Budget includes spending cuts, rainy day raid, enhancements
By Patrick B. McGuigan
Oklahoma Governor Brad Henry, Speaker of the House Chris Benge, and President Pro Tem Glenn Coffee announced a state budget agreement this afternoon (Thursday, May 20). Conference reports implementing the accord will begin to move through the Legislature this week.
Framework for the accord includes a new round of reduced state appropriations, accessing much of the remaining balance in the Constitutional Reserve (better known as the Rainy Day Fund) and cuts in a range of tax credits and exemptions.
The accord contains comparatively small reductions in spending on public education, including K-12 and Higher Education.
The release announcing the agreement, from the governor’s office, said, “As part of the agreement, K-12 education and career technology education will receive targeted cuts of just 2.9 percent to help avert teacher layoffs and other classroom reductions. Higher education’s budget will be reduced by 3.3 percent.
“The Department of Public Safety will be cut by only 1 percent in an effort to head off trooper furloughs. The Department of Corrections will receive a 3 percent reduction.
“The agreement also calls for providing additional, long-term funding to the Oklahoma Department of Transportation for road and bridge maintenance and repair efforts.”
The release from Gov. Henry’s office characterized the agreement as representing “a series of targeted agency cuts, reserve and stimulus funds, cost recovery methods and other savings and efficiencies across state government.”
The governor, in his statement, said, “In the face of a historic revenue shortfall, this was a very difficult and painful budget to craft, but I am proud that we were able to strike an agreement that largely protects the core services that are so important to Oklahomans and the state’s economic recovery.”
Henry thanked Benge, a Tulsan, and Coffee, of Oklahoma City, as well as the Legislature’s Democratic leaders, state Sen. Charlie Laster of Shawnee and Rep. Danny Morgan of Prague, “for all of their hard work and diligence under very challenging circumstances. Many agencies and programs will still feel the pain of the budget crunch, and that was unavoidable, but despite some bumps along the way, we were able to strike a bipartisan agreement that will help Oklahoma recover from these trying economic times. ”
Today’s release did not spell out deeper cuts to other state agencies, but that information will become clearer as revenue bills race through the House in the remaining days of the session. The Legislature must adjourn by 5 p.m. on Friday, May 28.
Speaker Benge said that “tough decisions we have said all session would be required to fill a $1.2 billion shortfall” will “inevitably touch every aspect of state government. I believe this budget insulates vital government services like public safety, transportation, health care and education from dramatic cuts while also leaving our state in a fiscally sound position for the next Legislature and beyond.”
President Pro Tem Coffee said, “In divided government, parties have to work together to do the people’s business. During a tight budget year, this agreement provides a responsible reduction in spending and protects taxpayers from a tax increase. Republicans have always fought to be prudent with taxpayer dollars, and I knew it was vital to maintain the $100 million reserve fund that will aid in the probable FY 2012 budget holes.”
Coffee expressed gratitude to Sen. Mike Johnson, appropriations chairman, “for his expertise and vision in helping us draft a budget that adequately funds the core functions of this great state.”
Some “cost recovery” and “revenue enhancement” proposals could face rough sledding, especially in the Senate. Yesterday, Democrats in the upper chamber withheld support for a proposal to end the rural capital investment credit and the small business capital credit. The measure passed 26-22 (in a straight party line vote). Perhaps more significantly, Democrats did not back an emergency clause provision on the two bills.
A two-year moratorium on the two credits would boost state government revenue an estimated $45 million. However, Ron Cupp, a vice president at the State Chamber, said loss of the credits could hurt economic development and future revenue growth. Other proposal moratoria could boost revenue another $75 million over a two-year period, fiscal analysts estimate.
Without the emergency clause, a law cannot take effect until 90 days after the Legislature adjourns. That would mean the income from ending the credits would not flow to the state for three months. With the emergency provision, legislation takes effect after the governor’s signature.
Sources in the business community say some tax credit limits or revocations already underway could have a chilling effect on economic activity in the building and construction sector.
Under the FY 2011 agreement, $6.68 billion in general revenue will be appropriated to state agencies and programs, a 7.6 percent reduction in total appropriations from the original FY 2010 budget.
The release on the accord disclosed, “The Oklahoma Health Care Authority will receive an increase in overall funding from other sources to address expected cost increases in health care programs. The Department of Mental Health and Substance Abuse Services will be cut by .5 percent and the Department of Veterans Affairs by 3.5 percent. The agreement also calls for a $5 million line-item appropriation to senior nutrition programs and $12.4 million to the Rural Economic Action Plan or REAP.”