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Oklahoma's rainy day has arrived

Oklahoma's rainy day has arrived


Published: November 8, 2009

Deeper cuts than the 5 percent reductions ordered the past three months appear likely for state agencies to make up for declining revenues this fiscal year, which could cause grim circumstances, the governor’s chief budget adviser says.

"My concern is that there are agencies that don’t appear to be able to take more than a 5 percent cut without it affecting their core services,” state Treasurer Scott Meacham said. "I’m talking things like corrections guards in prisons and highway patrolmen on the highways – the things that I think everybody would agree are basically core state services.”
To balance this year’s $7.2 billion budget, the 5 percent budget cuts would have to stay through June, the end of the fiscal year, and lawmakers would have to use most of the nearly $600 million in the Rainy Day Fund, Meacham said.

Larger cuts would be needed if state revenues take even a deeper dive or if lawmakers don’t want to exhaust most of the Rainy Day Fund, Meacham said. Nothing appears to have reversed the negative revenue trends of recent months and bigger across-the-board cuts are likely just to keep meeting monthly expenses.

"It’s pretty grim out there just at 5 percent,” Meacham said.

"You start going past the 5 percent, and it really starts getting tough.”

Most agencies had their budgets reduced by 7 percent this fiscal year. The additional monthly 5 percent reductions were enacted in August, the second month of the fiscal year, and if continued through June would put the annual cuts at nearly 12 percent.

Budget leaders were able to avoid cutting state agencies in July by using available cash reserves and transferring about $130 million from other funds to have enough money to pay expenses.

The $130 million must be paid back by the end of the fiscal year.

Even if deeper cuts are necessary, lawmakers could keep the cuts at 5 percent by using most of the Rainy Day Fund. Their options include:

• Use some of the $600 million in federal stimulus funds that remain available. Fearing an economic downturn that could spread well into next year, lawmakers used only $630 million of the state’s $1.2 billion in federal stimulus funds to put together this fiscal year budget. The rest of the money was put away to be used for the 2011 fiscal year budget.

• Raise revenue through a tax increase, but that seems unlikely. The Republican-controlled Legislature is averse to raising taxes, and it would be difficult even if legislators wanted to do it. In 1990, Oklahoma voters approved an initiative petition, State Question 640, which requires a statewide vote on tax increases that fail to win approval of three-fourths of both houses of the Legislature.

• Cut expenses, most likely by increasing the size of budget cuts to some agencies and departments by more than 5 percent.

Legislators will have a better idea this week whether the economic downturn is slowing down or is getting worse.

Revenue reports for October collections are due Tuesday.

Collections for the first quarter of this fiscal year were 26 percent below the estimate.

It’s up to legislative leaders and the governor to decide whether to call a special session before legislators return in regular session in February.

More than 30 of the 149 legislators have signed a petition requesting a special session — three-fourths of the 101-member House and 48-member Senate have to sign it.

"We can make it from a cash-flow standpoint to regular session,” Meacham said. "Whether you have a special session’s really more of a political decision at this point than it is a financial decision.”

About 400 people attended a rally last week at the state Capitol seeking the restoration of $7.4 million that had been cut from senior nutrition programs.

A couple legislators have said they support a special session so that money can be transferred from the Rainy Day Fund to pay for the meals.

"The problem is when we come into special session, the light is not going to be just on senior nutrition,” Meacham said.

"Senior nutrition is going to get sort of swallowed up in a sea of all these problems that we have as a result of the cuts in our budget shortfall.”

The governor’s office and legislators also have to make sure the budget cuts don’t put spending below last year’s amount for agencies that received federal stimulus funds.

The state agreed in accepting the one-time money that spending levels this year would be at least the same as during the 2009 fiscal year for education, transportation and the Medicaid program.

Failure to match last year’s funding level would result in the state paying back the state the federal stimulus money, Meacham said.

"We definitely want to fulfill the requirements,” he said.

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