Gov. Mary Fallin has released her executive budget sent to the legislature for fiscal year 2016 that begins July 1, 2015.
Fallin urged lawmakers to spend more than $80 million to boost funding for K-12 education, several health agencies and the Department of Corrections. Funding for ten other agencies would be flat; the rest would face 6.25 percent cuts to their annual appropriations. The state is facing a $300 million budget hole that could grow as low oil prices affect revenues. Fallin predicts a tough budget year.
"It’s not because of a stagnant economy or declining tax receipts," Fallin says. "Rather, it’s because our General Revenue Fund — the primary source of discretionary spending set by the Legislature every year — it is growing smaller.”
Fallin is asking lawmakers to rein in billions of dollars diverted from the general budgeting process, often through tax credits and incentives, or unused revolving funds, which she says many agencies have stockpiled.
From the executive summary of the budget proposal:
Funding Changes Reduced Appropriations for FY-2016
The Board of Equalization in December 2014 projected $298.1 million, or 4.1 percent, less revenue to be available for FY-2016 than was appropriated for FY-2015. In order to overcome this discrepancy while providing core services with additional or standstill funding, 55 agencies receive appropriations reductions of 6.25 percent or less, which generates $37 million to be appropriated elsewhere to meet the most pressing needs of the day.
Targeted Appropriation Increases for FY-2016
To reflect her focus on increasing educational attainment, reducing incarceration, and improving health outcomes, Governor Fallin’s budget includes the following strategic appropriation increases: :
- State Department of Education, $25 million • Department of Mental Health and
- Department of Human Services, $16 million Substance Abuse Services, $5 million
- Oklahoma Health Care Authority, $20 million • Department of Corrections, $15 million
Capitol bond debt service
For first-year obligations for the Capitol repair bond issue, $13.1 million is appropriated for debt service.
Administrative Workers’ Compensation Act
Pursuant to A.G. Opinion 2014-16 and O.S. Title 85A-122, an additional $3 million in workers’ compensation insurance premium tax revenue is directed to the Workers’ Compensation Commission; an additional $1.2 million in workers’ compensation insurance premium tax revenue is directed to the Court of Existing Claims; and $918,012 in workers’ compensation insurance premium tax revenue is directed to the Office of the Attorney General for use by the Workers’ Compensation Fraud Unit.
Flat Appropriations for FY-2016
In order to maintain core government services, the following agencies will maintain their current appropriation levels:
- State Regents for Higher Education • Pardon and Parole Board
- Department of Career and Technology • Department of Public Safety Education • Office of the Chief Medical Examiner
- Department of Transportation • Commissioners of the Land Office
- Department of Health • Department of Veterans Affairs
- Office of Juvenile Affairs
Revenue Adjustments Cash Transfers
Every year, state agencies maintain large cash balances in various agency revolving funds and other accounts. Even after the use of $292.7 million in cash from those revolving funds and other sources in the FY-2015 appropriated budget agreement, state agencies presently have more than $900 million in unencumbered dollars in revolving funds.
Because that amount far exceeds the amount required for fiscal year expenditures paid out of those funds, Governor Fallin proposes another total reconciliation of agency revolving funds. It is estimated the reconciliation will reveal a significant amount of funds that could be better used elsewhere without any critical service interruptions at the originating agency. As a result, Governor Fallin’s FY-2016 budget recommends $300 million be transferred from agency revolving funds to be appropriated elsewhere.
Going forward, Governor Fallin recommends annual reconciliations of all revolving funds, the placement of limits on money stored in certain revolving funds, or fee reductions where appropriate in order to prevent agencies from accumulating unnecessarily large revolving fund balances. Governor Fallin acknowledges some revolving funds exist to address long term projects or unforeseen contingencies, but also believes it is incumbent upon all government officials, as the designated stewards of taxpayer resources, to closely scrutinize and account for all funds in the possession of state agencies, whether those funds are appropriated or non-appropriated.
Revenue Commentary General Revenue Fund declines
Oklahoma currently faces substantial budget challenges. This is not because of a stagnant economy or declining tax receipts. Rather, it is because General Revenue Fund (GRF) collections, the primary source of discretionary spending set by the Legislature and governor annually, are declining, both in dollars and as a percentage of overall collections, due to the increasing cost of mandatory off-the-top apportionments (The trend of increased total tax collections and declining general revenue is illustrated in a series of charts on the following pages). (The trend of increased total tax collections and declining general revenue is illustrated in a series of charts on the following pages). As a result, revenues available for discretionary spending are declining in years when total revenues are growing. In these scenarios, many government functions receive fewer appropriated, or discretionary, dollars through the GRF while other functions receive more apportioned, or mandatory, dollars.
Read Fallin's entire proposal: