Hello again, everybody. This week, the state got some bad – though not unexpected – news: Tax collections are less than estimates on which we in the Legislature wrote the budget.
State law allows lawmakers to spend only 95 percent of what state government expects to collect, creating a five percent “cushion” between estimates and expenditures. Because the national recession is so persistent, state government is collecting less money than needed to meet the conservative budget we wrote last session.
When that happens, state law requires every agency’s budget be cut until the budget balances. Unlike the federal government, which can spend billions of dollars it does not have, Oklahoma state government’s budget must balance. To balance the budget for August, state agencies were cut five percent across the board.
Public schools were spared the five percent August cut because they get only 11 monthly payments instead of the 12 other state agencies receive. School district payments for August were 2.74 percent less than expected. Because school districts do not get a July payment, revenues from that month helped soften the blow. That cushion is now gone.
The August cut for schools in my district range from $27,580 in Durant schools’ state aid to a $268 reduction in Mill Creek schools’ payment. Subsequent cuts for schools likely will be greater because their cushion is gone.
Some state agencies will endure a very small impact. That includes those getting funding from other sources, including the federal government.
Agencies getting virtually all their money through the state budget – such as Corrections and Human Services – are most at risk. The Health Department – anticipating further shortfalls – ordered a larger cut in its budget than the five percent cut, shrinking its budget by 7.5 percent.
As bad as things sound, they could be much worse. The Rainy Day Fund has about $600 million that could be used. Also, we still have about half the federal stimulus money allocated to Oklahoma. The question is: Do we use these dollars now, or hold the money in case the recession continues to wreak havoc with the budget?
No one is talking about a special session to adjust budgets. However, if revenues continue to worsen, I believe there will be increasing pressure on the Legislature to take action. First and foremost, I believe we must protect, as much as possible, budgets for agencies charged with public safety and education.
For most of this economic slowdown, Oklahoma has endured very well. Our budget numbers are still better than almost all our sister states. While the national recession appears to be easing, I believe we should be cautious, protecting that which is most important.
Oklahoma was the “last in” to the recession. Whatever action we take, our goal should be to ensure Oklahoma is the “first out” of this economic downturn.
Thanks again for reading “The Senate Minute.” Have a great week, and may God bless you all.