Free market think tank projects billions in potential savings
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Published: 08-Mar-2012

The Oklahoma Council of Public Affairs (OCPA) has released an outline of what its analysts deem wasteful state government spending. The group, a free-market think tank, circulated the information to members of the Capitol press corps this morning (Thursday, March 8).

Jonathan Small, the organization's fiscal policy director, pointed to more than $2 billion in potential savings over a three year period. With resources redirected to transportation infrastructure spending, OCPA projected net savings to taxpayers of $1,753,737,207. 

The potential cuts in spending were circulated on a detailed one-page summary dubbed “the green sheet.” 

Small told CapitolBeatOK, “The idea that Oklahoma’s government doesn’t have enough money to operate or fund core services is an idea not based in reality. You can’t support the contention that every dollar being spent is spent wisely or on activities that are useful.”

The broad sweep of the analysis pointed to state expenditures in recent years on things such as golf course losses, roping contests, summer camps, festivals and state spending supporting programs in the suburbs of Tulsa, including the Jenks Aquarium.

Small noted that state had “in the last 10 years, spent $7.9 million on golf courses.” Last year, the government spent $395,000 on a SpacePort, he pointed out. And, since 1999, the state has passed out $8 million “on space travel.” Small continued, “And, Burns Flat has a golf course next to it where they built a fence.”

Small contends that not all of the possible savings fall into categories of relatively small expenditures which, added up, reach a substantial sum. Rather, he pointed to a 2010 proposal that had bipartisan support, Senate Bill 2052. 

With support from conservatives as well as the Oklahoma Public Employees Association (OPEA) and even the Oklahoma Education Association (OEA), the bill aimed to streamline the state employee Health Insurance program. 

Small observed, “It that were run again, it could save $75 million+. As it is, without a law like that, the state agencies don’t bid health insurance options and costs as the private sector does, and, second, the state overpays for benefits’ allowances.”

At the time that measure was debated in 2010, advocates such as then-Insurance Commissioner Kim Holland, a Democrat, and then-Speaker Chris Benge, a Kellyville Republican, asserted it could have avoided $75 million in insurance premium increases. 

Individual agencies had planned on significant cost savings, including $3.7 million at the Department of Corrections, and $1.2 million at the Department of Human Services, if the measure had been enacted.  

At the time, Governor Brad Henry’s veto drew searing criticism from his fellow Democrat, Holland, who had worked with members of both parties to boost the legislation.

In the interview with CapitolBeatOK, Small pointed to such an approach as one that could net the state government substantial near-term efficiencies and savings.

In discussion with CapitolBeatOK, OCPA President Michael Carnuccio said, “State spending is at an all-time high, but to hear some people talk it’s at an all-time low. There is a lot of waste in non-core spending. The logic doesn’t compute. Two plus two equals four; it’s not two plus two equals five.

“We are spending way too much money on things that are not core functions. That money should be returned to taxpayers.”

Pointing to the intensifying debate over proposed reductions in state income tax rates – and OCPA’s advocacy for a decade-long phase out of the unpopular levy – Carnuccio observed that legislation advanced by state Rep. Leslie Osborn (also dubbed “The Laffer Plan” for economist Arthur Laffer) would lower state revenues by about $400 million in the first year (in a “static” economic model ignoring likely income growth). 

Carnuccio observed, “Our point is that $500 million could be captured by just one-fourth of waste we’ve identified in this analysis. It’s not true that eliminating the income tax will kill core services. In fact the historic record shows that we’d have more money.”

In his prepared remarks for the press briefing, Carnuccio contended, “Combing through state agency budgets and previous appropriation levels, our researchers have identified a huge amount of taxpayer money that is either tied up in wasteful, inefficient bureaucracy, or is being spent on things that are clearly not core functions of government. By redirecting those funds and correcting these mistakes, the state could save the taxpayers $2 billion over the next three years.”

Small said policymakers should be cautious about “revenue neutral” formulations, or a stated objective to return state government spending to levels reached before the Great Recession. In his prepared remarks, Small said, “The desire to get revenue levels back to where they were before the national recession that began in 2008 is based on a false premise that spending at that time should somehow be used as the standard. 

“I would caution policymakers about using phrases like ‘revenue neutral’ because they can be easily misunderstood. When some people hear that phrase or sense a push to get back to previous appropriations levels, they can get the wrong message that every dollar currently spent by state government is justified or that it would not be better spent or invested by the taxpayer who earned it in the first place.”
 
In addition to the employee benefit reform Small highlighted, OCPA pointed to other potential changes that could produce hundreds of millions of dollars in savings. 

Today’s release from OCPA pointed to the state Department of Insurance and other agencies wehre additional savings are possible: “Several agencies receiving state appropriations are able to operate on their own and stop receiving taxpayer dollars. For example, the Oklahoma Insurance Department under both a Democrat and Republican insurance commissioner has requested to operate entirely without taxpayer funds just like many other regulatory agencies such as the Banking Department, Securities Department, Accountancy Board and many others.

“The Consumer Credit Commission has requested to operate without taxpayer funds and that effort is being led in part by Rep. Wes Hilliard [a Sulphur Democrat]. Allowing regulatory agencies that generate enough activity to operate on their own without taxpayer dollars is just common sense. Taxpayer funds should be reserved for the core functions of government. Making several agencies non-appropriated will save $20.7 million a year.”

Concerning a construction division at the Department of Huma Services, “This competes with the private sector. Further, with the shift in care for the truly needy to home based care and private sector community solutions, it is not the best use of funds to try and maintain and continue to amass infrastructure at a state agency. This reform saves $5 million a year.”

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