Even One-Party States Are Having Budget Battles This Year

Oklahoma's money problems represent a larger trend in state government.
by | November 2, 2017
Oklahoma State Capitol
The Oklahoma State Capitol (Flickr/Drew Tarvin)

Amid divisive politics and strained finances, it's become almost commonplace for state lawmakers to close budget holes with one-time fixes. But such sneaky budget maneuvers have a way of coming back to bite politicians. Right now, Oklahoma lawmakers are feeling the sting of such a scheme.

Even though they have the advantage of one-party control, the state’s two Republican-led legislative chambers are divided over how to address a $215 million budget deficit.

The shortfall was caused when lawmakers earlier this year attempted to get around the state’s tax-raising restrictions, which require a three-quarters legislative majority and ban passing revenue-raising bills during the last five days of the session. Nevertheless, lawmakers approved a $1.50-a-pack "smoking cessation fee" in the waning days of the regular session in May. Just three months later, the state Supreme Court struck down that fee as an illegally passed tax.

The ruling has forced legislators into a contentious special session to deal with the shortfall.

The state Senate, which has the required supermajority to pass revenue-raising bills, favors increasing some taxes to plug the hole. But the House, which doesn't have the supermajority necessary, favors using rainy day funds and cutting spending. The tactic has been so common in Oklahoma’s budget-making sessions in recent years that observers call it the "cash and cuts approach."

It’s a familiar problem in many states across the country. Legislatures dominated by one party have elected to go with one-time fixes. The problem with that approach is that it gets harder and harder to do.

Illinois, long ruled by Democrats, pushed off required payments for years until coming to a historic, two-year budget standoff when a Republican won the governorship. Connecticut Democrats repeatedly addressed budget shortfalls with one-time fixes until a newly split-party legislature finally approved a bipartisan budget that employs a mix of cuts and revenue-raisers. In Republican-controlled Kansas, lawmakers overrode a veto by Gov. Sam Brownback earlier this year to repeal his tax cuts that had led to repeated budget deficits.

Watching a similar scenario play out in Oklahoma has been frustrating for observers. “It’s like being on a hockey rink on flippers and trying to hit a spinning puck -- you just keep falling,” says David Blatt, executive director of the Oklahoma Policy Institute, a progressive group that suggests raising revenue would more permanently fill budget gaps.

Other observers think lawmakers need to downsize the budget to match the hit the state’s oil economy has taken.

“The Oklahoma state government is built on an economy where oil is $100 a barrel,” says Jonathan Small, president of the libertarian-leaning Oklahoma Council of Public Affairs. He believes the state’s lawmakers haven’t done enough to make agency spending more efficient. “Both sides are polling various taxes, and they’re basically gravitating toward what tax the public is least adverse to.”

It's unclear which policy lawmakers will opt for. Last week, the Senate passed a revenue-raising bill that included a cigarettes tax, a motor vehicle fuel tax and an additional tax on beer. They also gave a pay boost to teachers and state employees.

But that proposal didn’t get the required three-quarters majority it needed in the House, where minority Democrats said the bill only targeted the middle class for new dollars.

This week, the House countered with their own measure: Don’t raise revenue and instead partially fill the gap with money from the state’s rainy day fund and with excess cash from the previous fiscal year.

But that’s another one-time fix. It would leave the state’s rainy day fund with less than $70 million, and Oklahoma would still face an expected $400-million budget deficit next year.

There's no deadline for lawmakers to reach a budget deal. But if they fail to in the next month, the Oklahoma Department of Mental Health and Substance Abuse Services, which was banking on revenue from the smoking cessation fee, will have to undertake major cuts.

“I’m told they will have a partial resolution by then because they know they have to,” says Blatt. “When we’re saying Dec.1 is the drop dead date, it’s not entirely metaphorical.”