A first look at the Governor’s FY ’11 budget

In Monday’s State of the State address, Governor Henry laid out the broad parameters of his FY ’11 Executive budget. The Governor’s speech likened our current fiscal storm to the severe weather the state has faced recently and so often in our past.  While the Governor stated clearly that continued budget cuts are unavoidable due to the dramatic plunge in revenues that has hit the state during the current fiscal year (FY ’10) and that will continue next year, he earned loud, bipartisan applause when he declared:

We all will be asked to sacrifice. But we cannot balance the budget at the expense of the most vulnerable among us.

His speech was most eloquent, perhaps, when he spelled out what’s really at stake when it comes to cutting government:

As we proceed, I implore you to remember there are very real – and human – consequences to budget cuts. The men and women who make state government work are not numbers on a spreadsheet.

Government is the schoolteacher grading papers at night. It is the meat and poultry inspector ensuring a safe food supply. It’s the child welfare specialist investigating suspected child abuse. It’s the nursing home attendant caring for a loved one … the speech pathologist working with special-needs children … the corrections officer tasked with keeping dangerous criminals behind bars.

The challenge for the Governor, and for legislators hoping to mitigate the of budget cuts and protect core government services, is how to balance the budget when revenues are projected to come in some $800 million below initial appropriations for this year and when certified state revenues for FY ’11 are some $1.9 billion below the initial FY ’10 budget of $7.2 billion. Other than making the case for tapping the state’s Rainy Day Fund, the Governor’s speech itself offered no details on how to accomplish this task. However, the Executive Summary to his FY ’11 does lay out the Governor’s strategy for bringing the budget into balance.

The broad outlines of the Governor’s approach are as follows. First off, as announced last week in an agreement between the Governor, House Speaker, and President Pro Tem, the FY ’10 revenue shortfall will be filled in part by across-the-board annual budget cuts averaging 7.5 percent of funding from General Revenue. These cuts, which amount to some $465 million, are to be offset by some $180 million in supplemental funding divided between common education, higher education, Medicaid and corrections. That still leaves an FY ’10 gap of over $500 million, which the Governor proposes to fill with $485 million from the Rainy Day Fund and transfers from agency revolving funds.

For FY ’11, the budget would be balanced as follows under the Governor’s plan:

• FY ’10 cuts would be annualized and increased by an additional 0.5 percent to 3 percent for all agencies.  In addition, pass-through funds to several agencies would be suspended. In total, this represents some $380 million in budget reductions for FY ’11 compared to initial FY ’10 appropriations;
• $696 million in remaining stimulus funds;
• $67 million in Rainy Day Funds.  (This would leave the RDF with some $44 million);
• $53 million in anticipated savings from agency consolidations and consolidation of information technology services;
• $233 million from new bond issues that would free up General Revenue;
• $85 million in transfers of cash balances from revolving funds;
• $239 million from a variety enhanced tax collection proposals, particularly increased sales tax collections on Internet sales and automated enforcement of vehicle insurance.
• $103 million from eliminating or suspending various tax credits;
• $58 million from increases in fees and permits.

Two points need to be made about these budget balancing proposals. First, many of those I spoke with at the Capitol who had learned of the Governor’s ideas for generating additional revenues and savings through efficiencies were skeptical that the proposals would gain legislative support or would have the fiscal impact promised in the budget. Without these measures, however, cuts would have to be even deeper than those the Governor recommends. (On the other hand, if the revised certification to be presented later this month to the Board of Equalization projects stronger revenue collections over the next 17 months than December’s initial estimates, the budget gap will not be as sizable.)

Secondly, even with these optimistic assumptions about savings and new revenues, the impact of the proposed funding levels in the Governor’s budget remain extremely worrisome.   With a few exceptions, most agencies are facing FY ’11 funding that is 10 to 17 percent below their budgets for FY ’09. Even those core agencies in education, health and human services, and public safety that are partially protected will take cuts in FY ’10 and FY ’11 and are not funded in FY ’11 to deal with rising operating costs and caseloads.

The bottom line is, for all of us who count on government – on those school teachers, safety inspectors, child welfare specialists, nursing home attendants, and corrections officers – to protect our safety and well-being and make us a stronger state, this fiscal storm still looks to have a devastating effect.

To see OK Policy’s updated spreadsheet of agency-level and overall appropriations for FY ’09 through FY ’11, and related budget information, click here.