The Enid News and Eagle, Enid, OK

National and world

November 19, 2012

Fiscal cliff could cost Oklahoma $137 million

OKLAHOMA CITY — The failure of Congress to address the nation’s looming fiscal cliff could have dire consequences for Oklahoma’s economy beginning as early next year, a state finance official warned lawmakers on Monday.

Oklahoma’s Secretary of Finance Preston Doerflinger told members of a House committee that Oklahoma could lose $137 million in direct federal funding as a result of sequestration, commonly referred to as a fiscal cliff, which refers to the automatic, government-wide spending cuts set to take effect Jan. 1.

“The day has come for the federal checkbook to be reconciled, and this will no doubt have implications for states, ours included,” Doerflinger told members of the House General Government Committee.

Incoming House Speaker T.W. Shannon requested Monday’s study as a way for the state and Legislature to prepare for the likely loss of federal funding.

“As you know, there’s a lot of concern out there about the fiscal cliff and what’s going to be occurring in the next few months or even the next few years as it relates to Washington D.C.’s investment in the state,” said Shannon, R-Lawton. “My goal, my purpose, is to examine how our state agencies are prepared or not prepared to deal with it.”

Doerflinger said the $137 million in projected losses of federal funding include $50 million in funding for education and more than $40 million for health and human services. Several federal funding streams would not be affected by the looming cuts, Doerflinger said, including funds for Medicaid, transportation, Social Security payments, food stamps, Pell grants and most veterans’ programs.

Beyond the direct cuts in federal discretionary spending, Doerflinger said he’s more concerned about the possible ripple effect that cuts in defense spending could have in a state like Oklahoma, which has five military installations, including Tinker Air Force Base in Oklahoma City, the state’s largest-single site employer with more than 26,000 military and civilian workers.

“We all know defense is a big part of our state, and if we see dramatic cuts in that area, we will certainly see a ripple effect in that area that will have an effect on sales tax collections and other revenue streams,” Doerflinger said.

Although lawmakers are expected to have more revenue to appropriate when the Legislature convenes in February as a result of increased tax collections compared to last year, Doerflinger said state agencies also are requesting huge increases in their operating budgets. So far, agencies have requested more than $1 billion in new spending for the upcoming fiscal year that begins July 1, a figure Doerflinger said is unrealistic. Oklahoma’s state-appropriated budget last year was $6.8 billion.

“It is apparent that for some agencies there is an insatiable appetite for more money with less of an appetite for, or emphasis on, performance,” Doerflinger said. “Agencies are very good at telling us what they need for growth and maintenance of programs. I wish they were equally as good, in some cases, at detailing what cost containment and other cost avoidance measures they were utilizing.”

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