DALLAS – Oklahoma's recently approved $6.8 billion budget offers positive credit factors for public schools but negative implications for higher education and the state as a whole, according to Moody's Investors Service.
Moody's has a negative outlook on the state's Aa2 rating.
"The budget is credit negative for the state because it draws down reserves to approximately 6.5% of fiscal 2015 revenue, according to our estimates, its lowest level since at least fiscal 1994," Moody's analyst Adebola Kushimo wrote Monday for the ratings agency in an outlook piece.
Public K-12 schools benefit from flat funding growth, while higher education will see funding reduced about 16% on top of cuts in previous years, Kushimo said.
"Oklahoma's public universities are more reliant on state support than others nationally," Kushimo wrote. "Oklahoma state appropriations provide a median of 35% of public university operating budgets compared to approximately 25% nationally."
Oklahoma Gov. Mary Fallin signed the 2017 fiscal year budget bill, Senate Bill 1616, into law June 10. She also signed another bill and vetoed another, closing the book on the 2016 legislative session.
The budget closes $969.3 million of the $1.3 billion budget gap lawmakers faced in the legislative session. The $6.78 billion budget is $360.7 million, or 5%, less than the 2016 fiscal year budget prior to a midyear revenue failure.
The budget is $67.8 million, or 1%, less than the 2016 fiscal year appropriations as adjusted by the midyear revenue failure.
Other budget balancing measures include agency cuts, tax credit reforms and bond funding for transportation and Capitol repairs.
"We worked hard to protect key core services – common education, health and human services, corrections and the Oklahoma Health Care Authority – while keeping our eight-year transportation infrastructure plan intact," Fallin said in budget signing statement.
State revenues continue to underperform, Kushimo wrote, but have improved in the past few months.
"Oil prices have recovered in the past six months, which could offset some of the structural budget gap going into fiscal 2018," she wrote. "Oil and gas production and prices have a direct effect on state revenues through gross production taxes and a larger effect indirectly through sales and income taxes."