The FY 2019 Budget: Been down so long this looks like up

In the 1960s, the New York City poet and folksinger Richard Fariña published a novel titled “Been Down So Long It Looks Like Up To Me.” This title certainly applies to Oklahoma’s FY 2019 state budget, approved by the House and Senate last week. After several straight years of large shortfalls and repeated rounds of budget cuts, including mid-year cuts the past three years, lawmakers were finally able to pass a budget that kept funding for all agencies at least flat, provided modest increases for some critical programs and services, and included over $350 million for teacher pay raises.

State agencies next year will be appropriated a total of $7.567 billion in SB 1600, which is the annual General Appropriations bill. This is an increase of $718.5 million (10.5 percent) compared to the initial FY 2018 budget approved last May, and an increase of $601 million (8.6 percent) compared to the final FY 2018 budget, which included various mid-year cuts and increases. Next year’s appropriations will be the largest in state history, surpassing the $7.235 billion budget in FY 2015; however, when adjusted for inflation, next year’s budget remains 9.4 percent ($788 million) below the budget of FY 2009.

The money appropriated in the GA bill, which includes $107.1 million in supplemental funding for FY 2018, has three main sources:

• $7.064 billion that was certified by the Board of Equalization in February as available revenue for FY 2019 (see Appendix A-4);
• $507.4 million in additional tax revenue generated by revenue bills approved in special session (HB 1010xx, HB 1011xx, HB 1019xx);
• $172.4 million that was transferred from various agency funds to the Special Cash fund for appropriation ($92M of this amount that was transferred from the Highway Construction and Maintenance Fund and the Railroad Maintenance Fund will go to the Ad Valorem Reimbursement Fund in June; under HB 3712, these two funds will then be replenished with FY 2019 sales tax collections).

On the expenditure side, the largest increase went to the Department of Education, which will receive $2.912 billion in FY 2019, a $465 million (19.0 percent) increase from its initial FY 2018 funding and a $388 million (15 percent) increase from its final FY 2018 funding. The Department received $353.5 million for teacher pay raises, $52 million for raises for support staff, $24.7 million for increased benefit costs, and $50 million in increased state aid funding, of which $33 million is dedicated for textbooks and instructional materials.

These increases will boost common education funding to its highest level ever. But even with a $50 million increase, state aid funding will remain some $145 million less than it was in FY 2009, even as K-12 enrollment has grown by over 50,000 students. As important as the pay raises are for moving Oklahoma teachers towards a fair and competitive salary, schools remain in desperate need of additional operating support to reverse cuts that have led to fewer teachers and support professionals, larger class sizes, fewer courses and programs, and outdated textbooks and supplies.

Most other agencies will receive funding increases to pay for state employee pay raises that were approved in special session in HB 1024xx.  The raises, which range from a maximum $2,000 for employees with salaries under $40,000 to a minimum of $750 for those with salaries over $60,000, were initially budgeted to cost $63.8 million; however, the bill summary for SB 1600 shows the cost of pay raises to be $53.7 million. As with teachers, pay raises will help close some of the pay gap for state workers, whose average salary had fallen to an average of 24 percent below their private sector counterparts; however, the state employs 3,000 fewer workers than in 2009 and most agencies are receiving no new money to fill vacancies and address critical staffing needs.

Along with money for raises, several agencies are set to receive increased funding in FY 2019. Following passage of the GA bill, the Legislature directed how additional funds are to be spent in a number of agency-specific budget limit bills that were taken up in the final days of session:

• the Department of Human Services received funding to increase rates for providers in the Medicaid Advantage waiver and other waiver programs, to raise foster care and adoptions rates, and to serve families currently on the Developmental Disabilities Services Division (DDSD) wait list. DHS was also instructed to increase child welfare workers’ salaries and child abuse funding, establish a new respite care waiver, and use additional federal matching funds for clients who are aging or have developmental disabilities, child care subsidy, and adoption subsidy programs (HB 3708);
• the Department of Mental Health and Substance Abuse Services (HB 3707) and Oklahoma Health Care Authority (SB 1605) were directed to raise reimbursement rates by 2 percent or 3 percent for most providers. The Mental Health Department also received $4 million to perform needs assessments associated with criminal justice reform efforts;
• the Department of Corrections received $4.8 million to implement an electronic offender management system and $2.8 million to boost reimbursement rates for private prisons (HB 3706).

In addition, the Legislative Services Bureau received $2 million for agency performance audits and the Office of Emergency Management received $4 million for disaster relief, according to a press release from Senate President Mike Schulz.

[pullquote]“Overall, 40 of the state’s 64 appropriated agencies will remain 20 percent or more below their FY 2009 appropriations, without adjusting for nearly a decade of inflation.”[/pullquote]

Despite these increases, as Senate Appropriations Chair Kim David stated during debate on SB 1600, “this budget in no way makes everyone as complete and whole as we were in 2009.” The Regents for Higher Education, for example, will receive an additional $7.5 million for concurrent enrollment programs, but no additional money to support operations of colleges and universities. Higher education funding will remain $263 million, or 25.3 percent, below its FY 2009 levels. The Arts Council will get $2.8 million in FY 2019, which is 45.7 percent less than in FY 2009, while funding for the Department of Environmental Quality will be 33.2 percent less than in 2009. Overall, 39 of the state’s 65 appropriated agencies will remain 20 percent or more below their FY 2009 appropriations, without adjusting for nearly a decade of inflation.

Most lawmakers accept that the growth in the FY 2019 budget is only a first step towards restoring funding to levels that will allow state agencies to properly fulfill their missions, and they have committed to building on this progress next year and beyond. It will be the job of all Oklahomans to hold them accountable to this promise.