“In a year with a $611 million budget hole, today’s agreement takes extraordinary steps to shield common education,” Gov. Mary Fallin said.

DALLAS - Oklahoma Gov. Mary Fallin and state legislative leaders announced an agreement to patch the $611 million hole in the state's $7.1 billion fiscal 2016 budget.

Under the agreement, state spending will fall $74.3 million or 1.03% below the current year's outlays. Oklahoma's fiscal year begins July 1.

"In a year with a $611 million budget hole, today's agreement takes extraordinary steps to shield common education, our largest and one of our most important expenses, from budget cuts," Fallin said in a statement announcing the plan May 19. "The budget also protects and in some cases increases funding for health and public safety while preserving all funding necessary to keep intact the state's eight year transportation plan as well the five-year county road and bridge plan."

To cover the $611 million shortfall, the agreement takes $150 million from the Rainy Day Fund and $125.2 million from agency revolving funds. It also taps other state accounts.

"We knew this would be a difficult budget year, but we believe we have delivered a responsible agreement that includes strategic spending cuts and much-needed apportionment reform," Senate President Pro Tempore Brian Bingman, R-Sapulpa, said in a prepared statement. "In a year when we were faced with a significant shortfall, difficult decisions had to be made to produce a balanced budget."

The agreement preserves the funding necessary to maintain the state's current eight-year transportation plan and county governments' five-year road and bridge plan.

Oklahoma revised its revenue projections down by $611 million, or 8.5% of its total budget on Feb. 17, citing the effects of lower oil prices on the state economy.

"The large decline, double what the state projected in December, is the latest data point in a credit-negative trend of some energy states experiencing financial strain owing to decreased oil prices and production," Moody's Investors Service wrote at the time.

The big driver of Oklahoma's revision is income tax collections, which the state now projects will fall by $249 million in fiscal 2016. At the same time, the state projects that oil tax revenues will decline by $45 million, or 30%. Oil prices fell to about half of their peak 2014 levels and are affecting the underlying economy.

With $2 billion of outstanding debt, Oklahoma carries ratings of Aa2 from Moody's Investors Service and AA-plus from Standard & Poor's. Outlooks are stable.

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