Analysis: Fiscal Year Budget overview: Been down so long it feels like up

In the 1960′s, Richard Fariña titled his novel of his college days and experiences, “Been Down So Long It Feels Like Up To Me.” The sentiment might also apply to the state budget for the upcoming year. After being down so long – three straight years of shrinking budgets and cuts across almost all areas of state government – a budget that provides flat funding for most agencies as well as some targeted increases may “feel like up”. However, the FY 2013 budget still falls well below pre-downturn levels and will continue to strain the capacity of most state agencies and school districts to fulfill their core functions. 

The Legislature approved a FY 2013 budget of $6,855.8 million (appropriations were all made in S.B. 1975, except $3 million for common education in S.B. 1535). This is $252 million, or 3.8 percent, above FY 2012 final appropriations of $6,603.1 million, which includes supplemental funding. The increase follows three consecutive years of shrinking budgets and cuts across almost all areas of state government. As the graph below shows, even with this year’s increase, the FY 2013 budget remains $269 million, or 3.8 percent, less than peak levels of four years ago (FY 2009).

To develop the budget, the Legislature began with $6,579.8 million that was certified as available for expenditure by the Board of Equalization in February. Final appropriations included additional revenue of $276 million above the certified amount. Additional revenue came from a variety of sources including:

• $120 million in transfers from the Cash Flow Reserve Fund;

• $63.2 million in cash transfers from various agency revolving funds, the largest of which were the Treasurer’s Unclaimed Property Fund ($27.5M), a Computer Enhancement Fund of the Tax Commission and Office of State Finance, and the Attorney General’s Evidence Fund ($13.5M);

• $45.6 million in additional allocations from the HB 1017 Education Reform Fund;

• $23.5 million transferred from the Insure Oklahoma revolving fund for the Medicaid program;

• $22.6 million from enhanced tax compliance measures adopted in S.B. 1983 and S.B. 1984. 

At the same time, some $30 million was left unappropriated to pay for the tax cut  plan agreed to by the Governor, House and Senate that ultimately failed to pass. The unspent surplus will be less than $30 million due to last-minute appropriations and the failure of one revenue-generating bill (S.B. 1985) to gain final passage.  The Board of Equalization will conduct a final certification in June reflecting legislative changes.

Even with more available revenue, most state agencies will see a flat budget in FY 2013. Of the 78 agencies that receive state appropriations, 46 were appropriated the same amount or less than in FY 2012.  Several agencies did, however, receive additional funding for specified purposes. These include:

• Department of Transportation: +$99.7 million compared to FY ’12. Each of the past two years, ODOT was authorized to issue bonds, which freed up a portion of their allocation to fund other agencies but created a hole  for FY 2013.

• Department of Human Services : +$50 million. Half this amount is for the Pinnacle Plan reforms to the child welfare system, with the remainder allocated for the replacement of one-time funding ($17 million), attorney fees from the child welfare lawsuit ($4 million), rate increases to home- and community-based service providers ($3 million); and serving individuals on the developmental disabilities waiting list ($1 million).

• Health Care Authority: +$68 million for increased Medicaid enrollment and utilization ($65 million) and rural residency programs ($3 million). At the same time, $118.5 million of OHCA’s budget was transferred to the Department of Mental Health and Substance Abuse Service, which will now pay the state match for behavioral health services.

• Mental Health and Substance Abuse Services: +$6.2 million for the Systems of Care grant ($3 million), a mental health crisis center ($2.5 million) and the Justice Reinvestment initiative.

• Land Office Commission: +$8 million to be transferred to the agency’s revolving fund for land upgrades.

• Department of Corrections: +3.9 million for costs associated with transferring 800 beds at the Oklahoma State Penitentiary to private prisons and construction of a lethal fence ($2.8 million) and for the Justice Reinvestment initiative.

• Attorney General’s Office: +$7 million for water-related lawsuits ($5 million) and Justice Reinvestment grants ($2 million).

• House of Representatives and Senate: +$1 million apiece to address the impact of budget cuts.

• Department of Agriculture: +$2 million for the Oklahoma Youth Expo.

While few, if any, agencies, received funding increases that matched their budget requests, education arguably ended up as odd-man-out of the budget agreement. Common Education was appropriated $2,347.2 million for FY ’13. This is just $16.7 million, or 0.7 percent, more than FY 2012. The additional amounts were primarily for the Ad Valorem Reimbursement Fund ($12.05 million) and Teachers Retirement System ($1.6 million), while the combined budgets for the school funding formula and programs and activities grew by only $3 million. Common Education did receive $52.4 million to annualize its FY 12 supplemental, but this was only to ensure that teachers and support staff receive a full 12 months of benefits and to fulfill commitments to board-certified teachers. 

State aid funding will remain more than $200 million below its level of 2008, while enrollment has grown by 25,000 students. As we will show in an upcoming post, Common Education’s share of total state appropriations has fallen to its lowest level since at least 1992. Meanwhile, the legislature provided small increases to Higher Education ($10 million) and Career and Technology Education ($1.4 million) to annualize supplementals from FY 2011. Overall, the Education Subcommittee received a 1.1 percent funding increase in FY ’11, the smallest increase of any subcommittee.

This year showed that even with Oklahoma enjoying a strong recovery and revenues rising, providing adequate funding to address Oklahomans’ needs remains a great challenge. Over the next few years, additional funding will be needed to fully implement the child welfare reform plan, meet our commitments to funds roads and bridges, keep up with rising health care and pension costs, properly staff our correctional facilities, and address the simmering crisis of education funding. This makes the need all the more critical for an honest,well-informed debate about what we expect from state government, how much our obligations will cost, and how we will pay for them.