An early look at the FY 2022 budget (Capitol Update)

There was an informative interview in last Friday’s Journal Record of Senate Appropriations Chair Roger Thompson, R-Okemah, about his thoughts for the FY 2022 budget to be passed when the Legislature reconvenes in February. Last March, the pandemic hit legislators with a projected $1.3 billion in cuts to be made for FY 2021, which will end June 30, 2021. The $1.3 billion was a number wisely agreed to by legislators last session for crafting the budget in order to avoid the possibility of a revenue failure this year, even though the Board of Equalization had already met in February and certified a higher budget target.

According to Sen. Thompson, although no one knows what will happen with the economy given the turmoil caused by the pandemic, he is hopeful if things continue as they are, there will be a flat budget next year. That is not great news since the budget for last year represents the $1.3 billion cut from the year before, imposing cuts of 3.5 percent to 4 percent on most state agencies and lesser cuts for education and health care. This, just as Oklahoma was beginning to climb out of a hole created by a decade of budget cutting.

I am hopeful Sen. Thompson is, as budget chairman, speaking about a flat budget as a way of tempering expectations for next year. There are several reasons for both optimism and caution. On the upside, the $1.3 billion, if things continue as they are, was a larger cut than necessary for this year. According to Sen. Thompson, revenues are 6.3 percent ahead of projections, and the state is gaining ground as more Oklahomans return to work. It appears the revival will offset the full brunt of the $1.3 billion revenue hit projected, which will create a surplus. The unemployment rate is 5.7 percent compared to 14.7 percent in April, and business seems to be recovering some momentum.

But as cautionary notes, in addition to the cuts, this year’s budget is built on $180 million in money taken from revenue earmarked for transportation and replaced with borrowing. The state also reduced its contributions to state employee retirement funds, which deprived the funds of expected income. Legislators are not going to want to repeat these measures, so that will create a budget hole to be filled. Also, state savings accounts were nearly depleted making much less available for next year. Finally, there is going to be an additional $164 to $249 million required to fund Medicaid expansion passed by voters.

Altogether, from this early view, the bottom line for next fiscal year seems fairly good. The Senate Appropriations Chair is hopeful for a flat state budget meaning no further cuts, but things could be better than that. In addition, if Congress gets its act together and appropriates money to help cash-strapped states, things could get even better. There are those in Oklahoma who will say we do not need the federal money. But, for those who do not want to remain near the bottom in most positive measures of success, the better point of view is that our share of the federal money would be a big help toward a quicker and more robust recovery. If history is prologue, those who say we do not need the money will be more than happy to take credit for that which is accomplished with it.


Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1990. He currently practices law in Tulsa and represents clients at the Capitol.

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