| April 1, 2011

State Government Spending Continues to Climb

Contrary to what you may hear from our friends on the left, government spending in Oklahoma continues to rise, and it continues to outpace personal income growth in the state.

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 reports total revenues, expenses, and other financial data.

Taxpayers might be interested to learn that, despite two recessionary periods, total state expenditures increased every year from FY-2001 to FY-2010 (the latest year data are available). Yes, despite the recession, the state set a record for expenditures in FY-2010.

In FY-2001, total state expenditures were $9.6 billion. By FY-2010 state expenditures had grown to $16.6 billion.

It is important to use total state expenditures as a yardstick, because looking only at appropriations fails to consider the money that the state extracts from taxpayers that never enters the appropriations process.

For example, the Oklahoma Teachers Retirement System (OTRS) receives five percent of all sales, use, individual income, and corporate income tax revenues before those tax dollars can be appropriated.

That’s $669 million in the last three years alone—none of it appropriated. And the OTRS is but one example. Legislators are fond of using these “dedicated, directed” funding sources to channel millions of dollars to their favorite government programs.

According to the CAFR, spending for the category of Health Services (Medicaid and other programs) was the largest expenditure category for Oklahoma state government in FY-2010. Spending on Health Services comprised 28.4 percent of total state government spending in Oklahoma, edging out education spending at 28 percent.

This is not surprising when one considers the alarming growth in Medicaid, the joint federal-state medical welfare program. According to the Oklahoma Health Care Authority’s FY-2010 annual report, in FY-2005 the number of Medicaid enrollees served was 629,703 and expenditures totaled $2.81 billion. By FY-2010, the number of Medicaid enrollees had mushroomed to 881,220 (about 24 percent of the population) and expenditures had ballooned to $4.33 billion—an increase of 54 percent in just five years.

Yet for all this spending, Medicaid is “a broken program,” says former OCPA trustee Tom Coburn, a medical doctor who represents Oklahoma in the United States Senate. “Medicaid already denies patients access to roughly half of physicians. And when compared to individuals with no health insurance at all, patients on Medicaid have lower health outcomes, higher rates of infant mortality, and higher rates of complication after major surgery.”

In any case, “appropriations” is not the most useful measure of government growth. Indeed, appropriated funds account for less than 40 percent of total state expenditures. That’s right: of the $16.6 billion in state expenditures in FY-2010, only $6.4 billion of it was appropriated. Oklahoma’s state government receives (and spends) revenue from a variety of sources, including licenses, fees, permits, fines, forfeits, income from property, and grants from the federal government. And contrary to popular belief, federal grants are not “free money.” Oklahomans pay federal taxes, and our grandchildren will be stuck paying the Chinese for all this debt.

A recent SoonerPoll showed that Oklahomans overwhelmingly prefer a smaller government with fewer services. Unfortunately, we’re still waiting.

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