Mandated Cuts Again Hit Agencies

Oklahoma Treasurer Scott Meacham unveiled mandated 10 percent cuts in funding allocations to all state agencies yesterday (Tuesday). Meacham coordinated the action with Gov. Brad Henry, state Finance Director Michael Clingman, Senate President Pro Tempore Glenn Coffee and Speaker of the House Chris Benge.
The new cuts expand the state’s revenue crunch management beyond the 5 percent reductions ordered for all agencies since beginning of the fiscal year in July. In a joint statement issued yesterday afternoon, Gov. Henry and the two Republican legislative leaders said they would work together to replace lower revenues in the “1017 fund,” named for House Bill 1017, a public school funding bill passed nearly 20 years ago.
In the joint release, Pro Temp Coffee said continuing revenue challenges present “a real opportunity to prioritize our needs versus our wants, and make government more focused during this lean time in our history.”
State leaders remain cautious about a possible special legislative session to pull revenue from the Constitutional Reserve, better known as the Rainy Day Fund. Analysts point out it will be difficult to use the reserve for much more than “backfill.” So far this year, the state has accessed $233.8 million in cash funds held for such contingencies, and all that money must by law be repaid.

The Rainy Day Fund has about $600 million. Many legislators have said the state should limit the rainy day “raid” to $300 million in order to preserve some backup for the next budget cycle. The state also has available another wave of federal stimulus dollars that can be spent for some purposes.
During Tuesday’s press conference at the state Capitol in Oklahoma City, Tulsa Today asked Treasurer Meacham about the view of Indiana Gov. Mitch Daniels that revenues in the states would remain below expectations for years to come. Meacham replied cautiously, saying Oklahoma for now had no choice but to “shrink down and shrink the service base. We’ll get through it.”
Gov. Daniels raised, last summer, a provocative thesis, namely that he believed government revenues in most of the states would remain below 2008 levels for some time, perhaps for years. In a September commentary for the Wall Street Journal, he said state governments “have to change” in response to the revenue crunch.
In response to a question from Tulsa Today, Meacham said, “I don’t see reasons to incur the cost of a special session.” Meacham contends the budget picture will be clearer at the time the regular session begins in February, allowing legislators and the governor to make more informed decisions.
In discussions with reporters, Meacham said the problem “is not cash flow. The problem is revenues versus promised expenditures.” In light of state balanced budget requirements, he said, the allocation cuts are required by law.
Monthly revenue reports from the treasurer’s office cover mid-month to mid-month. Therefore, the November data did not include “Black Friday” (the day after Thanksgiving) sales tax revenues. November state sales tax receipts were 17.7 percent down from the prior year. Meacham expressed hope that next month’s data could show some improvement in this area.
For the budget as a whole, revenues remain significantly depressed, with the monthly total 30.5 percent below the prior year, and 25.1 percent below revenue estimates. The gross production tax on natural gas was 83.8 percent below last year, and 57.8% below the state’s estimate. Meacham says the shortfall surpasses "even the oil bust," and is the worst since the Great Depression.
Members of the state House of Representatives have held budget hearings in recent weeks, focusing on the effect of prior cuts on most state agencies. In the joint statement with Henry and Coffee, Speaker Benge explained, “Because we don’t know how deep or how long this revenue decline is going to last, it will require that we plan the budget as if it is an 18-month cycle in order to appropriately use reserves available to us. It is possible revenues will continue to decline, and it is important that we not get ahead of ourselves without all the fiscal information yet.”
The state board of equalization meets next Monday, Dec. 21 to receive Tax Commission projections. The next of Meacham’s monthly revenue reports (for December) is expected January 12.
About the author:  Pat McGuigan is editor of CapitolBeatOK, a news service operating from the state Capitol in Oklahoma City. He is also Capitol Editor for Tulsa Today and senior editor of The City Sentinel, a weekly paper in Oklahoma City.