State Rainy Day Funds have one sole purpose: to be used during economic downturns to minimize the extent of cuts to public services and to avert tax increases. Prior to this downturn, Oklahoma has been able to build up our Rainy Day Fund to just under $600 million. OK Policy just released a new issue brief arguing that, with the state facing a large budget shortfall and the prospect of cuts of 7 to 10 percent for most agency budgets, now is the right time to use a portion of the Rainy Day Fund.
Our argument is based on projections suggesting that revenues will begin to recover after next year, even as it takes several years to return to pre-downturn levels. Under the constitutional rules governing the Rainy Day Fund, once revenues begin to rise compared to the prior year, most of the Fund cannot be appropriated, even if there remain ongoing shortfalls compared to pre-downturn levels. This creates the strong possibility that unless we use a portion of the Fund next year, we will end up making deeper and more painful cuts than are necessary while leaving most of the Rainy Day Fund untouched during one of the worst recessions in decades. As we stated in a press release, “we could be facing a situation where the people and communities of Oklahoma are about to get drenched by budget cuts, while we are left holding on to an unopened umbrella.”
Oklahoma’s state public employees association is now calling on its members to contact legislators and the Governor to urge tapping part of the Rainy Day Fund to avert layoffs and furloughs in the year ahead.
The Legislature is slated to adjourn next Friday (May 22nd) but a budget agreement between the House, Senate and Governor has yet to be announced.
We hope you’ll take a look at the brief, and leave a comment letting us know what you think.