State budget shortfall will require a balanced approach
By Scott Meacham
Copyright © 2016, The Oklahoma Publishing Company
The governor’s State of the State speech is an important annual event for the Oklahoma Legislature as it kicks off the legislative session and sets forth the governor’s vision.
As Gov. Brad Henry’s secretary of finance, I spent eight years assisting in the drafting and practice sessions for the speech and then sat in the House chamber as he gave the speech. Throughout Gov. Henry’s two terms, I estimate that I heard each year’s State of the State at least 20 times — 160 times over eight years.
I provide that background as a little context so that people might understand why I did not listen to Gov. Fallin’s first five State of the State speeches. I had a serious case of speech fatigue.
This year, curiosity got the better of me. Oklahoma is facing a $1.3 billion budget hole, an eerily similar number to the $1.1 billion budget hole Gov. Henry faced after the Great Recession.
Gov. Fallin is obligated to present the Legislature with a balanced budget. I was curious as to how she would address a record decline in funds available for the Legislature to appropriate. So, I tuned in.
I was impressed by what I heard.
I did not see another politician wringing hands or doing everything possible to avoid tackling the problem. Instead, our governor put forth a bold and visionary plan to deal with the crisis and better posture Oklahoma to weather future crises. Did I agree with everything she said? Of course not. Do I believe the Legislature will follow through on all of her ideas? I am long past being that naive. But I did see our state’s chief executive do exactly what we elected her to do. She stood before the Oklahoma Legislature and led courageously and confidently.
The governor realizes that there is not a single, simple solution. We cannot tax, cut spending, bond or use one-time budget gimmicks to get us through this large of a budget shortfall. It is going to take a balanced approach that hits all of the categories above — just what the governor proposed.
One category, state-provided tax credits already are getting a lot of scrutiny. In particular, several in the business community, including leading Oklahoma businessmen such as Harold Hamm and Frank Robison, are questioning the large and growing tax subsidy our state is providing wind farms. Apparently the annual budget cost of the wind tax credits is $200 million and growing, with 38 percent of the credit going to non-U.S.-owned companies, and over 60 percent of the wind-generated power going outside of Oklahoma. Those numbers are startling.
More startling, however, is a comparison I recently saw of the increasing amount of wind generation over time correlated with a markedly similar decline in the price of natural gas.
Could the increase in wind-generated electricity be displacing use of natural gas, the core commodity on which our state’s economy relies? What if the $200 million per year wind subsidy actually is contributing to the decline in natural gas prices? Talk about unintended consequences.
The Legislature has no choice but to pass a balanced budget that addresses a record-size budget shortfall. The governor has suggested a sensible, if painful, path. Frankly, I am glad it’s no longer my job to figure out how to fill such a large budget hole. But fill it we must.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at [email protected].