For eight long weeks this fall, Oklahoma lawmakers met in special session, trying to produce a budget agreement that would fill an immediate funding hole for three state agencies and produce a longer-term solution to continuing budget shortfalls. That attempt ended with disappointment, frustration, and angry recriminations, after legislators failed to approve permanent new revenues and Governor Fallin mostly vetoed their cash-and-cuts budget.
In light of the failure of the first special session, few lawmakers are excited about a sequel. Still, Governor Fallin has called a second special session to begin on December 18th — a time that conflicts with holidays and vacations and bumps up against the regular 2018 session that begins February 5th. During this time, lawmakers and legislative staff are busy drafting and preparing to introduce the more than 2,000 bills and resolutions that are typically filed each session.
So why even bother with a second special session? Why not just wait until February and pick things back up in regular session? There are three main factors that argue for tackling the budget in a second special session.
Three health agencies still have large holes in their budgets.
The budget bill passed by the Legislature filled almost all of the $214 million hole to the budgets of the Department of Mental Health and Substance Abuse Services, Oklahoma Health Care Authority, and Department of Human Services that followed the Supreme Court striking down the cigarette fee. The Governor’s line-item veto of the budget did leave some of the funding intact, along with money appropriated in an earlier bill from the Rainy Day Fund. However, the agencies are still $110 million below their initial appropriations.
The three agencies responded as follows to the partial funding received in special session:
- The Oklahoma Health Care Authority is proceeding with rate cuts of 6 percent for most Medicaid providers and 1 percent for nursing facilities effective January 1st — the fifth time Medicaid reimbursements have been cut since 2010. Even after the cuts, OHCA remains $9.5 million short of a balanced budget for the current year.
- The Department of Mental Health and Substance Abuse Services, which remains $21.5 million, or 6.5 percent, below its initial FY 2018 appropriations, stated that the $53.5 million it received in November will “carry the agency into the spring, but will still involve cuts to vital treatment services if a funding solution is not found.”
- DHS received $27 million from the non-vetoed sections of HB 1019, leaving it $42 million, or 6 percent, below its initial FY 2018 appropriation. Without additional funds, DHS is looking to send out notices in early February of cuts that would take effect March 1st. The agency’s legal ability to cut these services has been challenged in a lawsuit filed by the ACLU.
In short, special session funding averted the immediate crisis for the three agencies but did not solve the problem. Waiting until the start of regular session to address the remaining $110 million shortfall will be too late to stop OHCA’s provider rate cuts and could one again threaten severe cuts to child welfare services, seniors, and individuals with disabilities and mental illness.
The current budget takes $130 million from county transportation projects.
Each year, the County Improvement for Roads and Bridges (CIRB) Fund receives $120 million from motor vehicle license tags. These funds are used by the 77 counties for road and bridge projects. The Legislature had already transferred $50 million in CIRB funds in its initial FY 2018 budget, and the “cash and cuts” budget bill passed in special session changed that to an $80 million withdrawal. The Governor’s line-item veto of HB 1019 meant that the $80 million transfer was added on top of the $50 million from regular session instead of replacing it, for a total loss of $130 million from county projects. This will result in the delay or cancellation of some 170 approved projects that were part of county five-year plans. County officials are expected to be vocal advocates for a revenue solution that will allow at least some of the country road and bridge funds to be returned.
Without permanent new revenue, next year’s budget hole approaches $700 million.
The initial FY 2018 budget included some $400 million in one-time revenue, and the measures approved in special session added more than $130 million to that total. There are also at least $150 million in additional costs for FY 2019, including increased bond payments, teacher and support staff benefit costs, and ad valorem reimbursement fund payments. Permanent new revenue is needed to begin to fill that hole and avert the likelihood of enormous budget cuts in FY 2019.
It’s certainly possible that a second special session will be no more successful than the first. But it’s also true that lawmakers were extremely close to passing a comprehensive budget plan — one that included close to $500 million in new recurring revenues, provided pay raises for teachers and state employees, and restored the state Earned Income Tax Credit. This plan had already won bipartisan support, passed the Senate with more than three-quarters support, and fell just five votes short in the House of Representatives. There is reason to be hopeful that the additional votes for a similar long-term solution can be found in a second special session — if enough leadership and political courage can be found as well.