Governor’s office was blindsided at end of budget negotiations (Fox 25)

By Phil Cross

Oklahomans have not been told the whole truth about the current state budget.

That should come to no surprise to anyone who follows the process, considering almost everything about the state budget decisions is done in secret.

“It has been one of the biggest pain points in my time here, that process needs to be more transparent,” Oklahoma Secretary of Finance and Revenue Preston Doerflinger told Fox 25. “Do I think that you can hold the entire process in public? No I don’t. But I think there are things that could occur in the public eye more than that occurs today.”

Documents obtained by FOX 25 shed new light on the difficulties of filling the $1.3 billion hole in the state’s budget. They reveal the governor’s office began talking about the budget long before the session kicked off. Doerflinger said while formal negotiations did not start until 2016, the talks started shortly after the 2015 legislative session closed.

Emails from the governor’s staff showed the session began with optimism. Even when House Minority Leader Scott Inman (D-Del City) told the Tulsa World there was no chance for a teacher pay raise during the session, the Governor’s Chief of Staff Denise Northrup wrote “challenge accepted…gov remember this for the meeting with Inman soon.”

Ultimately though, no teacher pay raise happened in the session. By May, a staff member for the governor’s office wrote, “Not very grateful,” in an email to Northrup containing the statement of Oklahoma State School Board Association on the end of the session saying schools would continue to struggle under the budget agreement. Northrup replied, “jerks.”

The frustration seen in the emails was due, in part, to the intensity of budget negotiations Doerflinger believes. The governor’s office had worked to keep common education from taking additional cuts and at times holding the office’s priorities in negotiations was difficult. “I would say it is very high pressure environment,” Doerflinger told FOX 25, “There are competing interests and from time to time the debate and the negotiations do become heated.”

In response to the emails the governor’s spokesman, Michael McNutt said in a statement, “The governor encourages her staff to be polite and courteous, and to keep in mind their email comments should be respectful of the dignity of the governor’s office.”

“This year I think that the leadership of the House and Senate understood the magnitude of what we were facing with the 20% budget hole we had to fill, but rank and file members that they had to herd may not have always had an appreciation for what we were up against.” Doeflinger said competing ideologies also complicated the negotiations with some members wanting deeper cuts to state agencies and government in general.

“You had some people truly believe you can still gut government and that mentality was floated around as well, which was not the responsible thing to do and was not going to happen on the governor’s watch.

Internal emails show the Governor’s office working to craft a public message about the negotiations with the legislature. An early draft about the end of the session included the phrase “the legislature failed,” however Secretary of State Chris Benge suggested that be changed to “opportunities were missed,” in regards to making structural reform to the state’s budget.

“I think that I would tend to believe there were opportunities missed,” Doerflinger said when asked if he supported the change in wording, “There was great progress made and I am an eternal optimist.”

However, optimism only takes you so far.

“In this budget, there are things that you don’t like,” Doerflinger said, “and in this case that was one that made my stomach church but at the end of the day the governor has to make a decision as to whether all the other things that were accomplished in this budget.”

The stomach churning was not confined to Doerflinger’s office. Upstairs, in the governor’s office Northrup looked at the final agreement which included an addition that was never part of any negotiation. She simply wrote, “puke.”

The wave of nausea, figurative or literal, was in reaction to the House and Senate demand for millions of dollars more for the Legislative Services Bureau, or LSB. It is an agency that has “donated” millions to both chambers when they have needed cash in years past.

“I’m not going to sit here and tell you it wasn’t a very difficult decision,” Doerflinger said, “Our goals were to preserve things like rural hospitals to try to do the less harm to folks who access health care authority.”

The increased LSB funding was not part of any official budget negotiation. The governor’s office said it was something the House and Senate discussed between themselves. It was never mentioned, according to multiple people included in the budget negotiations, until the day the deal had to be reached.

“I would have much rather seen that money go other places,” Doerflinger said. However, faced with spending $9 million more on the LSB or going into a special session, the governor chose to sign off on the agreement.

“There are things in every budget that are less than desirable and that I don’t like this one for this past budget cycle was my least favorite,” Doerflinger said. He does not believe more could have been accomplished by vetoing the appropriations bill and despite the hefty price tag he believes it is the best deal possible.

“Lives were affected by decisions being made by very few people without anything close to adequate time to review and debate what was being done,” said David Blatt, the executive director of the Oklahoma Policy Institute.

Blatt reviewed FOX 25’s findings about the budget and said he believes such tactics are possible due to the delays in rolling out the budget.

“This is a situation where if we had more time to examine the budget if they didn’t rush a budget through in the final days of session and didn’t threaten to hold the whole process hostage we might see better budget decisions being made,” Blatt said.

FOX 25 has requested interviews with legislative leaders in both chambers for nearly a month. In that entire month, all the leaders and budget negotiators have been too busy to answer questions about their actions.

Aaron Cooper, a spokesman for outgoing Senate President Brian Bingman (R-Sapulpa) issued a statement via email:

“Policymakers faced substantial challenges in crafting the Fiscal Year 2017 budget due mainly to the historic $1.3 billion shortfall and an economic slump fueled by depressed energy prices that has lasted longer than the Great Recession. With limited resources, policymakers had to make tough decisions about where to make budget cuts. To provide more money to one area such as education meant giving a larger budget cut to another agency. As far back as November 2015, policymakers were meeting regularly to tackle this challenge. Budget work continued nonstop through the 2016 session, during which lawmakers took significant steps to enact key budget reforms. After a great deal of work, the Governor, House and Senate reached a budget deal – described as some as a ‘herculean effort’ – that closed the $1.3 billion shortfall, balanced the state budget, and avoided the worst-case scenarios predicted by some.”

“The funds appropriated to the LSB for the Oklahoma State Senate in the FY17 budget are for legislative compensation mandated by the Oklahoma Constitution. The Senate’s direct appropriation was reduced 25 percent in the FY17 budget, and the Senate contributed 13 percent from its revolving fund to help close the FY17 budget shortfall. The Oklahoma Senate has undertaken deliberate cost-saving measures in recent years like reducing out-of-state travel, reducing staff, and voluntary buyouts. The fiscal stewardship of Senate leadership put the Senate in a position to go above and beyond in closing the FY17 budget shortfall and gives senators the ability, should it be necessary, to consider doing similarly in the future.”

Similarly, the House communications director Liz McNeil wrote:

“The increase in the LSB appropriation for Fiscal Year 2017 is a total of $9M from the original Fiscal Year 2016 LSB appropriation.

The $9M covers the constitutionally mandated salaries and benefits for House and Senate members. The $9M does not include staff salaries or operating expenses.

Prior to July 1, 2016 (start of Fiscal year 2017), the House budget was made up of 44% of these mandated expenses for member salaries and benefits which we cannot reduce or change.

Over the past several years, the House has spent surplus funds due to mandatory costs we cannot adjust. The House has consolidated positions and reduced operational expenses similar to many other state agencies. By moving these constitutionally mandated costs to LSB, it will allow more transparency on legislative operating costs and expenses and any future cuts to the House of Representatives and Senate will be cut from expenses that can actually be reduced or eliminated.”

“There’s no question, that the legislature’s decision to boost funding for the legislature as a whole and then shuffling money around so that it looked like the house and the senate took a cut when in fact they just ended up increasing the total amount of money for the legislature by funneling it through the Legislative Services Bureau,” Blatt said, “No question that smelled bad, looked bad.”

Blatt said lawmakers not only had to vote on the budget without enough time to review it, and they knew the danger of forcing a special session.

“Legislators all felt like they were being given the choice of either accept this that is being presented to you or we can come back in special session while you are all in the midst of the final weeks of a primary campaign.”

The Associated Press reported earlier in the session that even Governor Mary Fallin believed primary campaign considerations were slowing down the budget process.

“I think there are some members who are waiting to see if they draw an opponent during filing in April,” Fallin said when asked about ongoing negotiations with the House and Senate on the budget. “They’re slow playing things.”

There were only four elected officials in the budget negotiations. Senate Appropriations Chair Clark Jolley was term limited to his last session leading Senate negotiations. Senator Greg Treat, (R-Edmond), is facing re-election. House negotiators Representative Earl Sears (R-Bartlesville) and Representative Dennis Casey (R-Morrison) are not facing opposition in the general election.

“The problem,” according to Blatt, “Is we faced a $1.3 billion budget hole and they balanced that with $300 million in cuts and a billion dollars in enhanced revenues, most of that was one-time revenue.”

“The governor and I have encouraged movement away from one time funds and we have proposed budgets that did not include any one time funds,” Doerflinger said, “We are firmly in believe that we have to put new recurring revenue on the table.”

The next legislature is facing, according to some estimates, a $600 million budget hole. Some hole will exist regardless of how the economy performs for the rest of 2016.

“The problems we are having were not caused, they were exacerbated by, but not caused by low oil prices and they are not going to be fixed by oil prices rebounding,” Blatt said.

The governor’s budget negotiator agrees the budget process is still broken.

“Every year that I am here i feel like we make strides towards making this process better,” Doerflinger said, “But it will be something you see the governor focus on in her remaining two years to continue to push for structural reform within our budget.”

That may be possible with new faces joining the legislature. There could be as many as 50 new faces joining the House and Senate. Doerflinger said after the election the winners should make learning the budget a top priority, even if none of them are actually invited to sit down at negotiations.

“I would encourage any new member or sitting member to become experts to spend time at the agency level to truly have an appreciation and contribute to the developing what becomes the state budget.”

While the emails do show much of the back and forth, there is more that FOX 25 was not allowed to see. While the governor’s office has not released public records in more than a year, our request was to another state agency. However, the governor’s office intervened in that request and ordered 14 documents withheld.

When we asked why these documents were withheld, McNutt sent us this statement:

“The governor’s office has, to date, released 357,988 pages of documents in response to Open Records requests, more than all other Oklahoma governors combined. We will continue to release our records and maintain our commitment to open government.

“KOKH-25 was provided with 1,601 emails. In withholding only 14 emails, the governor utilized the executive deliberative process privilege given to her by the Oklahoma Supreme Court. As the court stated, ‘…the deliberative process component of executive privilege is also grounded in a strong public interest. The governor’s need for confidential advice in deliberation of policy and decision-making is just as important to the people’s protection, security, and benefit, and to promote their general welfare…’

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