February 07, 2011

OCPA Budget Reorders Priorities, Cuts Taxes

[This Marlin Oil advertorial appears in the February 10 edition of The City Sentinel.]

Last week, Governor Mary Fallin told members of the Oklahoma Press Association to expect 3 percent cuts in protected state agencies like the Education Department, public safety, and health and human services. Other agencies, she said, can probably expect cuts in the 5 percent range or higher.

While the chief executive is being realistic, her outline was not as aggressive as some fans had hoped. The outline of her budget -- with details coming all this week -- could be described as restrained.

On the other hand, the Oklahoma Council of Public Affairs has put into the debate a bold plan for actually reducing state spending, and reordering priorities. Most impressively, the OCPA budget includes a cut in state income tax rate from 5.25 percent to 4.25 percent, effective next January.

While all the right people are complaining about OCPA's budget, the truth is it makes only a 10.28 percent cut in total government funding.

After looking through the entire OCPA budget and interviewing Jonathan Small, fiscal policy analyst for the free-market think tank, Pat McGuigan of CapitolBeatOK reported some details:
Programs facing zero direct funding, in the OCPA approach, include the Arts Council, Educational Television Authority (OETA), Physicians Manpower Training Commission, Teacher Preparation Commission, Space Industry Development Authority, Human Rights Commission, Conservation Commission, Consumer Credit Commission, Horse Racing Commission, J.M. Davis Memorial Commission, Will Rogers Memorial Commission, and the Rural Economic Action Plan Fund.

No direct state appropriations would go to the following agencies, meaning they would have to rely on fees to finance operations: the Insurance Department, Workers Compensation Court, and the Secretary of State. In the latter case, the office could draw on its revolving fund for operations, Small said. Both the insurance agency and the comp court also have income streams from unappropriated dollars. ...
Bottom line: The OCPA budget would actually reduce state government spending, and that makes sense in light of the revenue picture over the last three fiscal years. At the same time, it establishes a time frame for further income tax rate reductions, continuing the progress of recent years in ridding the state of the number-one impediment to business relocations and retention of taxpayers with resources.

The context to the dueling budget visions is important. Many agency heads ignored the requests of state leaders to lay out cuts in the 5 to 10 percent range, and instead showed up with requests for budget increases totaling 25 percent, some $1.5 billion. Basically, the bureaucrats showed up with requests for increased spending when the revenue gap is expected to come in around $600 million.

Although indications from Fallin's team given last week could be described as conservative, somewhat disappointing was the governor's hint that most budget cuts will be across-the-board and not an aggressive start to real limits on the size and scope of government. The details in the executive budget laid out this week will be crucial, and proposals in the first week of the legislative session rarely reflect the final product in May.

To lay the basis for a better future of limited government and economic growth, the governor and legislators should carefully consider incorporating some of OCPA's ideas into the policy mix. There will never be a better year than this to "right-size" the government of Oklahoma.

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