Budget Accord to Guide Appropriations

The budget process moved into high gear at the Oklahoma state Capitol in wake of a leadership agreement on use of state reserves. Depending on how you look at the data, the budget shortfall for 2011-12 could be as high as $1.9 billion (in terms of the last session’s spending plans), or as low as $483 million (if all planned allocation cuts are carried through).

State leaders had reached agreement on accessing Oklahoma’s Constitutional Reserve, better known as the Rainy Day Fund, last Wednesday. However, announcement of the accord was delayed until late the next day, as substantive disagreements emerged among the “Big Three” – Governor Brad Henry, President Pro Tem Glenn Coffee and House Speaker Chris Benge.

Disagreements over at least one issue, including higher education spending in Tulsa, resulted in fresh negotiations. The rainy day gap among the three had been as high as $257 million (between Henry and Benge)  -- but each of the three consistently said an accord was likely, and that proved true.

Agreement came in time for government officials to avoid furloughs at the Highway Patrol, and to restore funding for Medicaid reimbursements. Fiscal challenges unprecedented in the modern era remain to be addressed, and many agencies face additional cuts as government officials seek to “right-size” spending.

Officials say $223.5 million will be used from the reserve to restore some of the reductions government agencies have faced this fiscal year. An equal amount is to be transferred from the reserve to into a special cash fund. While the trio said “special cash” money might be used for Fiscal Year 2011, some legislators have questioned use of the special fund in discussions with CapitolBeatOK. The leadership agreement would leave $149 million in the Rainy Day Fund.  Remaining federal stimulus funds will be used this session, but that revenue source is not available for next year.

Several supplemental funding amounts have been designated, ranging from more than $100 million for common education (K-12) to $700,000 for central services. Other agencies or spending clusters getting supplementals include higher education ($25.6 million), Corrections ($7 million) Public Safety ($3 million) and Rehabilitative Services ($1.2 million). With a supplemental of $33 million, the Health Care Authority was the only agency held “harmless” in the accord. Medicaid provider cuts will be reversed, officials said, as the agreement is implemented.

The leaders agreed on broad issues several weeks ago, including promises to provide supplemental appropriations for common education, higher education, Corrections and health care. However, they remained far apart for the first two weeks of February when it came to how much of the Rainy Day Fund to use to close the state’s budget gap for Fiscal Year 2010 and for FY 2011.

The leaders have also disagreed, respectfully, on total spending issues for this year, and on other issues. Those disagreements are likely to play out in the appropriations process that began to accelerate last week after the state Senate gave unanimous approval to a rules suspension. That vote allowed a full week to be trimmed from customary procedure.

As a result of the Board of Equalization meeting on Tuesday, Feb. 16, the government estimated a nearly $670 million gap remained for FY 2010 in terms of planned spending. The gap for FY 2011 was estimated at about $1.2 billion after the meeting.

However, anticipated gaps are declining as the effects of reduced agency allocations accumulate. Nonetheless, as state Treasurer Scott Meacham told CapitolBeatOK and other news organizations throughout last week, “additional cuts will be required” to reach the constitutional mandate for a balanced budget.

Michael McNutt of The Oklahoman reported Saturday (February 20) that Meacham has pegged the remaining gap for 2010 at about $283 million, with at least $200 million more for 2011.

The latest data certified by the Board of Equalization were actually a modest improvement on estimates established in December. For FY 2010, rising oil and natural gas prices and resulting boosts in tax collections have added about $60 million to the state’s revenue available for expenditure.

The latest analysis from the Tax Commission for FY 2011, as detailed for reporters on Monday and summarized for the Board on Tuesday, projects about $120 million more in tax revenue than estimated in December.