The Edmond Sun

Opinion

October 19, 2012

More dark clouds on economic horizon

EDMOND — It was just a month ago that I wrote these words: “The latest state revenue report … indicates that dark clouds might be forming on the horizon of the Oklahoma economy.” Unfortunately, the latest state economic data has done little to allay my concerns.

Throughout the spring and early summer, the Oklahoma economy was humming along — easily outpacing the growth in the national economy. In fact, state personal income growth in the second quarter of the year clocked in at the seventh fastest pace in the nation. This was further evidenced by a surge in state tax collections, including my favorite metric of current economic activity — seasonally-adjusted state sales tax collections. However, last month the data started to indicate some warning signs that trouble might lie ahead. Specifically, state officials announced that in August there was a sudden and significant drop in state income tax collections. Such declines are not usually consistent with a growing economy.

While one month’s data could be dismissed as an aberration, that data point has since been joined by another. Last week state officials released September’s state revenue report — a report that drew praise from state officials. For example, state Finance Secretary Preston Doerflinger claimed that “this report indicates to me that our recovery from the recession is still ongoing.” The reason for the optimism is that state income tax, sales tax and motor vehicle tax collections all exceeded last year’s total.

In reality though, the state revenue report wasn’t all that positive. While collections are above what they were a year ago, that growth is attributed not to the current strength of the economy, but to the strength in the first half of 2012. In actuality, seasonally-adjusted state sales tax collections — again my favorite metric of current state economic activity — fell for the third consecutive month in September. What’s even more troubling, is that not only did the metric fall, but it fell to its lowest level of the year.

Fueling even more concerns was the release of the state employment situation report by the U.S. Bureau of Labor Statistics. That report showed the state unemployment rate tick up slightly to 5.2 percent last month — the same month that witnessed a significant drop in the national unemployment rate and state-level declines in 44 states. This marks the third consecutive month that the unemployment rate rose. Furthermore, the establishment survey showed that the state economy actually shed 3,700 jobs last month.

The story that is most consistent with these various data points is that the Oklahoma economy has slowed — probably not into a recession, but into a period of slower growth — in the third quarter. Honestly, such a slowdown is not all that unexpected given the robustness of the state’s second-quarter growth — a growth that was likely too strong for the underlying economic fundamentals. The real concern though, is whether the state economy is ready to bounce back in the fourth quarter, or if the stagnation will continue.

The slowdown is already affecting my state revenue forecasts for the year. At the end of June, on the heels of that strong second quarter performance, I expected state general revenue collections to reach $5.9 billion this fiscal year. Now, that number seems unrealistically high. The impact this would have on Oklahoma’s school children, families and public service workers is clearly significant.

It is certainly still possible for Oklahoma’s economy to resume its recent performance as a national leader. The latest economic data though, indicates that if anything, during this last month those dark clouds on the horizon of Oklahoma’s economy have moved even closer.

MICKEY HEPNER is the dean of the College of Business Administration at the University of Central Oklahoma. Hepner serves on the Executive Committee of the Board of Directors for The Oklahoma Academy.

1
Text Only
Opinion
  • Bangladesh’s sweatshops — a boycott is not the answer

    One year ago this week, the eight-story Rana Plaza garment factory collapsed in Bangladesh’s capital city of Dhaka, killing 1,129 people. The building’s top floors had been added illegally, and their weight caused the lower stories to buckle. Many of the victims were young women who had been sewing low-priced clothes for Western brands, earning a minimum wage of about $9 a week. It was the worst disaster in garment industry history.

    April 24, 2014

  • Loosening constraints on campaign donations and spending doesn’t destroy democracy

    Campaign finance reformers are worried about the future. They contend that two Supreme Court rulings — the McCutcheon decision in March and the 2010 Citizens United decision — will magnify inequality in U.S. politics.
    In both cases, the court majority relaxed constraints on how money can be spent on or donated to political campaigns. By allowing more private money to flow to campaigns, the critics maintain, the court has allowed the rich an unfair advantage in shaping political outcomes and made “one dollar, one vote” (in one formulation) the measure of our corrupted democracy.
    This argument misses the mark for at least four reasons.

    April 23, 2014

  • The top 12 government programs ever

    Which federal programs and policies succeed in being cost-effective and targeting those who need them most? These two tests are obvious: After all, why would we spend taxpayers' money on a program that isn't worth what it costs or helps those who do not need help?

    April 23, 2014

  • Free trade on steroids: The threat of the Trans-Pacific Partnership

    Many supporters of the proposed Trans-Pacific Partnership, or TPP, trade agreement are arguing that its fate rests on President Obama’s bilateral talks with Japanese Prime Minister Shinzo Abe in Japan this week. If Japan and the United States can sort out market access issues for agriculture and automobiles, the wisdom goes, this huge deal — in effect, a North American Free Trade Agreement on steroids — can at last be concluded.

    April 22, 2014

  • Can Hillary Clinton rock the cradle and the world?

    What's most interesting to contemplate is the effect becoming a grandmother will have on Hillary's ambition. It's one of life's unfairnesses that a woman's peak career years often coincide with her peak childbearing years.

    April 22, 2014

  • Chicago Tribune: If Walgreen Co. moves its HQ to Europe, blame Washington’s tax failure

    The Walgreen Co. drugstore chain got its start nearly a century ago in downstate Dixon, Ill., before moving its corporate headquarters to Chicago and eventually to north suburban Deerfield, Ill.
    Next stop? Could be Bern, Switzerland.
    A group of shareholders reportedly is pressuring the giant retail chain for a move to the land of cuckoo clocks. The reason: lower taxes. Much lower taxes.
    If Walgreen changes its legal domicile to Switzerland, where it recently acquired a stake in European drugstore chain Alliance Boots, the company could save big bucks on its corporate income-tax bill. The effective U.S. income-tax rate for Walgreen, according to analysts at Swiss Bank UBS: 37 percent. For Alliance Boots: about 20 percent.

    April 21, 2014

  • Sulphur a future major tourist destination?

    Greta Garbo says, “I want to be alone,” in the 1932 film “Grand Hotel.” That MGM film starred Garbo, John and Lionel Barrymore, Wallace Beery and a young actress from Lawton named Joan Crawford. It told the stories of several different people who were staying at an exclusive hotel of that name in Berlin Germany.
    It was critically well received and it inspired more recent films such as “Gosford Park” and television shows such as “Downton Abbey” in that it detailed the relationship between powerful and wealthy people and those who served them. The film opened amidst much fanfare and it received the Oscar for best picture in the year of its release.

    April 21, 2014

  • St. Louis Post-Dispatch: Why poverty across the world matters to Americans

    A child starving in South Sudan should matter to Americans. That was the message delivered last week by Nancy Lindborg, whose job at the U.S. Agency for International Development is to lead a federal bureau spreading democracy and humanitarian assistance across the world.
    That world has reached a critical danger zone, with three high-level crises combining military conflict with humanitarian catastrophes affecting millions of innocents in Syria, the South Sudan and the Central African Republic.
    But back to that child.

    April 18, 2014

  • Government leadership complicit in overfilling prisons

    One of the thorniest problems facing any society is the question of what to do with transgressors. Obviously, the more complicated a culture becomes, the more factors come into play in trying to figure out what to do with those who choose not to “play by the rules.”

    April 18, 2014

  • My best days are ones normal people take for granted

    It is a weekend for working around the house. My fiancee, Erin, and I have the baby’s room to paint and some IKEA furniture to assemble. I roll out of bed early — 10:30 — and get into my wheelchair. Erin is already making coffee in the kitchen.
    “I started the first wall,” she says. “I love that gray.” Erin never bugs me about sleeping late. For a few months after I was injured in the Boston Marathon bombings, I often slept 15 hours a day. The doctors said my body needed to heal. It must still be healing because I hardly ever see 8 a.m. anymore.

    April 18, 2014

Poll

Do you agree with a state budget proposal that takes some funds away from road and bridge projects to ramp up education funding by $29.85 million per year until schools are receiving $600 million more a year than they are now? In years in which 1 percent revenue growth does not occur in the general fund, the transfer would not take place.

Agree
Disagree
Undecided
     View Results