Budget & Tax
Jonathan Small | September 21, 2022
Remember the lessons of state shortfall years
Most business owners and families understand the importance of spending less than you bring in, and of socking away the remainder in savings, to prepare for unexpected financial challenges.
Unfortunately, such thinking is rare in government, which explains why Oklahoma’s state government was in such bad shape only a handful of years ago. Sadly, some groups appear dedicated to ignoring the lessons of the recent past.
The head of the Oklahoma Education Association (OEA), the largest government union in Oklahoma, along with other tax-consumer advocates, is now calling on the state to spend down the record savings achieved during Gov. Kevin Stitt’s first term.
The OEA—which often leads calls for tax increases, increased taxpayer burdens, and increased government spending regardless of outcomes—wants money diverted from savings into schools and teachers. But in doing so, the OEA ignores the fact that teachers’ job stability depends on the state’s ability to maintain that new spending.
In recent years, Oklahomans have seen what happens when spending outpaces revenue and officials fail to set aside sufficient savings.
As House Speaker Charles McCall noted in a recent interview with The Oklahoman, state government experienced $2.7 billion in budget shortfalls from 2015 to 2018. He estimated $3.7 billion in savings would have been required to avoid any deficits and budget cuts during that time.
Do Oklahoma teachers recall the 2015-2018 years as the “good ol’ days”? I doubt it. Yet the OEA would again start Oklahoma down the path that created those problems.
In reality, the amount of savings needed to cushion against a similar downturn—which could easily happen again in a state whose economy is heavily tied to oil-and-gas prices—would actually require even greater savings than the $3.7 billion cited by McCall. The Speaker noted that figure would have addressed shortfalls in the past, but today’s state budget totals nearly $10 billion.
Furthermore, new spending on schools (or other uses) creates new annually recurring expenses. Experts already warn that schools have artificially inflated ongoing spending with one-time federal COVID-bailout funds and could face significant shortfalls once that spigot is turned off in two years.
Thanks to the foresight of Stitt and legislative leaders, Oklahoma government now has $2.8 billion in reserve—a historic amount that shatters the previous high-water mark of $597 million in 2008.
For some left-wing groups, the idea that government would not spend money is shocking. That’s why tax consumers like the OEA view good fiscal times only as an opportunity to explode spending, and view downturns only as a reason to raise taxes.
But Oklahomans know that money ultimately comes out of their pockets. And they appreciate it when state leaders take a long-term view of state finances, rather than embrace the collective amnesia preferred by those who spend other peoples’ money.
Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.