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COVID-19 Policy Analysis: As our nation confronts the COVID-19 pandemic, OK Policy will be analyzing state and federal policies that impact our state and its residents during this national health emergency. These posts reflect the most current information available at publication, and we will update or publish follow-ups as new information becomes available.
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Just last month, state leaders expressed concern about falling revenues, and the Board of Equalization made a modest downward adjustment in its revenue expectations for the current fiscal year and the next. Until last week, it appeared we were facing a manageable and short-term economic downturn.
Not any more. During the last week, it became clear that oil prices have plummeted, the coronavirus has spread across the nation, and normal life has paused, at least for now. We’ve clearly entered new and unknown territory, and our thinking must change to protect our fellow Oklahomans’ health and financial stability, and to speed our state’s recovery from this crisis.
Oklahoma has the resources it needs to act quickly
The State of Oklahoma has $1.035 billion in three savings accounts. The Rainy Day Fund, with a current balance of $806 million, was created for times like this, and we can access it immediately. Up to one quarter of the fund ($201 million) can be tapped for emergency purposes. This requires either:
- the Governor declaring an emergency and both houses of the Legislature appropriating money from the Rainy Day Fund with a two-thirds vote, or
- leaders of both houses of the Legislature declaring an emergency and both houses appropriating funds by a three-fourths vote of each house of the Legislature, if the Governor does not act.
Should the current fiscal year’s revenue fall below 95 percent of the original revenue estimate, an additional three-eighths ($302 million) of the Rainy Day Fund can be accessed to maintain state services and to fund the response to COVID-19. For the fiscal year starting July 1, 2020, the trigger to access additional amounts from the Rainy Day Fund has already been met. As a result, that additional $302 million will be available to continue supporting state services and COVID-19 response after July 1.
The state holds two other reserve funds, some of which can be available for any state service, and some of which are restricted to specific purposes. Those two reserve funds — the Revenue Stabilization Fund and the Rate Stabilization Act — have another $229 million. These funds are restricted for use in specific conditions: the Revenue Stabilization fund is for use when there are reductions in taxes on oil, gas, and corporate income, and the Rate Stabilization Act funds are for use when the federal share of Medicaid is reduced. However, since the restrictions are legislative and not included in the state Constitution, the Legislature can change that legislation and free up additional reserves. The federal Families First Coronavirus Response Act (FFCRA) increases the federal share of Medicaid, thereby saving Oklahoma an additional $340 million in state funds. The state also holds substantial uncommitted funds for unemployment, Temporary Assistance to Needy Families (TANF), and retirement funds. All of these can be used to provide benefits to Oklahomans who are eligible for these programs, helping them – and all of us – weather this state and national emergency.
States are seeing increased needs for many services as the economy slows down and the number of COVID-19 cases increase. Congress has acted and is still working on laws that make additional federal funds available to the states so that they can maintain and expand unemployment insurance, child care subsidies, schools, and nutrition programs. These measures also help support families and businesses through loans and direct assistance. These are intended to help families deal with the economic downturn and encourage businesses to keep paying their workers. Because the federal government is acting, states are able to provide state-specific supports and services to help their citizens better weather the storm. Oklahoma’s foresight in creating and adding to reserves will allow us to create an Oklahoma solution for the sudden and unexpected emergency.
Now is the time to act
It’s impossible to know the full measures needed by federal, state, and local governments to safely and successfully navigate these murky waters. One can expect, however, that the state will need to spend more on public health, help those with no health insurance or high co-pays and deductibles, support those who lose their jobs, and get money directly into the hands of the most vulnerable Oklahomans. We have the resources to do all of these things and should let our needs and creativity drive our efforts, not concerns over funds.
