Oklahoma Government Spending Is at an All-Time High

February 6, 2012

Every year the Oklahoma Office of State Finance, where I previously served as a budget analyst, prepares the Comprehensive Annual Financial Report (CAFR) for the state. The CAFR is the primary means of reporting the state government’s financial activities.

A review of the latest CAFR, which was released on December 30, 2011, makes clear that Oklahoma’s budget crisis is indeed real: Government spending is at an all-time high.

Despite two recessionary periods, total state expenditures increased every year from FY-2001 to FY-2011.

As the chart below indicates, in FY-2001 total state expenditures were $9.65 billion. By FY-2011 state expenditures had grown to $16.64 billion—a bipartisan spending increase of more than 72 percent in just 10 years.

It is important to use total state expenditures as a yardstick, because looking only at appropriations (which accounts for a mere 40 percent of state spending) fails to consider the money the state extracts from taxpayers that never enters the appropriations process. This includes funds for the Oklahoma Teachers Retirement System, the Oklahoma Firefighters Pension and Retirement System, the Oklahoma Higher Learning Access Program, and many other programs that use state-matched federal funds, fees, licenses, permits, and other non-appropriated revenues.

Other noteworthy nuggets from the CAFR:

• State of Oklahoma tax collections grew by $605.9 million from FY-2010 to FY-2011.
• While private-sector incomes have declined two years in a row, state and local government incomes have grown every year since 2001.
• Total state spending on social services has grown from $1.59 billion in FY-2005 to $2.25 billion in FY-2011—an increase of 41.7 percent in six years.
• Total state spending on health services has grown from $3.13 billion in FY-2005 to $4.85 billion in FY-2011—an increase of 54.3 percent in six years.
• Total state spending on education has grown from $3.53 billion in FY-2005 to $4.57 billion in FY-2011—an increase of 29.4 percent in six years.

It’s time for lawmakers to take a serious, in-depth look at state spending. The relationship between total agency spending and revenue sources other than appropriations deserves particular attention. The lure of “free” federal funds and grants has driven state agencies over the years to create and expand programs, which has the effect of ratcheting up state spending.

In short, it is clear from a review of the CAFR that Oklahoma doesn’t have a revenue problem. It has a spending problem.

Jonathan Small, a Certified Public Accountant, is OCPA’s fiscal policy director.