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Reports from Other States Urge Caution on Budget, According to Senate Leader

Word that the national economic slowdown has helped create unexpected budget shortfalls in as many as 15 states should send a message of caution to state policy makers in Oklahoma, according to a State Senate budget leader.

Senator Kelly Haney, chairman of the Senate Appropriations Committee, said that although the state currently has a modest amount of growth revenue, Oklahoma could easily find itself facing the same budget shortfall scenario as other states if it doesn't heed the economic warning signs.

"Because of all the bills we have to pay, we're already facing a tight budget this year, but this certainly adds a new dimension to the debate. We don't want to find ourselves in the same budget shortfall predicament that many other states are facing," said Senator Haney.

According to a recent article in the New York Times and information from the National Conference of State Legislatures, at least 15 states are facing unexpected budget shortfalls and spending cuts as high as 15 percent. Many of the states are in Oklahoma's region. For example, both Missouri and Kansas are facing budget reductions and Texas has seen most of its growth revenue wiped out by increased health care costs.

"We share many similarities with those states, especially in the area of rising health care costs. Maybe our luck will be better than theirs, but we need to be prepared just in case it isn't," said Senator Haney.

In many of the budget shortfall states, declines in sales taxes have helped contribute to the revenue shortfalls. Oklahoma's sales tax collections had been running even with estimates during the current fiscal year, but recently plunged below projections in December. While surging oil and gas prices have helped offset flatness in other revenue categories, policy makers must be wary of the boom and bust nature of the energy sector, according to Senator Haney.

"We have been fortunate because the boom in the energy sector has boosted our revenues, but as we know from past experience, that kind of money is often here today and gone tomorrow. We have to be very aware of the fact that budget decisions we make this year will impact the years to come," said Senator Haney.

Thanks to increased energy revenue, Oklahoma will have an estimated $300 million in growth revenue next fiscal year. However, a good deal of that money is already earmarked for financial obligations on road construction, bond issues, health care and teacher salaries. Obligations currently total approximately $230 million. When supplemental budget requests and other needs are considered, the amount rises to $600 million.

Despite those obligations and other funding issues, a number of tax cuts and spending initiatives have been proposed for consideration this legislative session. However, Oklahoma's budget outlook and the latest news from other states should cause the proponents of those measures to adopt a more cautious approach, according to the Senate budget leader.

"Certainly, we're not taking anything off the table this early in the session, but at the same time, I think it would be irresponsible for us to simply ignore the warning signs that are on the horizon. With that in mind, I would urge anyone who has a major spending initiative or a major revenue reduction program to take a close look at the budget situations in other states and our own revenue reports in Oklahoma. A cautious approach isn't just prudent; it's a necessity," said Senator Haney.

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Senate Communications Division - (405) 521-5605