Unfortunately, even as the state economy recovers, our fiscal outlook remains dire over the coming years. In order to avert the most catastrophic cuts to public services, we have balanced the budget over the past two years with a large injection of federal stimulus dollars, state reserve funds and other nonrecurring revenues that are largely exhausted. We have also committed ourselves to tax cuts and spending obligations for the coming years that will weaken our revenue collections and hamper our ability to fund basic services.
Up until now, policy makers have addressed the state budget crisis as a short-term situation that can be addressed with short-term measures. Our analysis is that we are not in a short-term cycle, but rather a new fiscal reality where revenues will fall far short of meeting the cost of core public services. Given current policies, our forecasts are that even by 2014, the state budget will not have returned to pre-downturn funding levels of 2008 and 2009. This doesn’t even take into account the need for normal spending increases to deal with inflation and growing population and caseloads.
This new fiscal reality calls for fresh perspectives and fresh strategies. There are three things we must do: First, we must create a revenue structure that supports public services, even in times of modest revenue growth. This involves deferring or repealing additional income tax cuts, eliminating inefficient tax breaks, considering new revenue streams for health care, prevention and treatment and making the tax base both broader and fairer.
Second, we must make smarter expenditure decisions that reduce future costs. This should involve consolidating agencies and functions where savings can be expected, prioritizing prevention and surveillance over detention and reforming the state pension system.
Finally, we must create new budget processes and structures that support responsible financial planning and management. We should develop longrange forecasting, adopt requirements that all spending commitments and tax cuts be fully paid for and continue to improve budget reserve policies.
Knowing that we face a prolonged fiscal crisis presents us with a choice. We can continue to weaken our revenue system, spend on favored programs without demanding results and try to scrape by one fiscal year at a time, as we have through many years. Or we can choose to re-evaluate our environment and craft a new fiscal approach that values good planning, effective spending and generating sufficient revenue to make Oklahoma smarter, safer and more competitive. We must choose wisely.
Blatt is director of the Oklahoma Policy Institute, a think tank based in Tulsa. Go to www.okpolicy.org to see the full forecasts and recommendations.