FY '10 budget agreement leaves questions and challenges

In a press release Tuesday afternoon, Governor Brad Henry, Speaker Chris Benge and Senate Pro-Tem Glenn Coffee announced agreement on how to address the shortfalls in the FY ’10 budget that have resulted from this year’s revenues coming in sharply below the certified estimate.

Based on the revised estimates for FY ’10 certified by the Board of Equalization in December, the state is looking at a total mid-year shortfall of $809 million in FY ’10, made up of  $729 million in the General Revenue Fund and $80 million in the HB 1017 Education Reform Fund. The leadership agreement involves the following main features for bringing the FY ’10 budget into balance:

  • Continued across-the-board cuts in monthly General Revenue (GR) allocations of  to each agency of 10 percent for the remaining five months of FY ’10. This means agency budgets will have been cut 5 percent for four months and 10 percent for seven months (there were no cuts to July allocations). This equates to a 7.5 percent cut in GR over the full course of FY ’10. Total across-the-board GR cuts will equal $385.7 million.
  • The agreement also includes supplemental funding for four agencies.  The Department of Education will get an additional $104.4 million. The bulk of these funds are intended to make up for the $80 million projected shortfall in the HB 1017 Fund, crating a net increase of $24.4 million.  Additional funds will also be provided to the Oklahoma Health Care Authority ($33 million), Regents for Higher Education ($25.6 million) and Department of Corrections ($7.2 million). Excluding the funds intended to address the HB 1017 Fund shortfall, total supplementals will equal $90.2 million

In total, OK Policy calculates that the agreement calls for appropriations to be cut by $295.5 million. Please see this spreadsheet (PDF) that provides agency-level calculations of FY ’10 cuts and revised appropriations under the agreement.

Given projected shortfalls of $809 million and cuts of $295.5 million, the question that still needs to be sorted out is where exactly the $513.5 million in additional revenue needed to bring the FY ’10 budget into balance will come from.  The leadership announcement remained short on details. According to the press release:

…state leaders also agreed to use reserve dollars from the Rainy Day Fund and the state stimulus account to help balance the budget.

The amount of additional stimulus and Rainy Day Fund dollars that will be injected into the FY ’10 budget is not specified in the release; however, Speaker Benge is quoted saying:

This agreement maintains more than half of our state’s total reserve dollars for fiscal year 2011 and beyond

The Rainy Day Fund has a current balance of $597 million; if less than $300 million of that amount will be used in FY ’10, then the agreement would seem to require well over $200 million in additional federal stimulus dollars or other unspecified revenues for FY ’10. The initial FY ’10 budget included $640 million in stimulus dollars, which was seen to represent one-half of total available dollars from the stimulus package that could be used to stabilize the state budget.

The conclusion of an agreement on the FY ’10 shortfall will certainly make the Legislature’s task in the upcoming session much less complicated and hopefully bodes well for the ability of the Governor, Senate and House to reach consensus. But it’s necessary to point out two things. First, even with the injection of well over $1 billion in  stimulus and Rainy Day Funds to buttress the FY ’10 budget, the cuts agencies are facing this year are having serious and worsening effects on public services over a wide swath of state government. Many agencies that took 5 – 7 percent cuts going into FY ’10 are now looking at 12 – 15 percent cuts compared to last year’s budget, while even those agencies that were spared steep cuts going into the year are reducing or eliminating core services. The Oklahoma Health Care Authority, which has already cut provider rates and scaled back benefits in recent months,  indicated yesterday it will have to implement another round of cuts to manage ongoing 10 percent monthly budget reductions over the remainder of this year.

Secondly, this agreement should result in final FY ’10 appropriations of some $6.935 billion. The initial FY ’11 certification of available ongoing state dollars is for $5.295 billion, or 24 percent less than the revised FY ’10 total. The one certainty at this point is that the challenge of finding revenues to fill that shortfall and mitigate the severity of cuts in FY ’11 will remain daunting.


Former Executive Director David Blatt joined OK Policy in 2008 and served as its Executive Director from 2010 to 2019. He previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers.

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