What now? With clock ticking, Legislature weighs options to avert Doomsday

Last week, lawmakers’ attempt to address the state budget crisis in special session collapsed. They rejected proposals that would have filled the entire budget hole and averted imminent and catastrophic cuts to the three health care and social service agencies — the Department of Mental Health and Substance Abuse Services , Oklahoma Health Care Authority, and Department of Human Services — that lost $214 million in funding when the State Supreme Court found a cigarette fee passed earlier this year unconstitutional.

At this point (barring further surprises), special session is likely to conclude with a new budget that averts the doomsday scenario facing the three health and social services agencies but does not address Oklahoma’s chronic budget problems. It would also impose a new round of cuts on most or all state agencies. In the meantime, with each new day that passes without an agreement, the hundreds of thousands of Oklahomans served by the three agencies must grapple with rising anxieties that the crisis won’t be resolved and that they will lose the services that their health, and even their lives, depend on. 

Recapping last week

The initial plan unveiled by Republican leaders last Monday included a $1.50-per-pack tobacco tax and a 6-cent-per-gallon increase in motor fuel taxes, along with various minor revenue modifications. It also provided raises for teachers and state employees beginning in 2018 and restored the refundable portion of the state Earned Income Tax Credit. Democrats — whose votes were needed to meet the three-quarters supermajority required of revenue bills under State Question 640 — unanimously opposed the plan because it relied entirely on more regressive taxes and left out increases in the gross production tax or income tax that they had insisted on to get their votes on the other revenues. The main revenue bill (HB 1035) passed out of committee but fell 21 votes short of mustering three-quarters support in the House, with all Democrats and 18 Republicans voting against.

On Thursday, the Senate passed a bipartisan resolution calling on the House to increase gross production taxes on new wells from the current 2 percent to 4 percent for the first 36 months of drilling. This increase was still too little for most Democrats and too much for many Republicans. On Friday, a new version of the omnibus revenue bill, HB 1054, failed on a 11-11 vote in the House JCAB committee, with all but one Democrat joining 5 Republicans in rejecting the measure, and several other Republicans declining to vote.

Where we are now: Cash and cuts and maybe more revenue

The repeated failure to find agreement on a revenue package capable of securing 76 votes in the House leaves little hope of a bipartisan agreement that could fill the entire budget hole with recurring revenues. Instead, the likeliest scenario, which is being called “Plan B” or “cash and cuts”, involves additional revenue from the following two sources:

  • $23.3 million is available from the Rainy Day Fund. Lawmakers can appropriate up to one-quarter of the Rainy Day Fund upon declaration of an emergency by the Governor and a two-thirds vote of both chambers. The remainder of the Rainy Day Fund — $70 million — cannot be used at this time.
  • $83.5 million is available from last year’s General Revenue that came in above the appropriated amount.

Several bills to appropriate the $106.8 million in carryover funds and Rainy Day Funds to the three health agencies have been approved by the full House and now await action in the Senate.

In addition to these measures, numerous proposals for additional revenue have been floated by legislative leaders. Under HB 1085, the gross production tax on horizontal wells drilled between January 2014 and June 2015 would increase from 4 percent to 7 percent. This would generate an additional $51 million in FY 2018. Other revenue measures that are less likely to pass include partially removing the sales tax exemption on motor fuels (SB 23) that would generate $58 million in FY 2018, and expanding the range of permitted games in tribal casinos (HB 1087), projected to raise $8.3 million in FY 2018. 

While agreement on these or other revenue ideas remains possible, at this point the likeliest scenario is for the Legislature to appropriate just the carryover cash and Rainy Day fund money totaling $106.8 million. This would leave a shortfall of $107.2 million, which would need to be cut from agency budgets. Rather than leave the three health and human service agencies on the hook for the entire shortfall, it is likelier that the Legislature will pass a new budget that spreads the cuts more broadly across state agencies. (Speaker McCall has suggested that if the three health agencies are appropriated enough money in special session to fill part of their hole, they should defer making cuts until April and allow the Legislature to address the problem in regular session. Finance Secretary Preston Doerflinger has responded that this would be unconstitutional because agencies must maintain a balanced budget throughout the year). No new budget has yet been released.

If a $107.2 million shortfall is allocated evenly, it will amount to a 1.6 percent cut to every agency. However, by the time a new budget is passed, agencies will have already received five months worth of FY 2018 appropriations, so their monthly allocations for the remaining months would be cut by about 2.7 percent. This spreadsheet shows OK Policy’s calculation of the impact on each agency of a $107.2 million total cut spread across-the-board.

Cuts have consequences

A 1.6 percent cut to every agency would be less catastrophic than the doomsday scenarios faced by the three health and human services agencies if the Legislature does nothing. However, we should not forget that the initial budget approved by the Legislature in May was already “massively underfunded,”  in the words of the then-House Appropriations chair Leslie Osborn. Many agencies have already absorbed cuts of 20 percent or more over the past decade, severely weakening their ability to fulfill their core responsibilities and leaving no good options for dealing with more cuts.

[pullquote]“Whenever the Legislature reaches a solution and whatever it looks like, those who need state services for their continued health have already been put under terrible stress and fear.”[/pullquote]

Common education, which would be hit with a $37 million cut, is already receiving some $180 million less in state aid support than in 2008 while enrollment has increased by over 50,000 students. It is likely that the Oklahoma Health Care Authority, which would lose $16 million, DHS, which would lose $11 million, and the Department of Mental Health and Substance Abuse Services, which would lose $5 million, will still have to cut rates paid to providers and services for vulnerable populations.

In addition, while filling the budget hole with one-time revenues would avert the doomsday scenario, it only deepens the problem of Oklahoma’s structural budget deficit. That means we will find ourselves with an even larger budget hole — and fewer options for dealing with it — when lawmakers come back for regular session in just a few months.

In the meantime, in the absence of an agreement, the Department of Mental Health and Substance Abuse Services, Oklahoma Health Care Authority and Department of Human Services have no choice but to move ahead with the administrative process for making cuts that would eliminate services for the state’s most vulnerable populations within the next month. For example, DHS this week sent out notices to seniors and individuals with disabilities that the waiver programs that allow them to receive in-home care will terminate December 1st. We must not forget that, whenever the Legislature reaches a solution and whatever it looks like, those who need state services for their continued health have already been put under terrible stress and fear.

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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.

11 thoughts on “What now? With clock ticking, Legislature weighs options to avert Doomsday

  1. I have only recently discovered your site but am already favorably impressed. I need medicaid to remain in the rural nursing home I reside in. The revenue shortfall is more than just numbers–it affects the most vulnerable segments of society. Yes, I am anxious as I watch the political wrangling while my future is at stake.

  2. Here’s an idea… start filling that budget hole with a cut in legislator pay and per diem, then the pay of governor down the chain, department heads, and commissioners.

  3. Here’s a thought for the waiver programs, instead of cutting rates why don’t you cut out all the middle men getting a piece of the pie for authorization of services, electronic billing and reduce amounts of supplies to be authorized. How about some restructure and streamline to make the program more efficient instead of cutting the actual service rates.

  4. I am deeply disappointed in our State legislature and government representatives. Their lack of cooperation and sense of duty to their constituents is a gross negligence of responsibility. If I or my wife performed this way in our jobs, we would be fired without question. Where is their sense of duty to the very people they serve?

  5. Oklahoma is such a broken state. We have elderly that will be forced into nursing homes, teachers that can’t afford to stay in our state to teach, our mentally ill walking the streets not medicated and homeless because there is no help for them, our disabled having to worry what will happen to them if their services are cut, child welfare workers with caseloads so large there is no way they can honestly look after the children that have been taken from unsafe homes so they are allowed to go back to these homes and face the same neglect or abuse that forced them into the system to begin with. I know that this is not your reality however a large portion of Oklahomans live this reality daily. Why is it that every time there is a budget shortage it is always the weakest and the less vulnerable that takes the brunt of the cuts. Where is this ok? I request that you look for other avenues to make up for your shortfall. We the taxpayers are sick of seeing this. Thank you for taking the time to focus on this

  6. They can find $30,000,000.00 if they would cut ( Swag ) for those of you who don’t know what this is it is a fund that the Senate and House members use to put their name’s on their coffee mugs and pens that’s right they get $30,000,000.00 of our money to do crap like this and yet they cant give this money up for the Budget let every one suffer all the while they use $30,000,000.00 to put their name’s on coffee mugs and pens I am offended by this and every one else should be too

  7. That’s incorrect, Tony. What’s been called $30 million for “swag” is a number that an anti-tax group came up with by adding up everything all agencies had spent on promotional materials, including things like merchandise to raise awareness of Oklahoma’s suicide hotline. The items included may be of varying importance, but none of is part of the budget of Senate and House members. These claims are mostly a distraction by people who want to stop any attempts to increase revenues.

  8. I beg to differ Gene in fact they debated this this very subject on the floor and one Dem. said if They do not buy stress balls with there logo on it people would die ( IE veterans ) I am a veteran and have not had one veteran tell me that if they did not have that stress ball they would have commeted suicide and yes there is a fund of $30,000,000.00 dollars of tax payers money set aside for this get your facts together before you tell me I am wrong [Editor’s Note: The fact is that there is no such fund.]

  9. Last year DHS cut 1200 employees. Case loads jumped, supervisory groups were combined, chain of command was flattened, county offices were closed and combined. Is there waste in government offices, sure. But the fat has certainly been trimmed dramatically. You HAVE to have case managers and support staff in order to coordinate services. At this point, new cuts hurt service recipients.

  10. As someone who works with a developmentally disabled individual on the ADvantage waiver program this past week, since we received the termination letter from DHS, has caused so much anxiety. Don’t our legislators realize the pain this budget crisis is causing! These people have a name and a face, it is not just a threatened program. Please come together and find a solution for the sake of your most vulnerable citizens before December 1st!

  11. I am on the Advantage waiver program. I have MS neuropathy spinal stenosis high bp tachacardia arthritis in my neck upper and lower back hands and feet my L3,4,&5 are completely blown and tears in my L4. Permanent nerve damage from having tuleremia so long. 90% compression of my sciatica canal on the left side and 60% compression on the right side.And just last week diagnosed prediabetic.
    I have spent the entire day in tears, praying, worrying. I am on 14 different medications a month. I don’t how I will get my medicine I don’t know how I will eat some days (advantage helps feed us) I don’t know how I will shower, get help in my home. I can no longer even take a broom to my floors. Im in a wheelchair. I don’t want pity. Just explaing how my life would probably end alot faster without this program. Please I beg our senate, please don’t turn your back on us. I know I face a very grave future without this program. My prayers are sent that you will find away to not let your fellow Oklahomans be left to fall to the wayside. My anxiety and sadness is beyond any words to describe. Continued prayers. May God Bless us all.

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