OKPOLICY.ORG
For the second time, Oklahoma Attorney General Scott Pruitt has struck down a provision of this year’s state budget, ruling that the legislature acted unconstitutionally when it pulled $5 million out of the State Health Department’s Trauma Care Assistance Fund to fund other government services.
In June, the A.G. ruled that the legislature had acted improperly when it diverted $7.9 million intended for the Oklahoma Higher Access Learning Program (OHLAP), also known as Oklahoma’s Promise, for other purposes. The college scholarship money was part of $191 million that the legislature redirected from nearly 30 different agency revolving funds and other state funds in an effort to balance the FY 2015 budget and avert even deeper cuts to services. With the OHLAP money no longer available, officials decided to apply an across-the-board cut to all agencies in proportion to their funding from the FY 2015 General Revenue fund.
Back in June, we called attention to several other funding grabs by the Legislature to balance their budget. In the case of the Health Department’s Trauma Care Assistance Fund, we noted that this would result in a $3 million shortfall in payments to hospitals and other trauma care providers in FY 2015, and had also led the agency to further slash critical funding for community health centers and cut support for the cord blood bank.
Representative Mike Shelton (D-Oklahoma City) subsequently asked the Attorney General whether this transfer of funds was unconstitutional. In his ruling, the A.G. affirms that the transfer violates constitutional language stating that “…no tax levied and collected for any purpose shall ever be devoted to another purpose.” The ruling concludes:
The Legislature’s transfer of tax revenues from the Trauma Care Assistance Revolving Fund to the Special Cash Fund to be used for purposes other than trauma care under SB 2127 violated Article X, Section 19 of the Oklahoma Constitution.
There’s an important caveat to the ruling as it affects both the Trauma Care fund and other transfers included in this year’s appropriations. The ruling states that it is only tax revenue, not all revenue, that may not, in most circumstances, be rededicated for other purposes. In a footnote, the A.G. added: “We offer no opinion on whether the transfer of non-tax funds was proper except to state that each source of funds must be considered individually in light of applicable constitutional provisions.”
The Trauma Care Assistance Fund is made up of a number of revenue sources, including a portion of cigarette and tobacco taxes approved by voters in 2004. In FY 2014, the Trauma Care Assistance Fund received $12.4 million in tobacco and cigarette tax revenue, which was slightly more than 50 percent of total revenue.
In a letter sent to agency directors following the A.G.’s ruling, Finance Secretary Preston Doerflinger declared that “it was portions of these non-tax revenues that were transferred” (even though the General Appropriations bill was silent on this matter) and that as a result, the full $5 million transfer from the Trauma Care Fund would stand. However, back when the budget was being written, legislators said the opposite. When the appropriations bill was being debated in the Senate and questions were asked about the propriety of transferring agency funds collected from fees, budget chair Clark Jolley defended the maneuver by stating that “some of the money from revolving funds included tax revenue that was set aside for a particular purpose.”
This new A.G. ruling calls into question any other transfer involving a reallocation of dedicated tax revenue. For example, the Oklahoma Aeronautics Commission, which is funded entirely from excise taxes assessed on the purchase of new and used aircrafts, along with aircraft registration and license fees, had $3 million grabbed from its revolving fund. It is likely that other agencies will be carefully examining statutory language to see whether their funds were diverted improperly.
As we noted when we first explored this issue after session, the legislature resorted to raiding revolving funds because they have refused to make hard and honest choices. To put it simply, this is what happens when endless tax cuts and tax breaks leave you chronically short of the tax revenue needed to fund basic services. As long as our state leaders are unwilling to address the growing fiscal gap by closing tax loopholes and broadening the tax base, they will continue to muddle through by grabbing whatever money they can and hoping their ad hoc explanations for what they’re up to don’t come under too much scrutiny.
