State agencies could take a hit because of Oklahoma budget shortfall

Sunday, January 6th 2002, 12:00 am
By: News On 6

OKLAHOMA CITY (AP) _ Vital services and projects could be put on hold because of a drop in state revenue and a move to reform the Oklahoma tax system, state agency officials say.

The state Equalization Board on Dec. 28 approved the state's projected revenue for fiscal 2003 as being about $105.3 million less than the current fiscal year. State revenues are expected eventually to fall more than $270 million below last year's revenues.

By law, the budget shortfall triggered an increase in the state income tax rate. The rate increased from 6.75 percent to 7 percent.

The automatic increase was a fail-safe mechanism placed in a 1998 bill that reduced the tax rate. It was intended to protect state government in a fiscal crisis.

In light of the $70.5 million shortfall, agency budgets will be cut by 2.1 percent each month through the end of the fiscal year on June 30, 2002. Under the Oklahoma Constitution, across-the-board budget cuts are required if there is a revenue shortfall.

The Legislature can alter the across-the-board reductions.

Before the shortfall was announced, the Corrections Department and the Oklahoma Health Care Authority said they needed almost $70 million to meet projected expenses.

The Corrections Department said it needs an extra $46.2 million with more than half of that needed to pay for inmates housed in private prisons.

The department may have to implement a hiring freeze, consider layoffs and cut back on operating expenses if it doesn't get the funding it needs, said department spokesman Jerry Massie.

``There are some areas we could realize some savings in, but there are not significant enough savings to generate enough to make up this difference,'' Massie said. ``Whether private prisons have them or we have them, there is a cost related to housing inmates.''

The Oklahoma Health Care Authority, which pays for health care for more than 460,000 Oklahomans in its Medicaid program, is projecting a shortfall of $23 million in state matching funds for its federally subsidized program.

To offset fiscal problems, the authority is considering making cuts in provider rates, member benefits and limiting clients' eligibility.

Other state agencies may have to put off costly, but high-priority projects because of the shortfall.

Common education is asking for $240.1 million more for the next fiscal year.

The Oklahoma Education Association wants fully funded health insurance for teachers and support personnel. It will cost an estimated cost of $114 million.

``I know it's hard to think about any new spending during a shortfall year, but this is getting to be a real crisis for our education employees and families, and it's creating a larger crisis in the teacher shortage we already have,'' OEA President Carolyn Crowder said.

The Oklahoma Public Employees Association wants a $1,350 across-the-board pay raise for more than 36,000 state employees.

Officials blame the budget shortfall on a decline in revenue from the tax on natural gas.

Meanwhile, Republicans and Democrats are using the current economic picture to push for tax reform.

Rep. Clay Pope, D-Loyal, will recommend this week that lawmakers consider a flat tax system similar to one in Colorado. His plan would attach a tax of about 4.5 percent on federal taxable income and extend a 4.5 percent sales tax to a limited range of services.

Gov. Frank Keating favors eliminating the state income tax and sales tax on groceries and shifting much of the tax burden to a 5.9 percent tax on services.

Pope said the state's current budget problems make Keating's plan too risky.

``The big thing is you have to look at where Oklahoma is and where we want to be,'' Pope said. ``We need to make changes in the tax code.''

Whatever plan is chosen, Pope said the Legislature must move slowly in reforming the tax code.

``There are a lot of unintended consequences on this thing,'' he said. ``I can't think of any issue that will have more effect on the future of the state, either for the good or for the ill.''