Oklahoma Progress Jeopardized by Massive Revenue Shortfall

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Faced with a $155-million budget deficit and legislative resistance to higher taxes, Gov. George P. Nigh of Oklahoma has ordered state agencies to cut their budgets, beginning with a 26-percent reduction this month.

Education, which accounts for almost 70 percent of the state's $1.689-billion appropriations budget, will be hit hardest.

The Governor's action came after the General Assembly adjourned a special session late last month without approving his proposed tax increase.

The deficit projected for this year and a slightly smaller deficit seen for next year have already affected the state's ability to pay for its ambitious program of salary improvements for teachers and could result in the layoff of 5,000 of the state's 40,000 teachers, according to one budget expert. "We're fooling ourselves if we think we can get through this without some major layoffs," said Douglas J. Eneboldsen, director of the fiscal division of the state House of Representatives.

But Beverly Borthick, a fiscal analyst for the House, said districts can cut spending in ways other than teacher layoffs--by scaling down programs such as after-school athletics, for example, or consolidating school districts, reducing unnecessary administrative positions, and cutting transportation services. Eventually, however, she conceded, the districts will be forced to lay off teachers unless the state increases taxes.

The state had no trouble meeting its monthly bills this year until last month. But then the state brought in $7 million less than was appropriated for November, and projected that December's revenues would fall short of expectations by $34 million. The Office of State Finance is projecting deficits of $19 million, $25 million, $25 million, and $45 million for the first four months of 1984.

Under a state constitutional provision, agencies must eliminate monthly deficits by making across-the-board cuts until the legislature acts to resolve the problem. Because the December revenues are 26 percent shy of appropriations, all agencies must make 26-percent cuts this month.

The General Assembly's joint appropriations committee started work last week on legislation that would assign specific percentage reductions to each government agency instead of requiring across-the-board cuts.

Opposition to Taxes

Although the Governor is expected to introduce new tax legislation when the legislature convenes again on Jan. 3, there is little expectation that his proposals will be approved. Lawmakers were in business for only two days in last month's special session when Senate and House leaders concluded they did not have the two-thirds majority needed to enact emergency legislation. Constituent mail and telephone calls reflected a 10-to-1 opposition to higher taxes, according to several reports.

On the day before the special session opened, the Daily Oklahoman published a front-page editorial that denounced the tax proposals. The newspaper, the largest in the state, also printed the names of all legislators along with their home and office telephone numbers and vowed to orchestrate a public campaign against legislators who voted for a tax increase.

"The legislators were just reflecting the views of their constituents," said James Sandage, executive director of the Oklahoma Association of Secondary School Principals. "[Constituents] were saying they don't believe there was a problem."

Leaders of both houses said they might have been able to gain a majority for the tax bills. But only emergency legislation could have addressed the immediate budget problem, since regular legislation does not take effect until 90 days after a legislative session. Some also feared that any tax increase would have been challenged in a referendum.

Governor Nigh had asked lawmakers to increase the state sales tax permanently from 2 percent to 3 percent and to temporarily increase that tax to 4 percent for the rest of the fiscal year.

In addition, he called for a tax on consumer purchases of beer and tobacco for the first time and an increase in the state oil and gas tax. The measures would have brought in $650 million, instantly balancing the budget.

The Governor sharply criticized the legislature's failure to act. After ordering all state agencies to cut their budgets, the Governor complained that the legislature would act only when faced with "bloodletting" in the state government.'

'Boom-Bust' Economy

Oklahoma's budget problems, state officials said, illustrate a growing problem for state governments seeking education improvements in a time of economic uncertainty.

Ms. Borthick and others said state services grew too fast for government officials to consider many of the appropriations carefully.

"When you're in a time of growth, you sometimes gloss over" some problems generated by increased spending, she said. "In Oklahoma, we've never had anything like a zero-based budget. We never go back and review programs in depth. I hate to admit that that's the way we've been operating, but it might be right."

The Oklahoma legislature in 1980 enacted a set of reforms in the teaching profession that committed the state to steadily increase teacher salaries. In exchange for establishing more rigorous certification standards originally opposed by teacher unions, lawmakers agreed to upgrade the teacher-salary system. The state also upgraded programs for special education and vocational education and established statewide programs for gifted and talented students.

Those initiatives, while ambitious, "were not going beyond what needed to be done," said John 'Folks, associate deputy superintendent of education. "We were doing a lot of catching up."

The state's budget, partly as a result of those changes, doubled from about $800 million five years ago to almost $1.7 billion this year. The state's salary-improvement program alone costs the state more than $200 million annually.

The average state-funded increases in teacher salaries were $900, $1,600, $1,600, and $2,000 between the fiscal years 1980 and 1983. The cost to the state for those raises ranged between $32.4 million and $81.3 million during each of those years. The legislature did not mandate any state-funded pay increases for this school year.

In the early years of the teacher-improvement program--when oil and natural-gas prices were high, as was the rate of exploration--the state government had no trouble raising the revenues to balance its budget. Revenue from the state income tax increased from $455 million to $734 million between fiscal 1980 and fiscal 1983, and revenue from the tax on production of oil, gas, and natural minerals increased from $240 million to $432 million during the same period.

For five consecutive years, the state had budget surpluses of $100 million, and Governor Nigh last year based his re-election campaign on a low-tax platform. The surpluses generally were used for capital projects such as improving the state's highway system, prison facilities, and college campuses.

As recently as two years ago, the state's unemployment rate was 4 percent, one of the lowest in the country.

Downturn in Economy

But by 1982, the state's natural-gas and oil industries hit hard times. Industry experts said the 1978 deregulation of "deep gas" prices, which at first inflated gas prices and increased state gas-tax revenues, eventually encouraged so much drilling that gas prices plummeted.

Last year, the legislature was forced to trim $90 million from the state budget. Officials say the economic slump, which has already pushed the unemployment rate to 8.1 percent, is likely to be reflected in depressed tax revenues. The Office of State Finance estimates that money from the gross-production tax will fall to $370 million by 1985, and the money raised from other tax sources also will level off.

"What we are seeing is the recession that everyone else saw four years ago," said James Caldwell, the state budget director. "It's directly tied to the boom and bust in oil and gas."

State officials and representatives of teachers' and administrators' organizations have expressed little optimism that the legislature will be more willing to increase taxes in January than it was last month.

"My fear is that [the special session] may have set the tone for the regular session, and it is the regular session where I think we could have been a little creative," said David Renfro, president of the Oklahoma City Federation of Teachers and the legislative liaison for the Oklahoma Federation of Teachers.

"Oklahoma is one state that needs to learn a lesson," Mr. Renfro said. "Other states that have had budget problems, like New York and Michigan, have still made education a number-one priority. But we have at the first signs of a budget crunch chopped away at education."

Ms. Borthick said legislators and educators in the state "have a problem of educating the populace on what it means not to have a tax increase."

Public support for taxes will increase when voters learn the consequences of cuts in school programs and some districts face default proceedings, she predicted. Higher taxes are necessary, she said, because "I don't think we have [$155-million] worth of programs where the money isn't being spent wisely" and can be spared without cuts in basic services.

Vol. 03, Issue 14

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