a budget hole of about $400 million if lawmakers don't come up with new sources of revenue, and there appears to be little impetus on the part of Republican legislative leaders to suggest specific new funding sources.

"My revenue enhancement plan is to create the very best business climate possible, so we'll help our businesses grow," Fallin said.

There will be no shortage of fiscal demands on lawmakers when they return in February. The Department of Corrections already has requested a $35 million supplemental appropriation just to make it through the current fiscal year and prevent massive additional furloughs of agency staff.

Without additional funding, prison workers will be forced to take a total of 23 furlough days this fiscal year, the maximum allowed by law, at a time when the inmate population has grown by more than 700 and state prisons are at 99 percent capacity.

The Oklahoma Health Care Authority, the state's Medicaid agency, needs $120 million to maintain its current level of services, and the Department of Education wants a $295 million supplemental to restore cuts to public schools, said David Blatt, director of the Oklahoma Policy Institute.

"The recovery is going to be long and painful, and up until now we relied on a lot of one-time fixes to get through," said Blatt, whose agency released a report last week predicting Oklahoma's economy won't recover fully until 2014. "And what we're calling for is to face a new fiscal reality with new strategies and approaches that will not just slap on more bandages, but provide some solutions to get us through the next several years."

Among the recommendations from both Meacham and the Policy Institute is the repeal or deferring of a scheduled one-quarter of 1 percent reduction in the state's income tax that is estimated to cost more than $100 million.

But that option is unlikely with a Republican-controlled Legislature and Fallin already has expressed her opposition to such a move.

Last week, both Steele and Bingman said they opposed delaying the income tax cut, which will take effect if state revenues increase by at least 4 percent over the previous year.

Steele suggested lawmakers might look at the elimination of some of the billions in tax breaks and incentives the state hands out each year as one way to offset the loss of revenue from the income tax.

Meacham agreed the state's tax incentives are ripe for closer scrutiny.

"We have a lot of incentives on the books," Meacham said. "We really have to look at which of those are really working and creating jobs and investments, and which of them are in effect giveaways of the taxpayer money."

©2010 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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