State government budget picture looking up

Tuesday, January 27th 2004, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) _ It will be another tight budget year for state government, but Gov. Brad Henry isn't complaining.

He says this year's standstill budget of $5.1 billion is a dream compared to his first year in office when he inherited a shortfall of almost $700 million, the worst in state history.

After months of cautious comments about climbing tax collections, the Henry administration appears ready to declare an end to the recession.

``Things have termed around, slowly but surely,'' a chipper Henry told a group of educators last week as he rolled out a five-year $244 million program increasing teacher pay and benefits. The first year cost: $64 million.

Scott Meacham, state finance director, said officials now have six months of hard data showing a growing economy, with increases in sales, income taxes and motor vehicle taxes and continued strong natural gas collections.

A year ago at this time, tax collections were lagging, forcing Meacham's office to announce cuts in existing budgets that averaged 7.85 percent for the year.

Agencies were hit with cuts of 13.74 percent in April, May and June and had their budgets whacked again during the appropriations process.

It was not a time for many new programs and Henry has declared that balancing the budget without tax increases was his biggest accomplishment last session.

On Henry's recommendation, the Legislature patched together a budget through a variety of actions, including raiding reserve funds, accelerating tax collections and refinancing bonds.

Henry also has announced a tax-cut program that would eliminate the capital gains tax on Oklahoma-based property, cut taxes of retirees and make permanent the reduction of Oklahoma's top income tax rate to 6.65 percent.

The governor's office declined to give an estimate of the cost, but a legislative budget analyst said it would be significant.

How can he do that, plus fund improvements in health care, higher education and other areas and solve funding woes of state prisons and other entities?

A few things are known.

For one, Henry hopes to ``conservatively'' collect more than $70 million if the Legislature goes along with his program to allow horse racetracks to have electronic games similar to those operated at 82 Indian casinos across the state.

The Democratic governor also is expected to recommend an increase in the tax on cigarettes, probably equal to about 50 cents a pack, which would bring in an estimated $100 million. Anti-tobacco activists are pushing for a $1 increase.

Much of the new tobacco revenue would presumably be set aside for a cancer center, to extend health care coverage to uninsured Oklahomans and for other health-related programs.

Meacham hints there will be proposals to improve tax collecting methods.

``We've tried to be innovative and aggressive in collecting taxes that are already actually owed the state'' in lieu of raising taxes, he said.

He said improving the health care system makes financial sense. ``We have two problems. One is that nearly 20 percent of our people are uninsured and the other is we pay our providers way less than the national average. Both of those problems are putting a lot of stress in the system.''

Meacham said taking care of the 20 percent who have no coverage adds an estimated 30 percent to the insurance costs others have to pay.

``We think its smarter to manage that care up from with lower dollars'' instead of high-cost treatment such as emergency care, he said.

The $5.1 billion budget was set last month and will be updated in February. It includes about $120 million in federal money states got because of the Bush tax cuts.

Meacham is expecting the state Equalization Board to increase the amount of money available for spending, based on reports of heavy holiday sales and other factors. But he says it will not be a colossal amount.

The biggest problem facing lawmakers, he said, may be pent-up demand created by three straight tough budget years that have caused reductions in services and a freeze on pay raises.

``If it goes on too long, you start losing your best and brightest employees to the private sector. It's a major concern. We've got to try and figure out a way to deal with these problems.''

Henry got bipartisan support from Republicans in solving last year's financial dilemma and GOP leaders seem to warm last week to his tax-cut proposals.

Meacham is concerned, however, that partisanship could rise up in an election year, especially given the fact that the balance of power between Democrats and Republicans is so close.

``Our position is we want to work together for the good of the state,'' he said. ``We're obviously dependent on having someone across the table to talk to us. But if they won't talk to us, there is no way we can work with them.''

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