Budget Overview: The rebuilding project continues

See all of our end of session round-ups: Taxes | Budget | Economic Opportunity | Health Care | Education | Criminal Justice

In the final days of session the Legislature adopted the state’s $7.9  billion budget for the fiscal year ending June 30, 2020 (FY 2020). The main budget, or General Appropriations bill (HB 2765), and several dozen companion bills lay out the blueprint for state government in the coming year (click here for a detailed appropriations summary). The budget is $434 million (5.7 percent) above the original budget for FY 2019 and an increase of $1.0 billion (14.9 percent) over the final budget for FY 2018, continuing a welcome trend that can help move Oklahoma toward greater and more widely shared prosperity. 

Three factors make this budget growth possible.

  • 2018 tax increases  that generated over $500 million of new revenue.
  • The caution shown by the Legislature this year in avoiding any broad-based tax cuts and limiting the expansion of targeted tax breaks.
  • Continued economic growth.

The journey to restoring services

Overall, it’s best to think of this budget as a second step on what needs to be a long journey to a full recovery of the state budget. When adjusted for inflation, this budget is still $905 million, or 10.2 percent below the FY 2009 level. Over half of state agencies still have less funding than they did in FY 2009 without accounting for inflation. Over one-third (23 agencies) are more than 20 percent down from 11 years ago, including Higher Education (-23 percent), Libraries (-38 percent), the State Auditor and Inspector (-29 percent), and Civil Emergency Management (-56 percent). Leaving aside the pay raises of the past two years, state K-12 formula funding in 2020 will remain almost $100 million below what it was in 2008, even as public school enrollment has grown by over 50,000 students.

Major accomplishments in the budget

This budget makes significant investments in some important areas. The headliner is $58.9 million for the second straight teacher pay increase, directed to be an average of $1,200 per year for all districts on the state funding formula, on top of the $6,100 average raise for the 2018-19 school year. Public schools will also receive $6 million more for the Reading Sufficiency Act, $19 million for teacher benefit costs, and $74 million through the school funding formula. Formula funding helps school districts cover costs such as hiring additional teachers and staff as enrollment grows. CareerTech receives a 13 percent ($18.6 million) increase for teacher pay, expanding educational attainment, and general operations. Higher Education receives $28.6 million for faculty salary increases, concurrent enrollment, and capital investments, but no additional funding for general operations or the impacts of increasing enrollment. 

Much of the progress in criminal justice reform stalled as the session ended, but the budget still takes steps. Within this budget, criminal justice reform is supported by a $10 million increase for Smart on Crime in the Department of  Mental Health and Substance Abuse Services and  increased funding for the Oklahoma Indigent Defense System to bring public defender salaries to parity with those of district attorneys. The budget further provides $20 million in appropriations to the District Attorneys Council to partially replace fees levied on criminal defendants. Fees will instead flow to the state General Revenue Fund.

Program investment and reinvestment

This budget helps slow and in some cases reverses budget cuts of recent years. It funds improvements in state programs and services, including $12 million to the Department of Corrections for Hepatitis C treatment, $4 million to the Department of Public Safety for additional trooper academies, and a $4 million (14 percent) increase to the Department of Agriculture for food safety and fire mitigation and control. The budget adds funding to the Office of Juvenile Affairs ($3 million) and Department of Health (nearly $3 million for increased immunizations, infectious disease response, lead screening, and services in county health departments). A $2 million increase for the Department of Human Services will serve approximately 200 of the over 5,500 individuals with developmental disabilities waiting for home and community-based waiver services. The budget also increases funding for elected officials and their offices. The budget for the Governor, Senate, House of Representatives, and Legislative Service Bureau increased by $13 million (34 percent). The total budget for these agencies is now 25 percent over the FY 2009 level.

Restoring the basics of government

The budget also restores spending that usually is the first to be cut during downturns. The budget includes $37.7 million for employee pay increases, ranging from $1,500 per year for the lowest-paid employees (under $40,000) to $600 per year for the highest (over $60,000). Most employees working for the Department of Corrections will instead receive a $2.00 an hour raise.

The state will step up investment in facilities, including a new facility for Medicolegal Investigations in Tulsa , a new Ardmore Veterans Center, and improvements at the schools for the blind and deaf,and Griffin Memorial Hospital. Infrastructure needs will be addressed by increasing the County Improvements for Roads and Bridges Fund and addressing flood control dam infrastructure through the Conservation Commission. Finally, the state will contribute $1.5 million for the 1921 Tulsa Race Riot Centennial Memorial.

The budget stops the decline in the state’s information systems. The Department of Human Services will continue the  OK Benefits project, which replaces 20-year old benefits systems with a modern, unified client services portal, and the Corporation Commission will replace its oil and gas permitting system. The budget establishes a fund for agencies to apply for funding to digitally modernize services and puts Information Services on more stable fiscal footing.

Preparing for the future

What the budget does not spend is important, too. The Legislature put $200 million into the Revenue Stabilization Fund to hedge against future revenue declines.  The Legislature also acted to cap future diversion of additional revenue into this fund. However, it is likely that at least $200 million will automatically be allocated to the fund next year under the new cap. This will raise Oklahoma’s total reserves (including the Rainy Day Fund) to among the highest in the nation while critical needs remain underfunded. The Legislature also set aside funds from growth in federal funding for Medicaid to protect medical provider rates when the federal match falls

Budget challenges will continue in the coming years. First, we must continue to increase funding that restores and improves core state services. Second, we must protect the revenue base from tax cuts.   Third, we must address the fiscal gap (the difference between revenue and expenditures if current laws and services stay in place) that will grow to over $1 billion by 2030. The last two budgets partially addressed all three of these challenges, but much remains to be done.

ABOUT THE AUTHOR

Paul Shinn

Paul Shinn is a Budget and Tax Senior Policy Analyst with OK Policy. Shinn has held budget and finance positions for the Oklahoma House of Representatives, the Department of Human Services, the cities of Oklahoma City and Del City and several local governments in his native Oregon. He's also taught political science and public administration at the University of Oklahoma, University of Central Oklahoma, and California State University Stanislaus. While with the Government Finance Officers Association, Paul worked on consulting and research projects for the U.S. Environmental Protection Agency, the U.S. Department of Transportation, and several state agencies and local governments. He also served as policy analyst for CAP Tulsa. He holds a Ph.D. in Political Science from University of Oklahoma and degrees from the University of Oregon and the University of Maryland College Park. He lives in Oklahoma City with his wife Carmelita.

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