by Chris Shelton and Dave Bond
Oklahoma Council of Public Affairs
Editor’s Note: The charts accompanying this story show dollars in millions.
Oklahoma City – In discussions about taxes and state government spending in Oklahoma, some advocates insist that available funding has been slashed to the bone for important public services.
However, the claim is simply not true. While state appropriations in Oklahoma have fallen below previous years, total state government spending in Oklahoma is higher than ever — more than $3.83 billion higher than 10 years ago.
It’s important to understand the difference between state appropriations and total state government spending. State appropriations make up “the state budget” that lawmakers at the Oklahoma Capitol vote on every legislative session in order to provide a portion of the funding for specific state agencies.
Total state spending, on the other hand, is the sum of all the many different sources of funding that flow to — and are spent by — Oklahoma’s state government agencies each year. This includes state appropriations, as well as federal grants, non-appropriated spending, “off the top” apportionments, and more. For the last several years, state appropriations have made up only about 40 percent of total state government spending in Oklahoma. Oklahoma’s state government operates on a fiscal year that runs July 1 through June 30. For Fiscal Year 2007, which began July 1, 2006, lawmakers at the state Capitol appropriated $6.64 billion. For FY 2016, lawmakers appropriated $7.13 billion.
So, Oklahoma state lawmakers appropriated $490 million more for state services in FY 2016 than they had 10 years prior, an increase of more than 7 percent.
It’s true that state appropriations for FY 2017, recently signed into law by Oklahoma Gov. Mary Fallin, did fall to $6.77 billion. This is still $130 million higher than FY 2007 appropriations, an increase of nearly 2 percent. But appropriations in FY 2008, FY 2009 and FYs 2013 through 2016 were all higher than the recent appropriations for FY 2017.
However, some key economic factors to consider: In FY 2008, the price of West Texas Intermediate crude oil topped $133 per barrel, an all-time high, dramatically benefiting Oklahoma’s economy — and tax collections. Oil prices were also historically high in 2013 and 2014, benefiting Oklahoma tax collections, and appropriations, considerably. In August of 2013, the price of WTI crude oil rose to $106 per barrel. In June of 2014, the price exceeded $105 per barrel.
Then, as 2014 progressed, oil prices plummeted as Saudi Arabia and other OPEC member nations, in effect, imposed economic sanctions on U.S. shale drilling states, including Oklahoma. Over the next two years, tens of thousands of Oklahomans lost employment in the energy sector. A number of Oklahoma-based energy companies declared bankruptcy.
These developments hit the state’s economy — and tax collections — hard. With this in mind, it shouldn’t be a surprise that appropriations for Oklahoma’s state government today are less than when oil prices regularly exceeded $100 per barrel.
What may surprise some, however, is that, except for a small blip downward in FY 2015, total annual spending by Oklahoma’s state government has consistently risen. In FY 2007, total spending by Oklahoma’s state government was $14.13 billion. In FY 2016, the most recent fiscal year for which full data is available, total state government spending in Oklahoma topped $17.96 billion.
In other words, total state government spending in Oklahoma is $3.83 billion higher today than 10 years ago, an increase of more than 27 percent.
The consistent rise in total state government spending in Oklahoma is fascinating for several reasons. First, it does not correlate with state appropriations, which rose and fell from year to year.
Second, it does not correlate with outside economic factors, such oil prices, on which Oklahoma’s economy often hinges.
Third, it was apparently not affected by the drop-off in federal government spending in Oklahoma following the tailing off of the 2009 Obama stimulus, which temporarily pumped hundreds of millions of federal dollars into the state beginning in 2009. Some will note that, despite the increase in total state government spending, state expenditures for public education are presently below previous years. Fortunately, thanks to rising collections in ad valorem taxes — i.e., property taxes, which are collected and spent by local governments, rather than by state government — total revenues for Oklahoma public schools have consistently grown over the past 10 years and are now at record highs.
It’s also worth pointing out that reductions in recent years in state spending on education, as well as reductions in state spending on transportation infrastructure, can be attributed almost entirely to skyrocketing levels of state spending on health care.
Since FY 2006, the amount of total annual state government spending in Oklahoma on health care has increased by a whopping $2.25 billion, or 65 percent. By comparison, median household income growth in Oklahoma grew by only 31 percent during that same period, according to the U.S. Census Bureau.
The escalation in health care spending by Oklahoma’s state government has devoured funding for other state services, including schools, roads, bridges, prisons and more.