The Legislature and governor have declared victory and headed home after approving a state budget for fiscal 2010, which starts July 1.

To many, it may seem like the end of a long process that featured plummeting state revenues, a federal stimulus patch, a full but still untouched Rainy Day Fund, and extended closed-door deliberations. In reality, though, it's the beginning of the story, not the end. Over the next year, Oklahomans will find out whether the largely standstill budget can fund the state services on which we all rely.

When the dust had settled, FY 2010 appropriations for all agencies totaled $7.2 billion, an increase of 1.5 percent over FY 2009. Had it not been for $641 million in stimulus funds through the American Recovery and Reinvestment Act, appropriations would have been 7.1 percent lower than FY 2009.

The budget used stimulus money to maintain state services in the face of declining state revenue. Common and higher education received $236 million in federal funds to keep spending at existing levels and several social services agencies received $405 million in increased federal matching funds for the Medicaid health care program.

Results for the state's 78 appropriated agencies varied greatly. The 10 largest agencies, which spend nearly 90 percent of the state budget, were protected from deep cuts. Smaller agencies, however, with responsibilities for labor standards, consumer protection, the judicial system, environmental protection, tourism promotion and other duties, saw decreases in appropriations of 4 to 7 percent.

That's just where the story starts. Even agencies with more money face a tight year. They will have to pay the increased costs of employee retirement and health insurance, as well as increases in general operating expenditures. Many agencies, especially those that provide services to economically displaced businesses and households, cannot easily control their costs because their workloads are driven by their customers.

While most agencies will avoid furloughs and involuntary layoffs if at all possible, the funding squeeze will lead many agencies to increase their number of unfilled vacancies, ratchet up staffing caseloads and cut back on services to the public.

We won't know until next June the full impact on public services or our health and well-being, but we can see warning signs. Early indications are that enrollment and usage in the Medicaid program are growing faster in the downturn than the levels provided for in the budget. The Department of Human Services already faces a deficit in the ADvantage program that provides an alternative to nursing home care.

We can expect fewer employees and shorter hours at state parks, museums and other public facilities, and longer waits for driver's license exams and other services.

Next year, the Legislature will wrestle with a new budget, but it is likely to look a lot like this year's, with revenue collections beginning to recover but still falling far short of pre-downturn levels. Indeed, it could be three or more years before economic recovery brings budgets back to where they were when the recession started.

Fortunately, there are several steps we could take to make the recovery smoother. One is to modify the Rainy Day Fund rules so the fund can be spent throughout the recovery; current rules make it difficult to spend except at the beginning of a downturn. Another is to delay the impact of tax cuts that were approved in better times. These cuts threaten to hamper state agencies just as they could be starting to recover.

The budget process has come to its logical conclusion; state agencies now know what they have to work with and we are putting the stimulus to work in keeping state services running and spurring economic recovery. As we move from process to execution, we'll see how it works on the streets.

David Blatt
Director of Policy

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