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Lawmakers Question Legality Of Rainy Day Fund Extraction

Mar 31, 2017

 


 

Monthly revenue shortages have led Oklahoma finance officials to dip into the Rainy Day Fund again this year, draining it completely.

If the state does not have enough money to pay its monthly bills, it typically takes the difference from a state department.

“Normally, they would look to something like the Department of Transportation, which usually has large amounts of cash,” eCapitol news director Shawn Ashley said in his weekly interview with KGOU.

That money was not available because ODOT received bond funding this year, so the Office of Management and Enterprise Services had to look elsewhere.

Speaker of the House Charles McCall and House Minority Leader Scott Inman have said they will investigate whether or not it was legal for Preston Doerflinger, the director of OMES, to take money from the Rainy Day to pay for the state’s monthly expenses.

“Normally, expenditures from the Rainy Day Fund require legislative action. In fact, they require a supermajority [three-fourths vote] to be approved. But state law allows the director of the Office of Management and Enterprise Services to borrow from any treasury fund to meet monthly cash flow needs,” Ashley said.

Speaker McCall said he was surprised to learn the Rainy Day Fund had been emptied in this manner.

“[McCall]...indicated on Thursday that he has asked House staff to look into the matter to see if, in fact, it was legal. House Minority Leader Scott Inman has indicated that he plans to seek an attorney general’s opinion to find out if it was legal,” Ashley said.

Financial officials are counting on a revenue surplus in April to pay back the money taken from the fund.

INTERVIEW HIGHLIGHTS

On why financial officials are borrowing from the Rainy Day Fund:

So what has happened this fiscal year is that revenues have been coming in lower than expected and lower than the monthly needs of the state, so, as a result, they had to borrow money from somewhere. In this case, they turned to the rainy day fund. As Preston Doerflinger, the director of the Office of Management and Enterprise Services, pointed out on Thursday, normally they would look to something like the Department of Transportation, which usually has large amounts of cash. But because they received bond funding this year, they do not have this cash available and it seems the only cash that was there was in the rainy day fund.

On legislators’ concern with the legality of OMES borrowing from the Rainy Day Fund:

 

He and many legislators were surprised to learn that the rainy day fund had been drained in this manner and indicated on Thursday that he has asked House staff to look into the matter to see if, in fact, it was legal. House Minority Leader Scott Inman has indicated that he plans to seek an attorney general’s opinion to find out if it was legal.

On the education budget not being passed by the deadline:

The importance of this date is to allow schools to begin planning for the next fiscal year for themselves, and without that information and without knowing how much money they’ll have, the idea is they won’t be able to do that effectively.

FULL TRANSCRIPT

Dick Pryor: Shawn, state finance officials are using money from the Rainy Day Fund to pay this year’s bills, which means the fund is down to zero. How can they do that?

Shawn Ashley: Well, normally, expenditures from the Rainy Day Fund require legislative action. In fact, they require a supermajority to be approved. But state law allows the director of the Office of Management and Enterprise Services to borrow from any treasury fund to meet monthly cash flow needs. So what has happened this fiscal year is that revenues have been coming in lower than expected and lower than the monthly needs of the state, so, as a result, they had to borrow money from somewhere. In this case, they turned to the Rainy Day Fund. As Preston Doerflinger, the director of the Office of Management and Enterprise Services, pointed out on Thursday, normally they would look to something like the Department of Transportation, which usually has large amounts of cash. But because they received bond funding this year, they do not have this cash available and it seems the only cash that was there was in the rainy day fund.

Pryor: How and when does the money get paid back into the Rainy Day Fund?

Ashley: Director Doerflinger indicated that they have to have that money paid back by the end of the fiscal year, by June 30. In particular, they’re counting on April collections to be higher than the cash needs of the state so that they can begin to make those payments.

Pryor: Speaker of the House Charles McCall is concerned about all of this.

Ashley: Yes. He and many legislators were surprised to learn that the Rainy Day Fund had been drained in this manner and indicated on Thursday that he has asked House staff to look into the matter to see if, in fact, it was legal. House Minority Leader Scott Inman has indicated that he plans to seek an attorney general’s opinion to find out if it was legal. Doerflinger said that he believed and was confident, after having the matter reviewed by his own legal staff, that it was allowed and that they would meet the requirement to have the money paid back.

Pryor: One of three supplemental funding bills needs money from the Rainy Day Fund, so how will that work?

Ashley: Yeah. It’s another cash flow situation it would appear. The House has approved a bill that would give approximately $34 million to the Department of Human Services really to make it through the remainder of the fiscal year. That includes $30 million from the Unclaimed Property Fund and, as you said, $4 million from the Rainy Day Fund. Senate appropriations chair Kim David indicated that what they would do would be to take the money first from the Unclaimed Property Fund and give it to the Department of Human Services in April and May, and then use money which had been paid back to the Rainy Day Fund by June to fund them then.

Pryor: Under state law, the legislature must pass the education budget by April 1. Now the legislature has only done this once and missed the deadline again this year.

Ashley: Yeah. It seems kind of ironic perhaps that the April 1 deadline was chosen, sort of an April fools joke, you might say, that it has become. But the legislature failed again this year to pass a common education budget by the deadline. It has done so once in the past, one year after the law was originally passed in 2003. It did so in 2004. House speaker Charles McCall indicated that the legislature did meet the deadline one other year, but that education budget was vetoed. The importance of this date is to allow schools to begin planning for the next fiscal year for themselves, and without that information and without knowing how much money they’ll have, the idea is they won’t be able to do that effectively.

Pryor: What’s the governor’s take on the budget situation?

Ashley: Well, the governor said on Thursday that budget discussions this [sic] far have been minimal. And, in fact, she urged lawmakers to come to the table and really begin to start talking about revenue enhancement measures and efficiencies and other steps that can be taken to balance the budget. She did praise the House Democrats for having put forth their plan a little more than a week ago, which offered ideas for filling the nearly $900 million budget hole. But she said, at this point, those ideas she put on the table during the state of the state speech largely have not been addressed and they need to get to work. If not, she’s prepared to call them back for a special session.

Pryor: What should we watch for over the next several days?

Ashley: Over the next couple of days, we will be going back to committees and finishing up the work there and seeing what legislation makes it to the floor and, perhaps, for final consideration.

Pryor: eCapitol news director Shawn Ashley, thank you.

Ashley: You’re very welcome.

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