Games legislators play

by | June 2nd, 2014 | Posted in Blog, Budget | Comments (0)
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truefalseIn the final days of session in May, the legislature approved SB 2127, the annual General Appropriations (GA) bill providing funding for most state agencies.  The press release issued by the Governor, House Speaker and Senate President claimed that the agreement reduces spending by $102.1 million, or 1.4 percent compared to the FY 2014 appropriated budget.

Given that the budget negotiators started with $188 million less of available revenue, limiting FY 2015 cuts to $102.1 million might seem like an accomplishment to be proud of. But under closer scrutiny this story doesn’t quite hold up, and neither do several other assertions made in the wake of the budget agreement. In this post we shed light at a few of the secrets buried in the budget.

This year’s budget was not cut by $102 million

The GA bill contains $110.1 million of what is labeled in supporting documents (here and here) as FY 2014 supplemental appropriations. A supplemental is usually made during the session to address a hole in an agency’s current year budget that requires immediate funding.  Yet of the funding labeled as FY 2014 supplementals, only $38.5 million ($25.5 million to the Department of Education for a current year shortfall in the Ad Valorem Reimbursement Fund and $13 million to the Department of Corrections for current year operations) resembles traditional supplementals and should clearly be counted as FY 2014 funding. All the other so-called supplementals – a total of $71.6 million allocated to nine agencies –  represent ongoing or one-time funding that appear to address funding needs for next year. In the case of $47.7 million appropriated to the Oklahoma Health Care Authority “to reduce provider rate cuts” that is labeled a FY 2014 supplemental, the amount is exactly equal to what is supposedly being cut from the agency in FY 2015. In the case of a $718,620 appropriation to the Ethics Commission that was also labeled a FY 2014 supplemental, the legislature even passed a follow-up bill specifying that the funding would only be made available at the start of FY 2015.

By back-loading these appropriations to FY 2014 in its budget summaries, the legislature was able to create the appearance that it had made overall cuts of over $100 million in a tight budget year. If the one-time and recurring revenues that are not true supplementals are counted as part of the FY 2015 budget, as is normally done, then the story is different. By our accounting, total FY 2015 appropriations are $7.193 billion, which is nearly unchanged from last year’s $7.197 billion budget.  A flat budget may not play as well on the election mailers for certain legislators as a 1.4 percent cut, but it better reflects what happened.

This funny business with supplementals was also used to disguise how lawmakers have protected their own budget while cutting most state agencies. In the budget summary released by the Legislature, it appears that, like the majority of state agencies, the House of Representatives budget was cut by 5.5 percent. However, a $1 million FY 2014 supplemental that will actually fund 2015 operations means that their budget was actually increased 0.5 percent. Last year, the House and Senate both enjoyed $1 million funding bumps.

Common education funding has not increased by $200 million in the past two years

While some legislators were overstating budget cuts, others were overstating funding increases. In particular, House Appropriations and Budget Chair Scott Martin proudly declared that over the past two years, K-12 funding has enjoyed a “roughly $200 million total increase”. While common education funding did increase by $80 million this year, FY 2015 funding will be just $122 million more than in FY 2013. Funding for common education will also still be $44.9 million below what it was in FY 2009. Of the total increase, just about half ($62 million) has gone to the state aid formula, with the rest being used to pay for increased health care costs and education reform measures.

The legislature made sure it won’t share in the pain of any mid-year cuts

For most state agencies, the lion’s share of their appropriations, if not all, come from next year’s General Revenue collections, which account for 78 percent of all appropriations. This carries some budgetary risks. If revenue collections miss the estimate by more than 5 percent and a revenue shortfall is declared – as has happened four times since 2000 and almost happened again this year – then appropriations made from current GR collections are cut by a corresponding amount. However, other funds, including prior year General Revenue, are not subject to cuts.

This year, for at least the third straight year, the House, Senate and Legislative Services Bureau were funded entirely from prior year General Revenue and are thus shielded from potential cuts. The past two years, only the legislative agencies were fully funded by prior year GR, while this year one other agency, the Space Development Industrial Authority, was as well.

It’s hard to avoid the conclusion that much of this year’s budget was more about PR than sound fiscal management. And for all of the talk about how agencies should be able to handle cuts without serious problems, legislators have been careful to protect themselves from having to make the same hard choices.

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