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Rain check


Kurt Hochenauer April 10th, 2008

So far Oklahoma has escaped the major economic downturn faced in many areas of the country because of the foreclosure and banking crisis, but state revenues are down because of recent tax cuts. Govern...

So far Oklahoma has escaped the major economic downturn faced in many areas of the country because of the foreclosure and banking crisis, but state revenues are down because of recent tax cuts. Government leaders should prepare for the worst.

The state should not hesitate to use its $571 million "rainy day fund" as leaders prepare a comprehensive plan to cut agency budgets and create more revenue streams. This will make the state's response less reactionary if a severe downturn develops, and could prevent drastic measures such as teacher layoffs and the reduction of social and health programs.

State legislators, a majority of whom embrace the ideology fueling ongoing conservative tax-cut movements, have sliced income taxes from 6.25 percent to 5.5 percent in recent years. They did so without enough serious consideration of replacing lost revenue. Long-term inflationary demands alone should make revenue replacement a major part of a tax-cut initiative, but you can't tell that to politicians who want to tout tax cutting as their ideological forte.

Eliminating the state income tax here has always been worthy of consideration, but it's difficult to restructure a tax system in a downturn or when political expediency demands immediate gratification.

The state has been flushed with tax money in recent years, but there are ominous signs on the state's fiscal horizon:
" The Legislature will be less $114 million to appropriate in the 2009 fiscal year, primarily because of tax cuts in recent years.
" Oklahoma schools need an additional $41.6 million just to make it through the current fiscal year.
" The Oklahoma Department of Human Services is predicting a $24.1 million drop in federal funding and is expecting state cuts as well.

The state's economy continues to show growth, and many agree the income tax cuts alone have created this relatively small loss in revenue in an approximate budget of $7 billion.

So is the state heading toward a situation similar to that in 2003, when it faced a $700 million drop in revenues?

The Alliance For Oklahoma's Future, a progressive-leaning think tank, claims "there is good reason to fear that we may now be in the early stages of a prolonged budget downturn that could last for the next several years."

The organization, in a recent study brief, also argues spending down reserve funds causes the least harm to the state's economy and population. The flip side to this argument is the rainy day fund should only be used for one-time, special expenditures. Yet managing budget cuts at the outset of a downturn to allow for planning can obviously mitigate a crisis.

Does Oklahoma want to be in the position of eliminating teacher positions under mandated reduction-in-force cuts? That is what happened during the last downturn. The cost of these layoffs in terms of retaining and recruiting talented educators cannot be underestimated.

There has been a blatant disregard for sound federal fiscal policy under President George W. Bush. Taxes were cut, war was waged and the federal budget deficit grew as part of the neoconservative agenda.

Many state legislatures, in trickle-down fashion, jumped on this tax-cutting bandwagon. But signs the neoconservative agenda has failed are everywhere. How much will this failure affect Oklahoma?

Hochenauer is an English professor at the University of Central Oklahoma and author of the progressive blog "Okie Funk: Notes From the Outback," www.okiefunk.com.

 
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