In crafting a budget in the face of a large drop in available revenue, lawmakers this year made a sincere effort to minimize cuts to key agencies in the areas of education, health, and safety. Whereas most agencies took cuts of 0.25 to 7 percent, the Department of Education received flat funding, and the Oklahoma Health Care Authority, Department of Corrections, Department of Human Services and Department of Mental Health and Substance Abuse Services received modest funding increases.
Yet even these agencies weren’t funded enough to keep up existing services when faced with growing caseloads and enrollment, rising costs, reduced funding from other sources, and other factors. As a result, most will need to make cuts to next year’s budget.
Here is next year’s budget outlook for five of the largest state agencies that got flat funding or increases:
- The Oklahoma Health Care Authority, the state’s Medicaid agency, got the largest dollar increase of any agency for next year, $18 million. However, Medicaid enrollment growth, rising health care costs, and a drop in the federal Medicaid matching rate still leaves OHCA some $40 million short of what they need to maintain Medicaid at existing levels. With the loss of federal matching funds, OHCA is moving ahead with $111 million in proposed cuts, which include reducing payment rates for physician assistants and other mid-level practitioners, tightening payments for hospitals and nursing homes, eliminating benefits, and other measures.
- The State Department of Education received flat funding for FY 2016 of $2.484 billion. “Schools are closing, teacher layoff notices have gone out and class sizes will grow across Oklahoma because of the state’s standstill education budget,” according to State Superintendent Joy Hofmeister. Support for the state aid formula will remain flat even as schools face another year of growing student enrollment. Since 2008, enrollment has grown by some 50,000 kids but state aid funding is down 8.4 percent. This year the Department requested $15 million to cover increased health care costs for teachers and support staff, but the budget appropriates only $8.7 million more for that purpose. While the exact amount of health care costs won’t be known until this October, the shortfall will have to be covered from agency carryover, while the Department will have to cut $8.7 million from other lines in its programs and activities budget.
- The Department of Human Services received an overall increase of $4 million, but that combines a $15.9 million increase for the child welfare reform plan with a $12 million cut for the rest of its budget. DHS needed $33 million in additional appropriations for a stand-still budget because of the costs of caring for more children in DHS custody, heavy use of one-time carryover in this year’s budget, and a declining federal matching rate. It now faces $45 million in cuts; most of this will be squeezed out of its administrative budget and reduced contracts, but cuts in reimbursement to private providers of home- and community-based waiver services may be necessary.
- The Department of Corrections received an additional $14 million, of which $9 million will replace use of one-time revolving fund revenues and for increased medical costs. The remaining $5 increase will be divided between physical plant repairs, rising utility costs, additional staff, and additional beds to deal with projected growth of 1,200 inmates. DOC is operating at 112 percent of inmate capacity but has less than 70 percent of authorized staffing positions filled. The Department had requested an additional $84.5 million for employee pay raises and other priority needs;
- The Department of Mental Health and Substance Abuse Services received $2 million more for FY 2016. Although the Department originally projected it would need a $10 million increase to avoid cuts, a big bump in the federal Medicaid matching rate leaves it with only a $2.5 million shortfall. DMHSAS expects to make minor adjustments to balance its FY 2016 budget. Last year, despite over $2 million in additional funds, DMHSAS faced a $20 million shortfall and had to implement serious cutbacks in behavioral health services for children and adolescents.
Rather than assume that agencies can operate with flat funding year after year, Oklahoma needs to grapple with the real cost of providing services. One promising budgeting technique, already used by some two dozen states and the federal government, is to develop a current services baseline projection, or current services budget. The baseline projection “measures how much it will cost a state in an upcoming budget period to deliver the same quantity and quality of services to resident it is delivering in the current period budget.” It takes into account the impact of factors such as inflation, changes in utilization (such as Medicaid or school enrollment, or prison populations), and previously enacted rule changes in establishing a baseline for future years.
If Oklahoma is ever to have honest conversations about the state budget, we need credible data about what it costs to provide services, and how we will pay for them. Developing a current services budget, along with better revenue forecasting, would be an important step in that direction.