Oklahoma Governor Orders Agencies to Prepare for Major Cuts

by | October 28, 2015

By Nathan Thompson

Gov. Mary Fallin ordered state agencies on Monday to prepare plans to cut 10 percent of "non-mission-critical" expenses for the remainder of this fiscal year and the entirety of the next.

The governor issued the executive order for the plans, as well as an immediate moratorium on all nonessential, out-of-state travel for state employees that is paid for by tax dollars.

Agency plans to reduce expenses are to be announced by Dec. 1, the order said, but it did not mandate immediate cuts. The plans are to include an explanation of how the dollars saved from the reduction will be reallocated to other needs within the agency.

The executive order from Fallin is a result of revenue coming into state coffers being below expectations -- as Oklahoma's economy is heavily reliant on the oil and natural gas industry. Layoffs and the continued slide of energy prices have caused taxes paid to the state to be much lower than expected, and are not expected to get any better in the near future.

"I'm asking every agency to start planning for potential spending cuts, and to develop a strategy that protects essential services," Fallin said. "It's important we get ahead of this issue as we enter a difficult budget year. Families and businesses tighten their belts during lean times; our state agencies can do the same."

Rep. Earl Sears, R-Bartlesville, chairman of the House Appropriations and Budget Committee, told the Examiner-Enterprise that Fallin took the appropriate steps to address the state's current economic situation.

"The governor is being prudent about our current situation," he said. "We have to have a balanced budget and I am glad that she is getting ahead of it."

Sears said he has been working with the Senate and representatives from Fallin's office to evaluate the situation.

"I started budget meetings with key people at the State Capitol in August," Sears said. "We don't know what the numbers are at this point, but we have been exploring options about any hypothetical shortfalls for the upcoming fiscal year. All we are doing at this point is looking at what ifs and what we could do about any additional cuts to find the funds to balance the budget."

One thing that Sears said has not come up is the incremental cuts to the state's income tax rate.

In 2014, Fallin signed into law a bill that will gradually lower Oklahoma's top income tax rate from 5.25 percent to 4.85 percent over several years if state revenues continue to rise. The first of these cuts went into effect this year.

"There are no talks at the State Capitol to roll back or repeal the tax cut," Sears said. "The first cuts are already in place and it will cost the state $95-$97 million this year. We have not talked about repealing that measure, but that's not to say that it won't come up in February."

The state legislature is scheduled to go back into session Feb. 1.

During budget negotiations earlier this year, lawmakers were forced to deal with a $611 million budget shortfall, causing cuts to most state agencies. One agency that was spared cuts at the beginning of this fiscal year was the State Department of Education.

In the midst of Fallin's executive order, Phil Bacharach, chief of communications and public affairs at the State Department of Education, said the department is currently evaluating where the proposed cuts can be made.

"We're certainly aware that the state is facing significant fiscal challenges," Bacharach said. "The Oklahoma State Department of Education is examining all options to meet budgetary constraints with as little impact as possible on students in the classroom."

With Oklahoma's economy heavy reliant on crude prices, analysts and elected officials have been looking at what the future holds, much of which is unknown. Fallin's office said a significant shortfall is expected to occur in the next budget year.

West Texas Intermediate crude oil prices dropped another 1.95 percent Monday, closing at $43.86 per barrel on the New York Mercantile. The price of a barrel of U.S. crude has fallen over 45 percent in the last year.

(c)2015 the Bartlesville Examiner-Enterprise (Bartlesville, Okla.)