DALLAS – After deeper cuts to Oklahoma’s bare-bones budget, Gov. Mary Fallin is hoping a second special session of the Legislature can patch a budget gap and raise teacher pay.
In the first special session that ended Nov. 17, Fallin’s proposed tax increases fell five votes short of the 75% super-majority needed in the House. The bill, which garnered bipartisan support, would have closed a $215 million shortfall in the current budget. Fallin is a Republican and the GOP has overwhelming majorities in the legislature.
Failure to pass the measure was declared a negative credit event by Moody’s Investors Service, which already has a negative outlook on the state’s Aa2 general obligation rating.
Instead of raising revenues, the legislature approved spending cuts, some of which Fallin vetoed.
“This will preserve a safety net for core health and human services until legislators come back for a second special session, which I intend to call in the near future,” Fallin said.
Fallin said she vetoed the budget bill because it came “perilously close” to using most of the state’s available one-time funds in various accounts and drawing down on available savings in the Rainy Day Fund. Signing the measure would have left the state with few available funds to deal with an estimated shortfall of more than $600 million in the next regular legislative session, which begins in February, Fallin said.
Fallin headed off $60 million in cuts to state agencies. The House bill also called for using more than half of the state’s $83 million in cash reserves.
“The constant budget crisis has put us in survival mode,” Fallin said. “We will thrive when we can adequately and consistently fund our core services. That will happen when we find sustainable and predictable revenue sources.”
After overcoming a $1 billion shortfall in the 2017 regular session, Oklahoma lawmakers produced a balanced budget for the fiscal year that began in July. But on Aug. 10, the Oklahoma Supreme Court ruled that a tax on cigarettes was unconstitutional, which opened the new $215 million gap.
The cigarette tax was passed in the waning days of the last legislative session as new recurring revenue, but violated constitutional stipulations that require a 75% supermajority in both legislative houses for new revenue and prohibit raising new revenue in the last five days of a session.
The requirement for a supermajority in the special session continued to dog the legislature, prompting some lawmakers to propose dropping the constitutional requirement.
“These exacting constitutional structures, alongside a lack of policy agreement on viable revenue measures, leave the structural deficit unresolved and weigh on Oklahoma’s credit quality,” according to Moody’s.
Despite the daunting threshold of a supermajority, Fallin said she does not want to wait until the regular legislative session in February to balance the budget.
“Some legislative leaders have stated that revenue measures will be taken up in February when lawmakers return in regular session,” Fallin said. “But I am very skeptical because next year is an election year and the pressure not to do anything will be greater.
“We came so close, with over 70% of the House and over 75% of the Senate voting for a viable budget plan,” Fallin said. “We cannot give up. We must find solutions.”
In further belt-tightening before the special session, Fallin issued two separate executive orders to spur consolidation of administrative services among college campuses and public school districts.
A third order calls on agencies to stop spending state money on unnecessary promotional items, which could save the state up to $58 million a year.
Fallin said the orders confront lawmakers' claims of “waste” in state spending.
“While I have always and will continue to support eliminating waste and inefficiency in state government, I strongly believe that we need to continue these efforts while solving Oklahoma’s structural budget problem and fund a teacher pay raise,” Fallin said. “These two goals are totally compatible.”
Fallin’s order directs the state Board of Education, with the assistance of the state superintendent of public instruction, to compile a list by Sept. 1 of every public school district that spends less than 60% of its budget on instructional expenditures.
School districts designated for administrative costs consolidation or annexation are to be notified by July 1, 2019, with the districts required to submit plans for administrative costs consolidation, such as human resources, purchasing, accounting, technology and maintenance, or annexation by Jan. 1, 2020. Implementation will begin with the 2020-21 school year.
“Oklahomans support additional dollars going into the classrooms, and we have to make sure those dollars make it there,” Fallin said. “According to a 2014 report, Oklahoma ranked sixth among states in the percentage of funds spent on district administration. This is unacceptable.”
In a comment on the first special session, the Oklahoma Policy Institute noted that overall funding cut just $30 million, or 0.4% from the budget passed in May.
“But the costs of this new budget will be substantial,” said OPI executive director David Blatt. “A majority of agencies, many of which have seen their funding slashed by 20-40% over the past decade, are hit with a further 2.4% cut.”
“Rather than beginning to climb out of a hole, lawmakers are digging themselves in deeper,” Blatt said. “The new budget relies on an additional $138 million in one-time dollars from the Rainy Day Fund and multiple agency revolving funds, while using up almost two-thirds of last year’s cash surplus. Along with one-time money appropriated in May, the new budget includes over $480 million in cash. When known obligations are considered, the state is staring at another budget deficit for FY 2019 of some $650 million.”