Cutting into the bone: Impact of falling revenues starting to be felt

Anyone hoping for signs that the state’s budget woes had already hit bottom found little to cheer in Tuesday’s  revenue announcement [PDF] from Treasurer Scott Meacham. August General Revenue (GR) collections came in nearly 32 percent below one year ago. As the chart below shows, this is the worst monthly performance compared to the prior year since the state fiscal crisis hit in January. August GR collections  were $131.3 million, or 28.2 percent, below the month’s certified estimate. For the second straight month, the Treasurer announced 5 percent across-the-board cuts to agency’s allocations from the GR Fund. The cuts should equal some $22 million. The remaining gap between appropriations and collections is being made up by borrowing some $80 million this month from the cash reserves in various state funds. The state can borrow between funds during the year, but is required to repay the amounts and balance the books by year’s end. Barring a miraculous revenue recovery in the coming months, the Rainy Day Fund will be needed to make up for the shortfall. Of the state’s $597 million Rainy Day Fund reserve, three-eighths, or $224 million, would be available to make up for shortfalls in current year collections, while an additional one-quarter, or $149, would be available upon declaration of an emergency.

Assuming that the means are available to limit the size of monthly cuts until the Legislature decides to tap the Rainy Day Fund, the big question that now needs to be asked is what the impact of ongoing monthly 5 percent cuts will be on vital state programs and services. The Treasurer’s press release [PDF] states that:

Until state revenues begin to rebound, we are making plans to ensure government services are not adversely impacted.

However, indications are growing that agencies that have thus far been able to absorb successive budget cuts by managing expenses more tightly are now being forced to consider more painful measures. The Office of Juvenile Affairs, for example, has already submitted a plan for up to 22 furlough days, along with measures to reduce staff. As the Tulsa World noted in an editorial last week, such proposals raise serious concerns about security at juvenile detention centers like the L.E. Rader Center. Similarly, Terri White, Commissioner of the Department of Mental Health and Substance Abuse Services, spoke bluntly last week about the consequences of continued budget cuts:

“People will lose services if we have to make more cuts,” White told members of the agency’s governing board on Friday. “There’s no other way around this.”

A loss of services could mean a drop in adolescent substance abuse treatment programs, treatment for people with severe mental illnesses and drug court services, White said.

Over the last several months we have been hoping to avoid cuts that will negatively impact the people of Oklahoma, but we have reached the point where further cuts will be felt by those who rely on state-funded services – people suffering from mental illness, low-income seniors and persons with disabilities, schoolchildren, college students, you and me.  As Commissioner White says regarding the simple equation of more cuts will equal lost services, “There’s no other way around this.”