For much of Oklahoma’s history, the conservative fiscal values of Oklahomans were upheld because state officials were unable to issue general bonded indebtedness without first receiving approval through a vote of the people. This is because Oklahoma’s constitution requires a balanced budget and prevents debt issuance without a vote of the people.
This all changed in 1998 when in a 5-4 ruling the Supreme Court wrongly stated that the Legislature could issue bonds without a vote by the people as long as the bond buyers understand that the Legislature is under no obligation to repay the bonds.
In his dissent, Justice Opala opined, “For the first time, this Court gives its imprimatur to deficit spending by our legislative and executive officers.”
Justice Wilson claimed that the decision sounded the death knell to Oklahoma’s constitutional balanced budget provisions, and Justice Lavender warned, “Our citizenry would be well advised to prepare for future large-scale deficit financing of capital projects by state officials.”
So, nearly twenty years later, was the ominous prediction of the dissenting justices correct?
In 1998, the state carried approximately 318 million dollars of debt.
In 2016, the core state government entities owed 2 billion dollars in debt with another approximate 10.5 billion of debt owed by the non-core entities, e.g., higher education, the Turnpike Authority and powerful state-owned energy monopolies.
The core government entities must make a yearly debt payment of approximately 250 million dollars.
To put this into perspective, I once calculated that the yearly debt payment would likely wipe out the need for 30 of the 50 tax categories collected by the state.
Just think about that for a moment. Eliminating the state’s debt payment would account for over half of the state’s tax categories, making them completely unnecessary.
Even in light of these facts, I have heard Oklahoma politicians claim that Oklahoma is much more fiscally responsible than the federal government because we have a requirement in the constitution that our budget remain balanced.
While Oklahoma’s financial situation remains much better than the federal government’s, as Justice Wilson pointed out, state government does not substantively adhere to the balanced budget requirement anymore.
Those dissenting justices predicted the future very accurately.
Once free from the constraints of the vote of Oklahomans and their pesky conservative fiscal values, the Oklahoma legislature went on a debt-fueled spending spree and approved debt issuance after debt issuance.
Each and every legislative year, with the singular exception of 2013, Oklahoma politicians wait until the end of the session and broker a deal by which debt issuance goes onto the books for years into the future.
With this practice Oklahoma legislators have become very much like their federal counterparts and this is a significant reason why they find themselves in their current predicament.
In 2015, for example, as the energy sector headed into its downturn, Oklahoma’s politicians inexplicably continued to issue debt; a very bad practice that has continued to this day.
That year, the premium payment on the most recently issued bonds offset the cumulative reduction in appropriations to approximately 35 state agencies.
Those who just casually glance at the appropriations documents from that year may conclude that Oklahoma significantly reduced appropriations to the agencies without realizing that the spending had simply been reshuffled from the agencies to debt payment.
I don’t think this nuance was understood by many legislators. I don’t think they have ever come to terms with the havoc they have caused with continual debt issuance.
They actually use the appropriations reduction to the agencies as logic for justifying their tax increases, without pointing out that the money was simply reshuffled into debt service on debt they voted to issue.
Worse, even as they make the argument for more taxation — they continue issuing new debt!
Until Oklahoma’s politicians can discipline themselves to live within their means, they certainly do not have standing to suggest tax increases — especially the punitive 35% increase of the state’s gas tax they have continually attempted.
The net effect of these taxes raises will be the continued enablement of Oklahoma’s politicians and the issuance of even more debt.