FY 2021 Budget Highlights

The FY 2021 budget decreases funding for state services

State agencies will be appropriated a total of $7.715 billion in FY 2021. This is a decrease of $283.2 million (3.5 percent) compared to the initial FY 2020 budget approved last May, and just $46 million (0.6 percent) above FY 2019 (see Figure 1).
When adjusted for inflation and population growth, next year’s budget will be the second lowest of this century. Since FY 2000, the state government has lost 31.1 percent of its purchasing power (see Figure 2).

Falling oil prices and the shutdown for the COVID-19 pandemic lowered estimated revenue for the General Revenue Fund by $1.4 billion.
The Legislature used $406 million from savings accounts to help fill the budget shortfall. After using savings for the FY 2020 revenue failure and for the FY 2021 budget, savings balances have declined from $1.03 billion to $244 million (see Figure 3).
The budget borrows $292 million from other programs to fund education. Funds normally dedicated to retirement funds for teachers and public safety workers will be redirected to the HB 1017 Education Reform Revolving Fund for two years and repaid over the following five years. Funds redirected from transportation to the HB 1017 Fund for FY 2021 only will be replaced by a bond issue.
The budget taps other funds not normally budgeted, including the Opioid Lawsuit Settlement, Medical Marijuana Authority funds, and agency revolving funds (see Figure 4 for a breakdown of revenue in the FY 2021 budget).

In spite of the budget shortfall, the budget moves the state forward in several areas.

The budget deposits $10.2 million from the legal settlement with Purdue Pharma in a new Opioid Abatement Fund for grants to expand treatment for individuals with opioid use disorders, provide services and alternatives for justice-involved opioid users, and other services. Seven health, law enforcement, and judiciary agencies will receive another $29 million for opioid projects.
Bonds were authorized for state park improvements, replacing the Oklahoma Department of Human Services’ Greer Center, transportation projects, and high hazard dam rehabilitation.
Salary increases were funded for judges and justices and for Department of Corrections employees who did not receive last year’s $2 hourly pay raise.
While the Legislature passed several bills to match the 90 percent share of the cost of Medicaid expansion in the coming year, the Governor’s veto of a bill to increase fees charged to hospitals will likely mean expansion is delayed for at least a year, dependent on the results of the June 30 vote on State Question 802.

The budget reduces the largest agency, the State Department of Education, by 2.5 percent ($78 million). Adjusted for inflation, state school aid per student in FY 2021, is 31 percent less than in FY 2008 (see Figure 5).
The Oklahoma Health Care Authority budget is unchanged at $1 billion. However, the state dollars in the budget will go farther because the federal share of Medicaid (FMAP) is temporarily raised due to the pandemic.
A few agencies received budget increases, including the Election Board and Department of Veterans Affairs (both to match federal grants), as well as the Attorney General and District Courts (both for opioid response).
Most other agency budgets were cut 3.5 to 4 percent.
Looking at the budget by function, 51 percent goes to education agencies, 20 percent to health and social services, and 11 percent each to human services and public safety. All other functions — including general government, natural resources, and regulatory services — represent just 7 percent of the budget (see Figure 6).
The 10 largest agencies receive 88.8 percent of the budget, with the remaining 54 agencies sharing 11.2 percent (see Figure 7).
This year’s cuts follow many years of static or decreasing budgets for most state agencies. Ignoring the effects of inflation and population growth, 41 of 64 agencies have less money to work with than in 2009, and 28 of them have experienced total reductions of 20 percent or more (see Figure 8).

At least $700 million of the budget came from savings and other one-time sources. Most of the savings now have been depleted. That means even with robust revenue growth, the FY 2022 budget could be even lower than this year’s budget.
The most important task for next year’s Legislative session will be to start an open and honest dialogue about:
- how budget decisions can be made in the open as they are in other states,
- whether the current budget is sufficient to support the state we want to be,
- how to reduce the budget’s dependence on the cycles of the petroleum market, and
- building a fair and efficient tax structure that supports our shared services and spurs economic growth.