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Budgeting During the Wuhan Virus Apparently Means Not Having to Make Tough Decisions


At the time of this writing, Governor Stitt remains in a budgetary impasse with the legislature over completing the current fiscal year, which ends in June. By the time this is posted, in all likelihood, he’ll have signed the spending bills that access the rainy day fund and which make no spending cuts for the rest of this fiscal year, despite current revenue issues and the fact that many agencies are closed. 

One of those bills Governor didn’t immediately sign also cut funding to the Digital Transformation Revolving Fund. This Fund appears to be very important to Governor Stitt as part of his efforts to make Oklahoma’s government top-10 in performance among the states. What’s strange is this is just about the only thing that saw a cut – something that likely involves contracts, and the sort of thing that does usually get defunded in the middle of a fiscal year.

A Tulsa World editorial has dismissed the disagreement with “The pandemic crisis isn’t a good time for a state budget fight” as if “pandemic” is all you have to say, and that makes the conclusion self-evident. And apparently, legislative leadership’s thinking is the same, along with a veto-proof majority of legislative members.

But is anybody – the legislature, the governor, or the press – in the right? Arguably, none are. Frankly, Governor Stitt is probably the closest to taking a principled stand. He has at least acknowledged that there is a rocky road ahead and now isn’t the best time to hide one’s head in the sand. The suggestion that budget cuts might be in order after a couple of years of pretty free spending and in the face of an economy devastated by a pandemic panic, accompanied by an oil price collapse, is actually a good idea. The error is in failing to prioritize. Some spending is less necessary than other spending. Across-the-board equal-percentage cuts is a result of laziness or an unwillingness to separate wheat from chaff.

The legislature and its press allies have nothing to stand on. The legislature’s first reaction seems to be that they really didn’t want to be at the capitol doing business in the first place. The pandemic therefore offers the perfect excuse to not do what they didn’t want to do anyway. Budget decisions made well before anybody had an inkling of what the overreaction to the Wuhan virus would do to the economy and before we realized just how badly oil prices would drop, are to stand (except a program important to the governor’s office, and apparently cut due to some sort of childish vendetta). Any and all of the gap between budgeted spending and revenue will be made up with rainy day funds. Yahoo! Let’s go home.

But when times are bad and rainy day funds get used, it’s generally prudent to review spending and prioritize, fall back to absolutely necessary spending, and cut any fat. It’s not a perfect analogy, but if a family’s chief breadwinner loses a job, that family might have substantial savings, but they don’t spend down the savings while continuing to live as if the job is still bringing in income – at least not if they’re prudent. They cut back expenses and use the savings to provide for necessities. That’s because they don’t know when or by how much the income will come back.

We don’t know when Russia and Saudi Arabia will cut back on their oil production or when they do, how much they’ll continue to produce. So we have no idea how much or when oil prices will recover. We have no idea what the economy will do once the powers that be decide we can go about our daily business again. We have no idea if the Wuhan virus or some variant might rear its ugly head again at some point in the fall. For that matter, these are uncertainties every time a budget is written, regardless of current circumstances, good or bad. But, we do know, right now, with absolute certainty, that revenues this year will fall short, and next year’s revenues are not likely to do well, either. Now is the time to be saving.

So legislature, why not acknowledge that Governor Stitt has a point? If you’re scared of the virus, maybe if the governor’s digital transformation efforts were fully funded, you could make new rules and meet virtually. Besides, it’s your job to make tough decisions. If that’s not what you stood for election to do, or if you seriously thought you wouldn’t have to, you really should leave the legislature and let somebody else take office who is willing to make some tough decisions. But if you stick around, this hyperlink gives some pointers for how you ought to make some of your budget decisions.

Byron Schlomach is 1889 Institute Director and can be contacted at bschlomach@1889institute.org.

The opinions expressed in this blog are those of the author, and do not necessarily reflect the official position of 1889 Institute.

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