Measure would tighten purse strings on Rainy Day Fund

Friday, October 15th 2004, 6:21 am
By: News On 6

OKLAHOMA CITY (AP) _ When revenue fell $376 million short of meeting Oklahoma's budget needs last year, lawmakers turned to the state's Rainy Day reserve fund to make up the difference.

But a $207 million revenue shortfall the previous year had drained the fund of all by $72 million to cushion the blow _ a mere drop in the budget bucket that forced massive cuts throughout state government.

A proposed constitutional amendment on the Nov. 2 statewide ballot would tighten the purse strings of Oklahoma's Rainy Day reserve fund to better control spending and make sure that vital public services are protected in a financial crunch.

``We shouldn't have a system that allows us to deplete our nest egg,'' state Treasurer Robert Butkin said.

The proposal is among nine statewide referendums that will be decided by voters. Others would permit cities and counties to finance multiyear economic development projects and give property tax breaks to some seniors and disabled veterans.

The Rainy Day measure, State Question 708, would raise the threshold the governor and state lawmakers must meet before they can withdraw money from the constitutional reserve fund.

Deposits are made to the fund when revenue collections exceed estimates. Since the fund was created 20 years ago, half has been set aside to cushion economic downturns and half for projects authorized through emergency declarations by the governor and the Legislature.

But Butkin said emergencies have been declared for a variety of projects over the years, even when the state experienced revenue growth.

``There was about $700 million spent out of the Rainy Day fund _ even in the good years,'' he said.

State Question 708 would increase to 75 percent the amount set aside to cushion budget cuts while reducing to 25 percent the amount available for discretionary spending.

The reforms, supported by Gov. Brad Henry and a bipartisan coalition of state leaders, will ``promote responsible spending and help prevent future occurrences of the harmful budget cuts of recent years in education, health care and other vital services,'' Butkin said.

If the proposed new limits had been in effect in 2002 and 2003, the Rainy Day fund would have had an additional $100 million to counter revenue shortfalls, he said.

The change will also improve the state's credit rating and permit it to issue bonds at lower cost. Butkin said bond rating agencies prefer that states create reserve funds to service debt and maintain operations in difficult budget years.

A proposed amendment involving city and county taxes and fees would make it easier for local governments to finance economic development projects without imposing new taxes, according to supporters of State Question 707.

``It's really going to help rural Oklahoma,'' said Rick Buchanan, spokesman for Yes! 707 For Economic Development. ``They will have an edge they didn't have in the past.''

The measure involves tax increment financing districts, areas in a community that are not likely to be redeveloped through private efforts. Within the district, a city or county can loan money for public improvements and construction.

Once development occurs, the assessed value of the property increases. The incremental increase in tax revenue is used to pay the public costs of the project.

Passage of the measure would permit local governments to pledge money in advance to entice businesses to invest in the community.

TIF districts, including the Presbyterian Health Foundation Research Park in Oklahoma City and Seaboard Farms' pork processing plant in Guymon, already exist. But state law requires cities and counties to get voter approval each year to collect and appropriate funds.

Under State Question 707, citizens would still have to approve TIFs but cities and counties would not have to conduct annual elections.

Buchanan said the measure has the support of the mayors of Oklahoma City and Tulsa and chambers of commerce throughout the state.

But some officials have expressed concern that the measure allows general spending for economic development without stating a specific purpose.

``I didn't see the limitations that some people would be interested in,'' said state Rep. Forrest Claunch, R-Midwest City. ``I think it could be used profitably. The question is, will it?''

Two other ballot measures address property tax relief for some seniors and veterans.

State Question 714 would raise the $25,000 gross household income limit for low-income homeowners 65 and older to qualify for a freeze in the value of their property for tax purposes.

State Question 715 would add a new property tax exemption for disabled veterans or their surviving spouses.