ENID — The Medicaid budget is responsible for some of Oklahoma’s budget woes, Oklahoma Council of Public Affairs President Jonathan Small told Enid Rotary Club on Monday.
In 1995, there were fewer than 400,000 people on Medicaid, and Oklahomans paid around $371 million for Medicaid, he said.
“If you wonder why the state of Oklahoma doesn’t have enough money for teacher salaries, if you wonder why it doesn’t have enough money for the core areas of corrections, if you wonder why it doesn’t have enough money for mental health, all you have to do is look at the Medicaid budget,” Small said.
In fiscal year 2015, Medicaid had a 1.1 million population, at a cost of $2.1 billion. More than 25 percent of Oklahoma’s population was on Medicaid, and 60 percent of births in Oklahoma were paid for by Medicaid, he said.
“That’s 553 percent growth,” Small said.
The No. 1 proposal for addressing the state revenue challenges is to have Medicaid enrollment audits, he said.
“I’m not referring to providers,” Small clarified. “What I’m talking about is when people enroll in Medicaid and they’re eligible for a period, and then when they become ineligible — either because of income changes, or they move into a household where there’s more income, or for whatever reason — and they don’t tell the Medicaid agency that that happened, and they still continue to get the Medicaid benefits.”
Illinois implemented enrollment audits, where it regularly checks on Medicaid enrollments to ensure they were still eligible, he said.
The state has saved more than $1 billion since the program was started three years ago, he said.
“Over this wild, novel concept that people shouldn’t get benefits that they’re not eligible for, which most Oklahomans agree with,” Small said.
Oklahoma is still in a recession, compared on 2013, he said.
According to Oklahoma Tax Commission, from 2014 to 2015 Oklahomans lost $13 billion in taxable income, Small said.
“To give you an idea of how massive that is, at a tax rate of 5 percent, which is the current personal income tax rate in Oklahoma, that means in one year, the state of Oklahoma lost out on almost $600 million,” he said.
From fiscal year 2015 to fiscal year 2016, Oklahomans had to cut purchases subject to sales tax by $4.1 billion. When you add in the state and local sales tax, and the state use tax rate, the state lost roughly $187 million to $190 million from Oklahomans having to cut their pay, Small said.
“Why did Oklahomans have to cut their pay? That’s because, just as an example from September 2015 to September 2016 ... Oklahoma saw more than 21,000 oil, and gas and manufacturing jobs lost, in one year,” he said. “It’s important to know what’s going on in the economy, it’s also important to know that Oklahoma is still in a recession compared to 2013.
“The reason that state revenues in Oklahoma are hurting is because Oklahomans are hurting. It’s actually not because they’re stingy or that they hate people, it’s just actually because there’s been the largest oil and gas price decline, as volume and its impact on the economy, in over seven decades. In fact, drilling activity in 2015, coming out of that sharp price decline, was a seven-decade low.”
While Oklahoma has diversified its economy, in relation to the 1980s, it is still the No. 1 most dependent state on oil and gas, Small said.
“An astonishing 13.9 percent of all household earnings in Oklahoma comes from oil and gas. The next closest state is 49 percent less than us, at 9.3 percent,” he said. “When you think about those headwinds hitting Oklahoma pocketbooks all across the state, and then hitting state government coffers, that provides better context why we’re seeing some of what we’re seeing regarding revenue.”
In fiscal year 2010, Gov. Mary Fallin made a comment to then-Gov. Brad Henry that “during times of recession the last thing that they would do is increase taxes, but, rather what they would do during a recession is that they would go line by line looking at every single item of government and then proposing performance reforms,” Small said.
“Needless to say to this crowd, I don’t have to tell you guys that that didn’t happen,” he said.
In Oklahoma, when you compare the share of total net state tax collections, as a share of the economy in 2015, Oklahoma collected from residents, on average, 5 percent. The national average for states was 5.11 percent, Small said.
Personal income tax collections never declined, over the period of personal income tax, except for immediately in a recession year. In 2014, the state actually set a record for net personal income tax collection. Sales tax collections, prior to the income tax cuts in Oklahoma, grew right around 2 to 3 percent. After the period of personal income tax cuts in Oklahoma, they grew at nearly 6 percent, he said.
“Now, some would say it’s a coincidence that when you give back people more of their own money, they’ll spend it on things that they desire to spend it on. Some people say that’s a coincidence, but the fact of the matter is, is that state sales tax collections grew by more than a billion dollars over the same time period that personal income taxes were cut, and keep in mind that personal income tax never declined over the prior year,” Small said.
OCPA also does not believe Oklahomans should be paying cash subsidies for wind production.
“They’re already getting cash subsidies that amount to more than 10 times the amount of what the state of Oklahoma pays. We feel like a wind turbine is great, it provides development, but it should be able to do it on its own. The subsidies that you pay as an Oklahoman cost about $38,000 per wind turbine. That’s basically the compensation costs for a teacher,” he said.