| August 4, 2011
Ten Budget Reforms for 2012
Oklahoma lawmakers aiming for serious spending reform, take heart. Indiana and other states are experiencing budget surpluses largely due to significant spending and budget reforms.
According to a news release from the office of Indiana Gov. Mitch Daniels:
- From 2005 to 2011, Indiana state expenditures have grown by only 1.43 percent annually. This compares to 5.88 percent annually from 1996 to 2004.
- Adjusted for inflation and population growth, Indiana state expenditures have declined by 1.8 percent per year (compound annual rate) from 2004 to 2011.
- The total number of full-time state employees in Indiana is 28,069. This is fewer than in 1976.
- Since 2008, the number of Indiana state employees has declined by 3,747 (11.8 percent), almost entirely through attrition.
If Oklahoma policymakers are interested in copying Indiana’s success, here are 10 suggested reforms.
- Establish limited priorities for Oklahoma’s state government. Once limited priorities are set, everything else should be considered according to these priorities. The state currently has hundreds of agencies, boards, and commissions; it’s no wonder there is chronic overspending and regular “revenue shortfalls.”
- Reform the budget and appropriations process. We are experiencing the second “revenue shortfall” cycle in eight years faced by the legislature. This is a result of too little planning, a poor budgeting process, and chronic overspending.
- Stop the heavy use of and reliance on one-time revenues for ongoing annual state expenses. This practice saddles future policymakers with decisions and consequences that should have been addressed by predecessors.
- Enact further pension reform, including the implementation of a defined-contribution plan for non-hazardous-duty state, education, and local government employees.
- Reform the state Medicaid program, and reduce the utilization of the program.
- Implement further corrections reform and spending reductions. With wisdom and caution, other methods (such as monitored restitution) must be implemented to drastically reduce the incarceration of nonviolent offenders.
- Implement administrative and operational reforms, and spending reductions, in common education. From the bloated number of more than 500 school districts (including seven in one Oklahoma town of fewer than 4,000 people), to the out-of-balance level of spending on administration, there is room for improvement.
- Implement higher education reforms and spending reductions. Higher education currently enjoys numerous special exemptions from oversight, has an excessive number of branch campuses, and benefits from a “peer factor multiplier”—essentially State Question 744 for higher education—which inflates appropriations by more than $191 million per year.
- Implement reform of Oklahoma’s tax code and better scrutiny of tax credit programs. Progress has been made, but Oklahoma still has one of the higher state income tax rates, which is unwise since Oklahoma has already shown other revenue sources increase with reductions in the income tax. Continued reductions in the income tax can be accomplished when unscrutinized items like the venture capital tax credit through the Oklahoma Capital Investment Board are ended. This program is likely going to cost the state millions as it sunsets and the investment scheme has faltered. Too bad for Oklahomans, because it looks like they are going to get to bail out this program through credits that will be cashed, with little return on the state’s spending.
- Reduce the bloated state and local government bureaucracy. Even during “revenue shortfall” years, both state government and higher education have experienced startling employment growth.