Oklahoma lawmakers on Monday granted Gov. Kevin Stitt extraordinary power to bypass state laws in responding to the COVID-19 pandemic.
Meeting in a special session Stitt called last week, the Legislature enacted the Catastrophic Health Emergency Powers Act that allows Stitt to waive statutory and regulatory requirements and redirect state agency or state employee efforts to responding to the COVID-19 crisis.
Stitt also will be able to activate the Oklahoma National Guard and shift up to $50 million in state funds to units of the government dealing with the crisis.
“The powers that we’re giving the governor are very broad,” said House Majority Floor Leader Jon Echols, R-Oklahoma City. “This is the equivalent of the Oklahoma Wartime Powers Act.”
The emergency powers come as the state is facing a $416 million revenue emergency caused by the pandemic and a collapse in the oil markets, both of which have brought a surge in unemployment.
"This revenue failure is not unexpected," Stitt said in a prepared statement. "Times like these further reinforce how critically important it was for our House and Senate leadership to work with me to save an additional $200 million during last year's budget surplus."
Stitt has called on the state Board of Equalization to start the process of allowing the Legislature to tap into the Rainy Day Fund, which holds about $806 million. The fund was boosted in last year’s legislative session after years of revenue shortfalls that prompted deep cutting in spending.
The Legislature, which was already in session to develop a budget, will be able to access up to roughly $500 million of Rainy Day funding instead of setting off 6.2% spending cuts automatically.
Until last week, Oklahoma’s Aa2 rating from Moody’s Investors Service appeared headed for an upgrade.
On Tuesday however, Moody's revised Oklahoma's outlook to stable from positive.
“The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices and financial market declines are creating a severe and extensive credit shock across many sectors, regions and markets,” analysts wrote. “The combined credit effects of these developments are unprecedented.”
As of the third quarter of 2019, the mining sector of Oklahoma's economy (consisting primarily of oil and gas) was the largest contributor to the state's gross domestic product at 22.6%, according to Oklahoma Employment Security Commission data.
Oklahoma Treasurer Randy McDaniel said the impact of the shock will show up in next month’s revenue report.
“This month marks the end of almost three years of economic growth,” McDaniel said in his report for March. “I expect to see a much different picture emerge in the coming months.”
The March report, which mostly reflected income for the month of February, showed slowing sales tax collections and reduced oil and gas production.
Total March receipts were $1.09 billion, up by $6.4 million, or 0.6%, from March of last year.
As a lagging economic indicator, gross receipts to the Treasury provide a look back at recent performance of the state’s economy. The numbers indicate the state’s economy remained relatively strong for almost three years, but had recently started to show signs of weakening. Then, the coronavirus pandemic hit Oklahoma.
McDaniel listed several data points showing a significant decline is underway.
First-time unemployment claims hit almost 45,000 the last week of March, the highest number ever reported in Oklahoma.
Oil prices fell from some $47 per barrel at the start of the month to less than $20 before month’s end. Already suppressed drilling dropped from 50 wells in April to 39 in March.
The Dow Jones Industrial average dropped by 23% during the first quarter of the year, its worst quarterly performance in history.
The Oklahoma Business Condition Index dropped to 45.7 in March, down from 51.5 in February. Numbers below 50 indicate expected economic contraction in the next three to six months.
“The economic indicators are disconcerting, but working together we will get through this downturn,” McDaniel said. “My thoughts and prayers are for the health and safety of my fellow Oklahomans. I am thankful for the first responders, health care providers and many others that are stepping up to make a difference.”
As of Monday, Oklahoma had recorded 1,327 positive coronavirus cases and 51 deaths.
