Subnational Fiscal Management During Times of Economic Distress and Resource Competition

Transcription

1 Oklahoma State Treasurer Ken Miller, Ph.D. Chair, National Association of State Treasurers Foundation Subnational Fiscal Management During Times of Economic Distress and Resource Competition April 2, 2014

2 Overview The Great Recession brought the largest economic distress to the U.S. since the 1930s This presentation will show its impact, corrective actions, and lessons learned in Oklahoma, a U.S. subnational government

3 The Great Recession The Great Recession, as defined by the National Bureau of Economic Research, began in December 2007 and ended in June 2009.

4 Collections Rolling Average $11.28 Dec-08 $11.53 Feb-14 $9.36 Feb-10 (in billions)

5 State Revenue Sources Fiscal Year 2014 First Half

6 State Expenditures

7 Federal Funds to Oklahoma Fiscal Year 2013 $7.1 billion

8 Federal Spending by the States (Percentage of state spending) Oklahoma 35.5%

9 Oklahoma Resurgence State economy is still growing, but at more moderate pace Unemployment rate is 14 th best in nation second lowest of bordering states. Since 2010, state economy has grown 9%, higher than national rate of 8.2% Due in part to strength of economy, Oklahoma is top-ten state in net migration Best NBA team. Go Oklahoma City Thunder!

10 Top 10 Lowest Jobless Rates 1. North Dakota - 2.6% 7. Iowa - 4.4% 2. Nebraska & South Dakota - 3.6% 4. Vermont - 3.7% 8. Louisiana - 4.5% 9. Hawaii - 4.6% 10. New Hampshire - 4.7% 5. Utah - 3.9% 6. Wyoming - 4.2% *14. Oklahoma 5%

11 Job growth Oklahoma U.S.

12 Unemployment rate U.S. 6.7% 5.0% Oklahoma

13 Real estate prices

14 Corporate profits Top 25 OK capitalized companies stock index 5-year average

15 Actions Taken Mandatory across-the-board cuts triggered due to revenue failure Targeted cuts in next three fiscal years, mitigated by federal stimulus funds, Rainy Day Fund, fee increases and suspension of tax credits

16 State Budget FY-09 Appropriations: $7.20 billion FY-10 Appropriations: $6.95 billion (-2.0%) FY-11 Appropriations: $6.72 billion (-3.2%) FY-12 Appropriations: $6.51 billion (-3.1%) FY-13 Appropriations: $6.84 billion (+5.1%) FY-14 Appropriations: $7.11 billion (+3.9%)

17 Federal Spending in the States The majority of federal spending in the states is for entitlement programs such as social security and health care for the elderly and poor A smaller percentage is spent on national defense, transportation and education

18 Federal Spending in the States (billions of dollars) $346 Total: $3.2 trillion $37.5 $6.3

19 State & Local Spending The majority of state spending is allocated to education, health care, human services and public safety The majority of local expenditures are for public safety (police and fire) and public health (water and sewer service) State and local spending is rebounding

20 State & Local Spending (billions of dollars) $431.3 $31.0 $6.2

21 State & Local Spending (percentage of GDP) 28.4% 21.2% 21.0% 15.8%

22 in millions Rainy Day Fund FY 2000 FY 2014 $535.2 million

23 Better Forecasting Employ outside experts from government, business and academia to create a consensus revenue forecast Mandate balanced operating budgets. All U.S. states, except Vermont, have constitutional or statutory requirement Legally require scientific, apolitical revenue forecasts that are binding on the Legislature and governor Legally limit appropriations to allow for margin of error in revenue estimate (Oklahoma 95% of estimate)

24 Maintain Adequate Tax & Fee Structure The ideal tax and fee structure would: Generate a predictable, stable and diversified revenue stream Sufficiently fund core government services without: harming the profit motive that drives entrepreneurship, discouraging consumption, unfairly burdening property owners or rewarding idleness Impose program costs on program beneficiaries Consolidate revenues into a general fund

25 Create Sustainable Pension System Implement a 401(k)-style system for new hires that meets the demands of a modern workforce and a leaner government; one that reduces and stabilizes costs; offers choice, flexibility and portability; provides uniformity among the systems; ensures long-term stability, and is fair to taxpayers and public employees.

26 U.S. Workers Pension Coverage Defined Contribution (DC) only No pension coverage Defined Benefit (DB)only Both DC and DB

27 Concentrate on Funding Core Services Build on forced efficiencies gained during recession In Oklahoma Treasurer s Office, funding was reduced by 17% during recession, but efficiency projects have led to requested 5% funding cut in each of past two years The staff is 40% smaller and all work in one location in the State Capitol Building after closing external offices.

28 Questions?