Oil-Dependent Oklahoma Cuts Budget Deeper

by | March 7, 2016

By Sidney Lee

The Oklahoma Office of Management and Enterprise Services told state agencies to prepare for an additional 4 percent cut of their annual state allocations.

This comes a few months after state agencies took a 3 percent cut.

"It's uncharted territory," said Tim Allen, deputy treasurer for Communications and Program Administration at the state's treasury department.

He said in his 26 years with the treasury, he has seen multiple oil busts, but never has the state's revenue taken a similar hit in relation to these energy busts.

Allen also said while these cuts are a total 7 percent of yearly revenue, agencies will actually experience an 18 percent cut in monthly allocations.

"We're coming into the ninth month of the fiscal year, so it's being compressed into one-third of the year," said Allen of this last 4 percent cut.

To understand the math behind this, one has to start by looking at the entire year's allocation.

When an agency is given their yearly allocation, it doesn't come in one lump sum. Instead, it is received in 12 equal "slices," one per month.

So when the state announced a 3 percent cut halfway through the fiscal year, six of these "slices" had already been spent, meaning what would have been a 3 percent cut to each slice at the beginning of the year would now be doubled to a 6 percent cut to each of the remaining slices.

This most recent cut of 4 percent was announced with only three months left in the fiscal year. With two-thirds of the allocation slices already spent, this 4 percent cut will be tripled for the last three months, or slice allocations, of the fiscal year.

This means for the last three months of the fiscal year, state allocations to agencies will be 18 percent less than what these agencies budgeted at the beginning of the year.

Oklahoma Policy Institute Executive Director David Blatt said while a second cut was expected, it was not expected to be more than 2 percent at most.

"This 4 percent cut on top of 3 percent came as a real shock," said Blatt. "I think it's going to be extremely difficult to manage across the state."

The timing of the cuts makes it even worse, according to Blatts.

"If you were going to get $100 in April, now you'll get $82," said Blatts.

Part of the bigger picture of what government agencies are facing requires looking back the beginning of the year when Blatt said most state agencies took a 5 percent cut in funding before the fiscal year even began.

While education may not have got a spending cut and did receive some increases in spending, state funding per student has dropped 25 percent with inflation in the last seven years.

"We already we at the point where agencies had made all the easy cuts and some of the hard cute," said Blatts. "We've already cut away all the meat. We're already cutting into the bone."

He hopes by erring on the side of caution with this 4 percent cut, there will not be another cut until the next budget.

But most of the officials who spoke with the Transcript do believe there will be another cut before the end of the fiscal year in June.

State Senator Rob Standridge(R) is one of them.

Standridge said he believes these two cuts will actually work out to be closer to 16 percent per month cut from monthly allocations than the 18 percent expressed by Allen.

"It's unfortunately indicative of the recession we are in," said Standridge.

Standridge is one of the senators on the Senate Appropriations Committee as well as sitting on the Appropriations subcommittee on Health and Human Services.

During these budget cuts, Standridge said the challenge for the legislature is to maintain basic services while these drops in revenue continue to happen.

"Budget failures are not something that can be foreseen before they happen," said Standridge.

During a public education legislative forum at McKinley Elementary on Tuesday night, Senator John Sparks (D) spoke about the cuts.

"We're in a marathon, not a sprint," said Sparks.

Both Sparks and Standridge indicated they believe there may be additional cuts in the next three months, as well as in next year's budget.

Representative Scott Martin (R) and Representative Emily Virgin (D) also attended at the legislative forum on Tuesday night.

"We have to remember to be engaged because a lot of the decisions that led to where we are today are decisions that were made when things were good," said Virgin. "We need to realize these booms and busts are going to happen."

Martin spoke of multiple options for helping agencies during this round of cuts by going into special session and opening the state's rainy day fund to help weather the storm.

"We would prefer to take action right now," said Martin.

Virgin also spoke in favor of tapping into the state's rainy day funds.

"We appropriated money we thought was going to be there and it wasn't," said Virgin. "I think it's our responsibility to take responsibility for that and we can."

Norman Public Schools Superintendent Joe Siano told parents at the forum he advocated using rainy day funds for the current revenue shortfall in order to meet this year's obligations.

"Im not totally discounting that, we just need to make sure we don't drain the fund for the next year or two in the economic downturn," said Standridge.

Martin said during the forum there have also been discussions about holding some agencies "flat," like the Department of Education or the Department of Corrections, though this would mean other agencies received a bigger cut.

These are the two agencies Standridge said will be hit hardest by the latest round of budget cuts.

Standridge said the Department of Corrections in particular had already asked for over $20 million in supplemental funds before the most recent cut to their general funds was announced.

(c)2016 The Norman Transcript (Norman, Okla.)