Presented by:

Steve BurrageState Auditor & Inspector

Keynesian Economics

The Washington TimesMarch 11, 2010

“The recession and the ongoing jobless recovery devastated much of the private-sector work force last year, sending unemployment soaring, but government workers emerged essentially unscathed, according to data released by the Labor Department.”

4.3%

5.7% 5.9% 5.8%

5.2%4.7%

4.4%5.1%

8.6%

9.7%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

U.S. Unemployment Rate2001-2010

March

Source: Bureau of Labor Statistics

8.6%

8.9%

9.4% 9.5%9.4%

9.7% 9.8%

10.1%10.0% 10.0%

9.7% 9.7% 9.7%

Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan Feb. Mar.

U.S. Unemployment RateMarch 2009 – March 2010

Source: Bureau of Labor Statistics

Government

Self-Employed

Agriculture

Other Services

Leisure

Education/Health Services

Prof/Bus Services

Financial

Information

Transportation

Trade

Manufacturing

Construction

Mining

3.9%

6.2%

18.0%

8.4%

12.5%

5.2%

12.4%

7.7%

10.4%

9.7%

10.1%

12.6%

24.9%

10.9%

2.8%

5.9%

19.0%

6.0%

11.6%

4.5%

11.4%

6.8%

7.8%

9.0%

9.0%

12.2%

21.9%

9.8%

2009 2010

U.S. Unemployment Rate by IndustryMarch 2009 compared to March 2010

Source: Bureau of Labor Statistics

Source: U.S. Department of Labor

CNN Money.comApril 4, 2010

A total of 33 states and the Virgin Islands have depleted their [unemployment compensation]funds and borrowed more than $38.7 billion [from the federal government].

Unemployment Compensation Trust FundsTop 10 Insolvent States

(in millions)

1. California -$8,409

2. Michigan -$3,783

3. New York -$3,001

4. Pennsylvania -$2,814

5. Ohio -$2,229

6. N. Carolina -$2,136

7. Illinois -$2,057

8. Texas -$2,026

9. Indiana -$1,807

10. New Jersey -$1,551

Source: National Employment Law Project

Unemployment Compensation Trust FundsTop 10 Likely Solvent States

(Months of Benefits Saved)

1. Louisiana 21

2. D.C. 17

Maine 17

Mississippi 17

5. Alaska 16

6. Puerto Rico 14

7. N. Dakota 13

8. Utah 11

9. Washington 10

10. Oklahoma 9

Source: National Employment Law Project

News from Around the Country

The Oklahoman

The Star-Ledger

Stateline.org

The Christian Science Monitor

Chicago Sun-Times

Columbia Tribune

Des Moines Register

News from Around the Country

Las Vegas Sun

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

9,589,2059,609,87810,432,981

11,650,94512,283,698

13,780,03014,461,300

15,055,82415,311,12314,817,000

Oklahoma State Budget

Source: Oklahoma Office of State Finance – 2009 CAFR

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

34%38% 38% 37% 37% 35% 35% 37%

41%

49%

Percent of Federal Funds in State Budget

Source: Oklahoma Office of State Finance – 2009 CAFR

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

9,589,2059,609,87810,432,981

11,650,94512,283,698

13,780,03014,461,300

15,055,82415,311,12314,817,000

Oklahoma State Budget and Percent of Federal Funds

34%38% 38% 37% 37% 35% 35% 37%

41%

49%

Source: Oklahoma Office of State Finance – 2009 CAFR

Series1

3,811.90*

2,830.00*

FY09 Actual FY10 Actual

Variance from prior year:July – February

$981.9 million

-25.8%

* in millions

General Revenue Fund CollectionsFY09-FY10 YTD† Comparison

†July-February

Source: Oklahoma Office of State Finance

Total Revenues

Sales Tax

Gross Prod-Oil

Gross Prod-Gas

Income Tax-Corp

Income Tax-Ind

$2,830,000,000

$999,700,000

$35,100,000

$178,500,000

$79,200,000

$1,081,000,000

$3,811,900,000

$1,144,200,000

$85,600,000

$513,600,000

$154,400,000

$1,339,500,000

FY09 FY10

General Revenue Fund CollectionsFY09-FY10 YTD† Comparison – Top 5 Revenue Sources

-19.3%

-48.7%

-65.3%

-59.0%

-12.6%

-25.8%

-$258,400,000

-$ 75,200,000

-$335,100,000

-$ 50,500,000

-$144,500,000

Variance

†July-February

Source: Oklahoma Office of State Finance

“A state budget is not balanced if the pension funds are not adequately funded.”

Sheila WeinbergInstitute for Truth in Accounting

Oklahoma FinancialState of the State

What do we ownCapital Assets $8,472,088,000Other Assets $9,981,267,000OUR ASSETS $18,453,355,000

What do we oweState Bonds $1,303,380,000Amounts Due Pension Funds $14,833,003,000Other Liabilities $3,333,574,000OUR BILLS $19, 469,957,000

Where we standOur Financial Hole $1,016,602,000

Oklahoma FinancialState of the State

Our bills $19,469,957,000Unrestricted funds $2,981,874,000Shortfall $16,488,083,000Your family’s share $14,600

“Debt has become our country’s drug of choice, personally, in the states and nationally, and until we are honest with ourselves about how much we really owe, we can’t begin to solve this problem” Sheila Weinberg

Oklahoma FinancialState of the State

“State revenue collections in February exceeded the estimate for the first time since December

2008. What we’re seeing now appears to be signs that we’ve hit the bottom, and now we’re starting

to climb back up a little bit.” State Treasurer Scott Meacham

The Oklahoman

“Agencies are currently facing significant additional cuts if revenue projections prove true.”

House Speaker Chris BengeThe Oklahoman

“I would caution against making those kind of statements. We’re looking at 10% in additional cuts

to state agencies and I don’t see any way for education to be spared.”

Senate President Pro-Tem Glenn CoffeeSpeaking to a Leadership Oklahoma Class

The Oklahoman

“If we don’t do some things, and we rely totally on cuts to agencies, we will devastate state government . . . these agencies and the programs that are vitally important to Oklahomans are not going to be able to recover.” Governor Brad Henry The Oklahoman

March 31, 2010

0.4%

-4.5%

-3.2%

3.1%

-4.4%

-1.2%

-4.7%

-3.1%

-12.1%

-9.7%

-21.0% Mining

Construction

Manufacturing

Trade/Trans/Utilities

Information

Financial

Prof/Bus Services

Education/Health Services

Leisure/Hospitality

Other Services

Government

Employment: 12 Month Percent of ChangeOklahoma – February 2010

Source: Bureau of Labor Statistics

Percent of Employment by Industry SectorOklahoma - February 2010

Source: OESC Economic Research & Analysis

22%

4%

9%

14%

11%

5%

18%

8%

4%

3%

Government

Other Services

Leisure & Hospitality

Educational & Health Services

Professional & Business Services

Financial Activities

Trade, Transportation & Utilities

Manufacturing

Construction

Mining/Logging

Percentages may not equal 100% due to rounding.

33,51735,945 35,053

37,257

33,531

FY05 FY06 FY07 FY08 FY11

If Statejobswere

cut by10%.

State Government Employees

Source: Office of State Finance

257,500

226,800

273,100 272,900 280,300291,600

State & Local Government EmploymentJanuary 2005-2010

2005 2006 2007 2008 2009 2010

PreviousBudgetCrisis

Source: OESC Economic Research & Analysis

28.6%since2006

a. A smaller government with fewer services . . .

b. A larger government with many services . . .

c. Don’t Know/No Response . . .

a. A smaller government with fewer services . . . 61%

b. A larger government with many services . . . 28%

c. Don’t Know/No Response . . . 12%

SoonerPoll.comSurvey of 1000 Likely Voters

February 25 – March 8, 2010

Source: Oklahoma Council of Public Affairs

“Which would you rather see in Oklahoma?”

SoonerPoll.comSurvey of 1000 Likely Voters

February 25 – March 8, 2010

“If Oklahoma’s state government is faced with a budget shortfall, which of the following actions do you think the state should do?”

a. Raise taxes and/or fees . . .

b. Cut spending . . .

c. Neither . . .

d. Both . . .

e. Don’t Know/No Response . . .

a. Raise taxes and/or fees . . . 10%

b. Cut spending . . . 77%

c. Neither . . . 3%

d. Both . . . 8%

e. Don’t Know/No Response . . . 2%

Source: Oklahoma Council of Public Affairs

SoonerPoll.comSurvey of 1000 Likely Voters

February 25 – March 8, 2010

“Would you support or oppose a proposal to reduce the number of state government employees by 10 percent?”

a. Support . . .

b. Oppose . . .

c. Don’t Know/No Response . . .

a. Support . . . 67%

b. Oppose . . . 26%

c. Don’t Know/No Response . . . 8%

Source: Oklahoma Council of Public Affairs

Source: Oklahoma Council of Public Affairs

Life after the Stimulus Package? State Budgets at FY05/06 Funding Levels

State Workers at FY05/06 Staffing Levels

Smaller state/local government(s)

Increasing share of Federal dollars to fund state government(s)

Astronomical federal deficit – Larger federal government

Questions?

Presented by:

Steve BurrageState Auditor & Inspector