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| C+ | Oklahoma |
• Population (rank): 3,579,212 (28)
• Average per capita income (rank): $20,935 (45)
• Total state spending (rank): $16,882,365,000 (29)
• Spending per capita (rank): $4,717 (33)
• Governor: Brad Henry (D)
• First elected: 11/2002
• Senate: 48 members: 24 D, 24 R
• Term limits: 12 years (lifetime)
• House: 101 members: 44 D, 57 R
• Term limits: 12 years (lifetime)
Populism is alive and well in Oklahoma's government. The 46th state admitted to the Union approaches its finances with a strongly held belief that the citizens can spend dollars a lot smarter than the state can. A deep distrust of centralized authority has left Oklahoma with dozens of boards and commissions that usurp a great deal of the executive authority that other states vest in their governors' offices. Agency plans sometimes need approval from a long list of officials. Says Janice Buchanan, the fiscal director for the House of Representatives, "There are a lot more decision makers here."
Right now, the economic climate in Oklahoma is healthy; soaring oil and gas prices have helped to fill the state treasury to overflowing. But if prices decline over the next few years, some of the state's decisions about how to spend the current windfall may leave it with serious problems. Instead of using the money for one-time expenditures — such as cutting a $230 million deferred-maintenance bill for state highways — officials opted for long-term tax cuts. Since reversing the cuts would require an unlikely three-fourths majority in the legislature, Oklahoma is effectively spending one-time money on ongoing bills. That's contrary to one of the golden rules of prudent management.
But a downturn in oil and gas might not be quite as troublesome as it would have been in past years. The state's economy has become much more diverse. Twenty years ago, oil and gas taxes provided 30 percent of the revenue, whereas now they are less than 15 percent. Moreover, the state's rainy day fund is full for the first time in history.
Still, Oklahoma would be well advised to consider paying more attention to the future impact of current-day decisions. "Long term in our environment is two years," says Buchanan. One example: The legislature passed laws that lengthened prison sentences but now refuses to fully fund a prison system afflicted with overcrowding. Corrections officials have to return to the legislature before the end of each fiscal year for additional funds.
The state did succeed in revamping its agencies' strategic plans, which now look ahead at least five years. But it's hard not to notice that many of their goals are quite modest. The Department of Human Services' health care measures, for example, show few plans for getting improved health care to more Oklahomans for at least another four years.
Another problem is the low pay scale for state employees. Each year, agencies with extra cash on hand do make an effort to boost the salaries of difficult-to-recruit employees. In 2006, some 7,000 employees received more than $9 million in skill-based pay raises and market adjustments. But that's in the context of workforce salaries that are still unrealistically low overall. Oklahoma does provide employees with good benefits. "It's one of the few areas where we can fully compete with the private sector," says Hank Batty, deputy administrator of personnel. "We have not seen the erosion in benefits that other states have had."
In the past, Oklahoma has provided many of these benefits without any real attention to how they would eventually be paid. The teachers' retirement fund was in particularly bad shape. "Over the past few decades, benefits were increased without matching funds," says Jauna Head, the director of special projects for the Office of State Finance. "It's taken a number of years to get everyone to pay attention to the problem," she adds, "and now we're trying to play catch-up."
But legislators seem to have gotten the message. Recent legislation mandated increased contributions to the system. In 2008, the pension fund will get an extra $9 million, in 2009, an extra $48 million and in 2010, $58 million. "Within 20 to 25 years," says Budget Director Brandy Manek, "these changes will get the teachers' fund to an acceptable 80 percent funding level."
Perhaps the best news of all on this front: In 2006, the legislature passed an "Actuarial Analysis Act," which mandates that any change to employee benefits must be carefully analyzed for its long-term fiscal impact.
For additional data and analysis, go to pewcenteronthestates.org/gpp.