Deep Blue Connecticut Faces Fiscal Woes. So Does Deep Red Oklahoma.

Aug 31, 2017

Connecticut is a blue state that has fiscal problems. Oklahoma is a red state that has fiscal problems. Conservatives blame Connecticut’s problems on liberal tax-and-spend policies. And liberals blame Oklahoma’s problems on conservative economic policies.

We decided to interview representatives from a liberal think tank in Oklahoma and a conservative think tank in Connecticut to see what common ground they could find. WSHU’s Ebong Udoma spoke with the Yankee Institute’s Suzanne Bates and Oklahoma Policy Institute’s David Blatt to find out what they’d recommend to fix their state’s fiscal problems.  

So first of all, Suzanne Bates, what is the budget situation in Connecticut, and what would you say is responsible for where we are today?

SB: Even this year, if they solve the $3 billion deficit we’re looking at deficits every two years for the next decade at least, because we have a huge pension crisis in Connecticut and some other issues that are really driving the size of the budget and revenues just can’t keep up.

David, according to this Guardian article that came out just a few days ago, Oklahoma isn't working. And it isn't working because public services are failing. Could you just explain what’s been going on in Oklahoma?

DB: The Guardian article referred to Oklahoma as a failing state, that is certainly not an especially generous interpretation of it, but it really feels that way. And it can be tied to policies that have consistently tried to be the lowest tax state on the belief that if we just keep cutting our income tax rate, it’s gonna lead to economic growth and the data is showing that that strategy of trying to cut our way to success is really not working.

Suzanne, what would you say because that’s a proscription that the Yankee Institute has come up with for Connecticut, that we are taxing too much and that’s why high-earners are leaving the state?

SB: We’re kind of at opposite ends of the spectrum here, and so, here’s Connecticut, an incredibly high tax state, we’re a wealthy state, and our taxes are incredibly high. And so, our state government has a significant amount of money, they’ve just been spending it very poorly. The whole cost of state government has become so burdensome on people that they no longer are willing to stay and pay for it. You cannot tax your way to a state government that works in Connecticut. You know, Oklahoma problems are very different, you know, they have a boom-or-bust cycle with their heavy reliance on natural gas and oil. Our sort of “natural resource” has been wealthy people down in Fairfield County. And the idea was that every couple of years they would just dial up the taxes on those people and they would just keep on giving. But, you know, unlike natural resources, wealthy people can move. And so it got to the point where we’ve reached that tipping point and we’re no longer getting the return every time we dial up those tax increases.

And how does all this tie into political philosophy? Where we have the red states, there’s a certain philosophy to government and in the blue states there’s a different philosophy to government. How does that play into what we’re seeing right now with the fiscal situation in states like Oklahoma and Connecticut?

SB: Connecticut’s a very blue state from top to bottom. And what has happened because of that is you’ve got certain actors in the political system who’ve become very powerful and in Connecticut that happens to be the government unions, the state employee unions. So whenever you have one special interest that crowds out everybody else, it doesn’t lead to good governance, whether that’s someone in the private sector or the public sector.

But in Oklahoma, David, you say for eleven years teachers have not had a raise in Oklahoma?

DB:  That's right, we have a teacher salary schedule in our statutes which provides minimum salaries and that has remained frozen since 2005 or 2006. So we're facing a situation where we just are not bringing in the revenue to be able to fund even the normal year-to-year growth in the cost of providing services when you're dealing with increasing enrollment or increased operating costs and so on. So I think where there's common ground here is that in every state there needs to be a better process in place to provide planning on what the costs of services are gonna be and to make sure that the tax system is aligned with the cost of providing services. Here we try to always compete with Texas which is a no-income-tax state. That if we keep cutting taxes, that it’s going to serve as a jolt of adrenaline to the economy, and in fact we’ve seen that tax cuts have had very little benefit. We’ve seen what we would say is an ideologically driven effort to lower taxes in an effort to somehow be more competitive or drive investment, in fact it’s had minimal economic advantage and has led us to the situation where we’re just not able to fund our schools and mental health centers and public safety services and so on.

As a matter of fact I saw in The Guardian article that one of the oil companies in Oklahoma actually moved its operation base, moved it out of state to Texas, even after the 30% cut in taxes.

DB: Sure, there’s a lot of reasons why companies make decisions on where to locate and where to invest, and I think overall, the state personal income tax rate or the corporate income tax rate is of minimal importance. You know, there’s lots of things that companies themselves will say are more important that whether the top income tax rate is 5% or 6% or even 9 or 10%.

SB: If I could just follow up, one of the problems we’re facing here in Connecticut is that we’re both increasing taxes and cutting services. So we’re seeing increased revenues and we’re also at the same time having to cut services because there are parts of the budget that are growing so fast. So, we’re seeing cuts to the classroom, just like they’re seeing in Oklahoma, but it’s even though we’re actually seeing higher rates.

David, how are you guys dealing with your situation in Oklahoma right now?

Not well, we are in a situation where we’re pretty much looking at a political crisis where our legislators recognize that we have a severe revenue problem. We’re at a point here where I think there’s growing recognition that we’ve cut too far, we need to raise revenues but face some real constitutional obstacles and political obstacles as well.

Thank you so much David, and thank you Suzanne.

DB: My pleasure.

SB: Happy to be with you.