Governor Kevin Stitt announced today that state government faces a $416 million shortfall for the current budget year, which ends June 30. That’s substantially more than publicly reported figures had indicated only days earlier.
Lawmakers are expected to reconvene in legislative session on Monday, April 6, to concur with the governor’s declaration of a catastrophic health emergency and to address the fiscal year 2020 (FY20) budget shortfall.
“This revenue failure is not unexpected given the significant impacts of the COVID-19 pandemic as well as the dramatic downturn in the oil and gas markets,” Stitt said. “Times like these further reinforce how critically important it was for our House and Senate leadership to work with me to save an additional $200 million during last year’s budget surplus.”
Thanks in part to setting aside much of last year’s surplus, state government today has $1 billion in savings, a record amount. Much of the money in savings can be immediately accessed to address the state’s shortfall.
The state’s Constitutional Reserve Fund, often called the “Rainy Day Fund,” has a balance of $806 million. Of that total, up to $302 million can be used to supplement the FY20 budget, and another $201 million can be accessed due to the governor’s declaration of an emergency.
In addition, around $200 million in the state’s Revenue Stabilization Fund can be accessed at any time.
Without the use of savings, state agencies will face automatic cuts of 6.2 percent to all budgets due to the shortfall.
However, lawmakers may want to preserve some savings to address the anticipated shortfall for the 2021 budget, which is still being negotiated. The exact size of the 2021 shortfall has not been announced, but it could be comparable to or even larger than the 2020 shortfall.
Earlier this week, Senate President Pro Tempore Greg Treat said lawmakers expected to use savings to cover this year’s shortfall, although he indicated the size of the 2020 shortfall would impact those decisions.
“Any monies that we have to use to plug those holes will adversely impact our ability to look at the FY21 budget,” noted Treat, R-Oklahoma City.
He said Senate Republicans would prefer to “completely fill” the 2020 shortfall “to make sure services are still received by Oklahomans,” but that they would also have to consider how much savings was available.
Shortly after Stitt’s announcement, one House leader indicated that lawmakers still plan to use savings rather than reduce spending to deal with the 2020 shortfall.
“There will not be any cuts this year because we will be tapping savings,” said House Majority Floor Leader Jon Echols, R-Oklahoma City.
Stitt said budget planning “will prioritize protecting our core services for dealing with the COVID-19 crisis.”
“As the last few weeks have demonstrated, it will take time to fully understand the impact COVID-19 will have on our state revenue,” Stitt said. “We must be very cautious and remain fiscally prudent to restrain spending as we work with the legislature on next year’s budget.”