Oklahomas Fiscal Outlook: Moving from Crisis to Stability

July 2012

David Blatt
dblatt@okpolicy.org (918) 794-3944

Oklahomas Path to Prosperity

What does Oklahoma need to be a prosperous state?

Oklahomas Path to Prosperity

What Prosperity Looks Like

Good-paying jobs Well-educated, well-trained workforce

Quality education system from early childhood to post-secondary

More college graduates

Well-functioning infrastructure Healthy communities

Access to timely and affordable care Public health

Safe streets Stable safety net for those in need

Oklahomas Path to Prosperity

Were In This Together

Successful outcomes for our families, businesses and communities depend on effective public structures and systems Government is among our means of achieving our common goals as a state alongside private businesses, non-profits, philanthropies, faith groups, and families

Oklahomas Path to Prosperity

We Lag Behind
We fall short in many of our common goals:
Students in bottom third in reading and math proficiency (2009)
43rd in share of population with a college degree (22.2 percent, 2008) 46th in overall health; in the bottom 10 states for rates of smoking, obesity, diabetes, job-related deaths, premature deaths, infant mortality, and days lost to mental and physical illness (2011) 1 in 6 Oklahomans (16.9 percent) and 1 in 4 children (24.5 percent) live in poverty (2010) 4th in total prisoners per capita and 1st in female incarceration rates (2009) 9th worst road conditions

Oklahomas Path to Prosperity

We Already Lag Behind
Oklahoma invests less than most states in our public structures.
State and Local Spending per Person by Function, 2007-08
$9,000
Spending per Person

$7,000
$5,000 $3,000 $1,000 -$1,000
Oklahoma US Average

Source: U.S. Bureau of the Census

Oklahomas Path to Prosperity

We Already Lag Behind
Four years of budget cuts or flat funding and growing obligations threaten to corrode our public structures and weaken our prosperity Can we provide a quality education for all students and produce the skilled workforce that businesses need? Can we fix our crumbling infrastructure? Can we improve our physical health and well-being?

Can we ensure the safety of vulnerable children and seniors left in our care?

Budget Trends: FY 10 FY 13

Budget Trends: FY 10 FY 13
The Recession Hit in Late 2008
Oklahoma experienced six straight quarters of negative growth (declining state personal income) in late 2008 2009 Economy has mostly grown faster than the nations since start of 2010
% Change from Prior Quarter

Quarterly Change in Personal Income, Oklahoma and National, 4th Quarter 2007 to 1st Quarter 2012

8.0%

6.0%
4.0% 2.0% 0.0% -2.0% -4.0% -6.0%

-8.0%
2007.3 2008.1 2008.3 2009.1 National 2009.3 2010.1 Oklahoma 2010.3 2011.1 2011.3

Budget Trends: FY 10 FY 13
State Budgets Hammered
All but four states faced budget shortfalls in FY 11.

Budget Trends: FY 10 FY 13
Its a Revenue Problem
Five consecutive quarters of worsening collections Revenue dropped more than twice as steeply as in the previous downturn Revenues recovering over past eight quarters
Quarterly Year-over-Year Change in General Revenue Collections, FY '02 - FY '12
30.0%
20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -12.1% 5.7% 16.1%

-40.0%

-29.5% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY '02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10 '11 11 12 12

Budget Trends: FY 10 FY 13
Its a Revenue Problem
FY 10 General Revenue 23 percent below FY 08 pre-downturn levels Revenues increased by 10.5 percent in FY 11 and are projected to rise 8.1 percent in FY 12 but to remain below pre-downturn levels through FY 13
Annual General Revenue Collections, FY '00 - FY '13
$5,701 $4,717 $4,408 $4,174 $4,616 $4,966 $5,935 $5,953 $5,544 $5,138 $5,555 $5,600

$7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0

$4,621

FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12 FY '13 (proj.) (est.)

Budget Trends: FY 10 FY 13
Its a Revenue Problem
Tax Cuts Had a Long-Term Impact
Tax cuts were large, permanent, and back-loaded Tax cuts were stretched out over several years; full impact will not be felt until FY 13 Major cuts were almost all to the personal income tax
Lost Revenues from Select Tax Cuts Enacted 2004 - 2006 FY'05 through FY'10 (in $ millions) $800.0 $600.0 $400.0 $200.0 $0.0 $18.7 FY'05 $144.8 $333.3 $561.8 $776.9 $651.1

FY'06

FY'07

FY'08

FY'09

FY'10

sour c e : Ok l a hom a Ta x C om m i ssi on

Budget Trends: FY 10 FY 13
Its a Revenue Problem
Tax Collections Are at Historic Lows
In FY 10 tax collections equaled 5.5 percent of state personal income, compared to 7.2 percent in FY 01 Tax collections have not kept pace with personal income since FY 06
Oklahoma State Taxes, Total and as Share of Personal Income, FY '82 FY '10

10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 -

8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0%

2002

2007

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2003

2004

2005

2006

2008

2009

State Tax Collections

Tax Collections as % of State Personal Income

Sources: State personal income from Bureau of Economic Analysis; Tax collections from Annual Executive Budget

2010

Budget Trends: FY 10 FY 13
Budgeting Through the Crisis
Three consecutive years of declining appropriations (FY 10 FY 12) followed by modest increases (FY 13) FY 13 appropriations of $6,855.8 million:
$253 million, 3.8 percent, above FY 12 $269 million, 3.8 percent, below FY 09
State Appropriations, FY '06- FY '13 (in $ Millions, includes supplementals, excludes Rainy Day "spillover" funds)
$7,500
$7,043

$7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 FY'06

$30

$6,760 $6,217

$224
$273
$838 $554

Total= $6,603
$100
99

$6,856

$7,095 $6,404 $5,897 $5,938

FY'07

FY'08 State Revenues

FY'09 Federal Relief

FY '10

FY '11

FY '12

FY '13

Rainy Day Fund

See FY 13 Budget Highlights at: http://okpolicy.org/files/FY13Highlights.pdf

Budget Trends: FY 10 FY 13
Budgeting Through the Crisis
Just under 90 percent of appropriations consistently goes to 10 agencies that provide core services Over 65 agencies share remaining funding
FY '12 Appropriations: Total and 10 Largest Agencies (excludes supplementals)
DHS; $537 ; 8.3%

Total Appropriations: $6,510.5 million

OHCA (Medicaid); $983 ; 15.1%

Corrections; $460 ; 7.1% Transportation; $107 ; 1.6% Mental Health; $187 ; 2.9% Career Tech; $134 ; 2.1% Juv. Affairs; $96 ; 1.5% Public Safety; $85 ; 1.3%

Total Ten Largest: $5,811.9; 89.2%

Higher Ed.; $945 ; 14.5% All Other Agencie s; $699 ; 10.7%

Notes: Transportation also received $70 from bond issue; OHCA excludes revenue from hospital provider assessmber (SHOPP)

Common Ed.; $2,278 ; 35.0%

Budget Trends: FY 10 FY 13
Budgeting Through the Crisis
Budgets for three straight years (FY 10, FY 11 & FY 12) involved variations on a theme:
Large shortfalls in projected revenues
Fear of devastating budget cuts Use of non-recurring revenues to partly bridge the budget gap Budget cuts across state government but less severe for core education, health, human services, and public safety agencies

Budget Trends: FY 10 FY 13
Budgeting Through the Crisis: FY 10 FY 12
Governors Henry and Fallin and the Legislature used various revenue enhancements to bridge budget shortfalls and reduce the severity of cuts: Revenue enhancements totaled close to $3 billion over 3 years Half from federal stimulus bills; remainder divided between Rainy Day Fund, cash transfers, enhanced tax compliance, and suspending and deferring tax credits Most new revenues were one-time/non-recurring Budget cuts for almost all agencies for 3 consecutive years Some 40 agencies more than half of all appropriated agencies absorbed cuts of greater than 20 percent Cuts to some key health, human services, education, and public safety agencies were less severe

Budget Trends: FY 10 FY 13
Budgeting Through the Crisis: FY 13
Total appropriations increased by $253 million (3.8 percent) from FY 12 Most agencies will receive flat funding in FY 13
46 of 78 appropriated agencies will receive the same amount or less

Several agencies received funding increases for targeted priorities, including:

DHS for the child welfare reform plan Transportation to fill budget holes after end of bond issues

Health Care Authority for Medicaid expenditure growth

Mental Health and Corrections for criminal justice reforms

Education agencies received no additional funding or very small increases

Support for public schools through the state aid formula held flat

Budget Trends: FY 10 FY 13
Budgeting Through the Crisis
No agencies have been funded to cover rising operating and employee benefit costs State government workforce has shrunk by 9.8 percent compared to FY 09 and is 4.4 percent smaller than in FY 01 Staffing cuts have been especially severe for correctional facilities
State Employee FTE Count by Fiscal Year Average, FY 01 - FY '12 (excluding Higher Education; FY '12 YTD Apr)
40,000 35,000 30,000 25,000 20,000 FY-01 FY-02 FY-03 FY-04 FY-05 FY-06 FY-07 FY-08 FY-09 FY-10 FY-11 FY-12 39,350 38,231 38,834 38,924 38,154 37,486 37,684 37,403 37,139 36,723 36,081 35,504

Budget Trends: FY 10 FY 13
Impact of Cuts
State appropriated spending reached its lowest level in at least 30 years in FY 11 and has likely fallen even further this year Budget cuts and funding shortfalls continue to affect Oklahoma students, teachers, public employees, nonprofit organizations and private sector businesses
Appropriated Budget as % of State Personal Income, Oklahoma, FY '80 - FY '11
7.0% 6.5% 6.0% 5.5% 5.0% 4.5%

Sources: State personal income from Bureau of Economic Analysis; Appropriations from various sources

Budget Trends: FY 10 FY 13
Impact of Cuts: Education
State aid funding has declined by $214 million since FY 2008 while public school enrollment has increased by over 24,000 students. Almost 1,000 fewer teachers than in 2008, leading to larger class sizes and reduced class offerings. Department of Education eliminated funding for adult education, alternative education, research-based teacher training programs, evaluation contracts, and other programs. Despite new testing requirements, funding reduced for ACE remediation and eliminated for Reading Sufficiency in FY 13. FY 12 budget initially failed to fund full year of health care benefits and stipends for board-certified teachers. Common education has fallen to lowest share of state appropriations since at least FY 00

Budget Trends: FY 10 FY 13
Impact of Cuts: Health and Human Services
In the past three years, the Health Department has been cut by 20 percent, forcing layoffs for at least 300 employees. Health Department eliminated 17 child guidance centers serving pre-school children with developmental delays; Department of Mental Health and Substance Abuse Services reduced beds and closed centers for childrens mental health and adult substance abuse, cut contracts to all providers; Over 6,000 families on waiting list for developmentally-disabled home and community based waiver program;

Significant reductions in counseling programs for abused women and children and prenatal education for low-income mothers;
Office of Juvenile Affairs cancelled youth detention and gang prevention programs.

Budget Trends: FY 10 FY 13
Impact of Cuts: Other Areas
The Department of Corrections remains critically understaffed. Stress from being required to work frequent double-shifts is leading to high turnover. Often just one officer may be on duty in a dining hall of 160 inmates. The number of state troopers on Oklahoma highways is at its lowest level in 22 years. The state owes $36 million to more than 600 cities, counties, electrical cooperatives, state agencies, fire districts, schools and Indian tribes for its share of costs associated with 21 natural disasters dating back to 2007.

State workers have not received a pay increase in 6 years. The number of state workers has dropped by 3,804 (9.8 percent) since FY 09.

Budget Trends: FY 10 FY 13
Impact of Cuts
Oklahomans expect state government to: educate our children train our workforce maintain our infrastructure protect our communities

aid our most vulnerable family members and neighbors

Have years of underfunding and the extended period of flat funding and cuts shrunk state government to the point where it is no longer capable of performing these core functions?

The Challenges We Face

The Challenges We Face

An Incomplete Recovery
Monthly General Revenue collections above the same month for the prior year in 24 of last 25 months
Change in Monthly General Revenue Collections, Compared to Same Month Prior Year, Jan '09 - May'12
20% 13% 12% 16% 13% 10% 9% 5% 18% 15% 6% 23% 19% 15% 7%

30.0%

20.0%
10.0% 0.0% -10.0% -20.0% -30.0% -40.0%
1.6% 0% 10% 6% 2% 5% 6% 3% 9%

6%

4%

-1%

-8%

-7% -17%

-19% -22% -21%

-24% -26% -28% -30% -31% -29% -30% -32%

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12

The Challenges We Face

An Incomplete Recovery
FY 12 revenue collections through May up 21 percent from FY 10 but still 7 percent below FY 07 Revenues still below nominal levels of 6 years ago

$6,000 $5,000 4,269 $4,000 $3,000

July-May General Revenue Collections, FY '01 - FY '12 (in $Millions)

5,121 4,001 4,191 3,748 4,431 5,348 5,321 5,077 4,532 4,123 4,982

$2,000
$1,000 $0 FY '01 FY '02 FY '03 FY '04 FY '05 FY '06 FY '07 FY '08 FY '09 FY '10 FY '11 FY '12

The Challenges We Face

An Incomplete Recovery
Substantial demands on scarce resources Short-Term In a hole
Need to restore cuts of past three years and pay for ongoing operating costs of state government Strengthen our child welfare system in accordance with settlement agreement Thousands with developmental disabilities and mental illness on the waiting list for services

Long-Term Structural deficit

Hazardous physical infrastructure roads, bridges, state buildings Water infrastructure needs - $80 billion over next 50 years Aging population will require increased health care, social services spending Unfunded pension liabilities still exceed $10 billion

The Challenges We Face

Growing Long-Term Obligations
Oklahoma faces a structural deficit
Normal growth of revenues is insufficient to finance the normal

cost of services year after year.

Projected Annual Budget Surpluses and Deficits Before and After 2004-2006 Tax Cuts (2007 to 2035)

1,000 500
M i l l i o n $2005

0 (500) (1,000) (1,500) (2,000) (2,500) 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 Ye ar B e for e Tax Cut s A ft e r Tax Cut s

Source: Projections conducted in 2007 by Dr. Kent Olson, Professor of Economics, Oklahoma State University

The Challenges We Face

Growing Long-Term Obligations
Federal Deficit Reduction Will Compound State Problems
Budget Control Act established caps on discretionary spending though 2021 to reduce federal deficits by $917B
Failure of Super Committee to agree on deficit reduction measures triggered automatic procedures to reduce spending by $1.2 trillion

Exempts Medicaid, mandatory programs

Half the cuts would be from defense budget Discretionary programs facing 9 percent cuts Includes all education and worker training funding streams, many social services and health grants, agriculture, environment, others Effective January 2013

The Challenges We Face

A Fiscally Responsible Course

You have to be sure you're right before cutting tax rates or shrinking the tax base. The Legislature and the governor cannot say in following years, Oops, we made a mistake.
- Larkin Warner, OSU Regents Professor of Economics, Nov. 2011

Whatever our tax structure is in Oklahoma, its doing a good job of not holding us back, and on the other hand we dont want to do anything to mess it up. And thats what you always have to be careful of when you start getting political solutions to problems that may not really exist.
- Scott Meacham, Former State Treasurer, April 2012

The Challenges We Face

A Fiscally Responsible Course
Preserve the Income Tax
The essential cornerstone of a balanced tax system
Single largest state revenue source: $2.2 billion in FY 10 - 32.1 percent of total collections.

Total State Tax Collections, FY '10

Other, $1,353.6 19.6% Motor Vehicle Taxes, $579.3 8.4% Gross Production Tax, $732.2 10.6% Personal Income Tax, $2,224.8 32.1%

Sales Tax, $1,815.3 26.2%

Corporate Income Tax, $216.4 3.1%

The Challenges We Face

A Fiscally Responsible Course
Preserve the Income Tax
Largest funding source for state services
Based on the share of agency appropriations funded with income tax revenues, elimination of the personal income tax would leave us unable to pay for:
Salary and benefits for 17,000 classroom teachers; AND

Health insurance coverage for 430,000 low-income children; AND

Incarceration of 9,300 inmates; AND Tuition for 19,000 Oklahomas Promise students; AND The ROADS transportation improvement plan; AND

Many other services and programs across state government.

See: What the Income Tax Pays For at http://okpolicy.org/tax-reform-information

The Challenges We Face

A Fiscally Responsible Course
Preserve the Income Tax
Taxes are rarely decisive in business investment decisions.

I will tell you that state income tax had absolutely no impact in terms of the decision of merging the company and where the corporate headquarters is located.
-Phillips Petroleum CEO Jim Mulva, discussing the companys merger with Houston-based Conoco Inc. and decision to locate its new headquarters in Houston, November 2001

For 24 years, Ive been conducting interviews with executives of companies that we tried to recruit to Ardmore that ended up locating elsewhere. Not once in all those years did a company that rejected Ardmore base its decisions on taxes.
-Ardmore Chamber of Commerce President Wes Stucky, Oct. 2011

The Challenges We Face

A Fiscally Responsible Course
Preserve the Income Tax
Income tax cuts will not make Oklahoma more competitive

If our ability to educate and train employees for a 21st century economy is damaged through lack of funding, if we cant maintain our roads and bridges, strong health care system, robust research and technology infrastructure, safe streets, etc., then the benefits of a reduction in the income tax rates may be limited.
-Tulsa Metro Chamber Vice President & Former House Speaker Chris Benge, Oct. 2011

I can't sit here and say having no income tax, having low property tax, whatever, is going to make a big difference We have to have a state that's known for excellence.
-Ardmore Chamber of Commerce Pres. Wes Stucky, Oct. 2011

The Challenges We Face

A Fiscally Responsible Course
Preserve the Income Tax
Oklahoma is already doing better than most states, including those without an income tax

Third best job growth, #1 best manufacturing job growth (2011)

The Challenges We Face

A Fiscally Responsible Course
Preserve the Income Tax
Cutting the income tax will create great pressure to raise sales taxes or property taxes
Oklahomas average combined state and local sales tax rate 8.66 percent is already 5th highest in the nation (Tax Foundation) Untaxed Internet sales already cost Oklahoma $185M to $225M annually (OK Tax Commission) Texas has a higher state sales tax rate (6.25 percent) than does Oklahoma (4.5 percent) and assesses the sales tax on 83 categories of services, compared to 32 in Oklahoma Every state without an income tax has higher per capita property taxes than Oklahoma The average Texan pays three times as much property tax as the average Oklahoman

The Challenges We Face

A Fiscally Responsible Course
Preserve the Income Tax
The income tax is essential to tax fairness
Low and middle-income Oklahomans pay more of their income in state & local taxes than do wealthy households Income tax partly offsets the regressivity of sales and property taxes Broad-based tax preferences help lowincome seniors and families with children

The Challenges We Face

The 2012 Tax Debate
Various tax cut proposals under consideration

All would lower the top income tax rate, at least partly offset lost revenue by eliminating various income tax credits, deductions and exemptions
Plan differed as to: Fiscal impact (revenue-neutral vs. revenue reduction) Which tax preferences were eliminated Reduction or elimination of income tax

Triggers for future tax cuts

See OK Policys Summary and Comparison at: http://okpolicy.org/files/TaxPlanComparison.pdf

The Challenges We Face

The 2012 Tax Debate
The Senate Plan (SB 1623)
Based on 2011 Tax Reform Tax Force recommendations developed by Sen. Mazzei & Rep. Dank Would have lowered the top income tax rate from 5.25 to 4.75 percent over 2 years Revenue-Neutral: lost revenue fully offset by eliminating the sales tax relief credit, child/child care tax credit, earned income tax credit and economic development incentives; limited eligibility for personal exemption Increased taxes for one-third of Oklahomans and shifted more of tax load onto middle-income and low-income households

The Challenges We Face

The 2012 Tax Debate
OCPA/Laffer Plan (HB 3038/SB 1571)
Immediately lowered top income tax rate from 5.25 to 3.5 percent
Top rate automatically reduced each year until total elimination (2022) (amended versions included triggers for future cuts) Eliminated ALL deductions, exemptions and credits, including:

Standard deduction, personal exemption

Low-income credits All business income tax credits Floor substitutes restored exemptions for retirement income, Social Security benefits, veterans income, military pay Huge revenue loss while raising taxes for almost half of households

The Challenges We Face

The 2012 Tax Debate
Governor Fallins Proposal (HB 3061)
Governors Oklahoma Tax Reduction and Simplification Plan: No tax on those making <$15k (single)/$30k (married); 2.25 percent on those from $15 - $35k/$30-$70k; 3.5 percent on those earning >$35k/$70K Taxes ALL income at same rate creates a tax cliff Eliminates itemized deductions, low-income credits, deductions for retirement and military income, and almost all economic development credits Tax cut for most but increase for low- and moderate-income families with children and seniors.

Fiscal impact in first full year of $350 million Further cuts in the top income tax rate in future years whenever revenues rise > 5 percent until income tax is completely eliminated.

The Challenges We Face

The 2012 Tax Debate
The Final Agreement/Disagreement
Governor, Speaker, Pro Tem announced tax cut deal just prior to final week of session: Top rate reduced immediately from 5.25 to 4.8 percent Trigger to reduce rate to 4.5 percent based on revenue growth Revenue losses partially offset by limiting eligibility for personal exemption (to families below $70,000, individuals below $35,000); limiting itemized deductions, eliminating some business tax incentives Fiscal impact of $33 million in FY 13, $102 million in FY 14 Tax increase for 24 percent of filers

House leadership refused to let bill get heard by full House Senate rejected last-minute House plan Governor opted against special session

The Challenges We Face

A Fiscally Responsible Course
How do we create a revenue structure that meets our obligations?
Review and reduce tax credit programs: Income tax, gross production tax credits Adopt combined corporate reporting Limit itemized income tax deductions Modernize the sales tax: Expand sales tax base to some additional services Pursue collection of online sales through clickthrough/affiliate programs Increase the personal exemption Stretch and index tax brackets Expand the grocery tax credit or earned income tax credit

Target any tax relief towards those in greatest need:

Adopt pay-go requirement for tax cuts and new spending

The Challenges We Face

A Fiscally Responsible Course
Limit Tax Credit Programs
Tax credits should adhere to the following standards:
Formal eligibility process for businesses applying for credits Clear performance standards regarding investment and/or job creation, with consequences for failing to meet targets

Full disclosure of how credits are allocated

Sunset provisions, with reauthorization tied to a performance review Limit state liability through caps on amounts that can be claimed subject to annual legislative authority

Gross production tax credits should be limited or eliminated

The Challenges We Face

A Fiscally Responsible Course
Limit Itemized Income Tax Deductions
Itemized deductions mostly benefit upper-income households
Several options could be considered: Repeal itemized deductions while increasing the standard deduction available to all families, OR

Cap the total value of itemized deductions, OR

Convert deductions to a credit as a set amount of selected federal deductions, OR Do away with the deduction for state income tax payments Could generate $100 million to $115 million in new revenue Additional state tax liability would be partly offset by reduced federal tax liability

The Challenges We Face

A Fiscally Responsible Course
Modernize the Sales Tax
Expand the sales tax base to cover selected services
Oklahoma currently taxes only 32 of 168 potentially taxable services Taxing services is needed to maintain the long-term adequacy of the sales tax and make the sales tax more economically fair and rational Should be careful to exclude services consumed primarily by businesses to avoid pyramiding Do away with sales tax exemptions benefitting favored industries Pursue collection of online sales through clickthrough/affiliate programs Combine these measures with ending the sales tax on groceries

The Challenges We Face

A Fiscally Responsible Course
Provide Broad-Based Income Tax Cuts
If tax cuts are on the table, increasing the personal exemption and stretching income tax brackets would assist more households and distribute benefits more broadly than further cuts to the top rate
Personal exemption has remained unchanged at $1,000 per person since 1982 Failure for decades to index income tax brackets: Seven brackets all narrowly squeezed together Bracket creep56 percent of taxpayers now reach the top bracket; a much greater share of income is taxed at the highest level

The Challenges We Face

A Fiscally Responsible Course
Adopt Pay-Go Requirement
Ensure that fiscal balance is maintained by requiring that tax cuts be fully offset with:
New revenues Elimination of tax breaks

Identified spending cuts

New spending obligations would have to be paid for with additional revenues or cuts to other services Current services budget and long-term budget forecasting would also help policymakers make sustainable budget choices

The Challenges We Face

A Fiscally Responsible Course
Make smarter expenditure decisions: Consolidate duplicative agencies and streamline services Prioritize prevention and surveillance Ensure adequate funding of public pensions Give control for making decisions about revenues and spending back to our elected representatives

Looking Ahead A hopeful note?

The odds of our elected officials doing the right thing are zero unless YOU tell them what needs to be done.

For More Information

Updated Budget Information
okpolicy.org/current-budget-information

Tax Policy Information

http://okpolicy.org/tax-reform-information

Stay informed and get engaged

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