The Worst May Be Coming

What's next? Frogs? Locusts? Fire ants?

To hear the state's powers-that-be tell it, Oklahoma's financial plague is an Old Testament-esque calamity, a crisis so extraordinary and so utterly unexpected that only divine intervention or Draconian cuts can save the republic.

Puh-leeeeze.

Just because the leaders of the Republican legislative majority and the Democratic brain trust [Gov. Brad Henry and Treasurer Scott Meacham] are singing the same mournful hymn -- Shall We Gather at the Red-Ink River? -- doesn't mean this projected $1 billion budget shortfall is any great mystery.

Yes, the worst economic collapse since the Great Depression dealt a staggering blow to Oklahoma's budget, just like every other state. But the damage would have been less severe if Republican legislative majorities, in concert with the Democratic minority and a Democratic governor, hadn't pandered to voters during times of plenty, cutting taxes by $770 million.

Hmmm. Is it mere coincidence that through the first five months of the fiscal year state revenue collections were $717.1 million less than the same period last year?

Maybe we should employ this biblical analogy instead -- you reap what you sow.

It was grandly bizarre theater last week when a Mutual Admiration Society blossomed between longtime Capitol combatants -- Meacham and Henry on one side; House Speaker Chris Benge, Senate President Pro Tem Glenn Coffee and the House GOP's chief budget writer, Rep. Ken Miller, on the other.

They were effusive in their praise for each other as -- irony of ironies -- they join forces to confront the very problems they were complicit in creating. It's classic Politics 101: There's safety -- aka political cover -- in numbers, especially bipartisan numbers.

All grandstanding aside, Miller, an Edmond Republican and college professor, argued that lawmakers have only three weapons available to help manage the crisis: deeper and longer budget cuts, spending more of the state's share of federal stimulus dollars now rather than later and tapping the nearly $600 million Rainy Day fund.

Meacham suggested several others: increasing fees for state services, more efficient tax collections, more aggressive law enforcement [can you spell f-i-n-e-s?] and refinancing state bonds at more favorable interest rates.

No one in a position of authority, however, had the courage -- or even the temerity -- to suggest increasing taxes or to even acknowledge that the tax-cutting frenzy might have been a mistake. Instead, all cling to what former President George H.W. Bush once derided as "voodoo economics" and its fantasy that tax cuts will generate more revenues.

The anti-government, Supply Side geeks will forever argue two points: First, the tax cuts were not a factor in the state's budget crisis [they actually make this argument with a straight face]. Second, increasing taxes during recession will make matters worse.

Worse than the loss of thousands of jobs tied to the state budget -- whether direct state employment or private-sector positions held by those whose companies contract with the state to provide services? How about simply reversing the cuts that disproportionately benefited the state's most affluent?

Meacham was correct when he noted that Oklahoma's economy remains at the mercy of the energy industry's vicissitudes. In July 2008, before the economic collapse, natural gas prices topped $10 per million BTU, filling state coffers with gross production tax revenues. In the months since, prices plummeted below $3 per million BTU for a time -- mostly hovering in the $4-5 per million BTU range.

Last month alone, gross production taxes were down 84 percent from a year ago.

Anyone with even a passing knowledge of Oklahoma is aware of the state's boom-and-bust history. It doesn't take a PhD in economics -- sorry, Rep. Miller -- to recognize that tax cuts approved earlier this decade were the equivalent of playing with fire.

It's also comical to watch all these free-enterprise anti-Obama conservatives who earlier this year railed against federal stimulus dollars now gratefully accepting the $1.26 billion and arguing over how much to spend this fiscal year and next.

Amidst the dire budget analysis, however, there were two tidbits of good news. Well, sort of.

First, the governor and legislative leaders acknowledged that public education was absorbing deeper cuts than other state agencies because of a $41 million shortage in the Education Reform Revolving Fund -- a secondary fund created during the late Gov. Henry Bellmon's second administration to help finance House Bill 1017 reforms.

Henry, Benge and Coffee agreed to make up the shortage, ensuring schools are treated no differently under the budget cuts than other state services.

Second, Meacham acknowledged that state leaders may have no choice but to consider ways to increase revenues -- mentioning higher fees for some state services as an option.

Maybe he's willing to raise the issue because he's decided not to seek re-election next year and is leaving politics altogether. Or perhaps he refuses to live in denial, opting instead to face up to bleak early forecasts for the 2010-11 fiscal year and beyond -- especially if no more federal stimulus money is forthcoming.

Either way, Meacham didn't bother to sugar-coat Oklahoma's predicament.

"We don't have the optimism," he said grimly, "that we've seen the bottom yet."

-- Arnold Hamilton is editor of The Oklahoma Observer www.okobserver.net