Modest state spending restraint, prompted last spring in the face of an unprecedented pandemic-driven economic shutdown, may make dealing with this year’s state budget slightly easier, although it will not eliminate budget challenges, based on information presented at the December meeting of the State Board of Equalization.
The State Board of Equalization certifies the amount of money lawmakers can spend when drafting next year’s state budget.
Because of the unusual circumstances created by the COVID-19 pandemic, the spending levels authorized by the board last February were soon understood to be wildly inflated, and the group met a second time in April and urged lawmakers to spend far less than the amount authorized.
During the group’s Dec. 18 meeting, officials were informed that because the Legislature did so, the state will now end the year with more than $500 million in cash-flow reserve funds of which $200 million will be available for appropriation in either the current fiscal year 2021 (FY21) budget year, which runs through June 30, or for the FY22 budget.
While critics may decry the modest cuts imposed this year as unnecessary, Gov. Kevin Stitt defended that action, noting the initial projections from last February did not hold true.
“If we had a crystal ball, we could have spent another $500 million if this all comes through correctly,” Stitt said. “But had we spent the $1 billion more, we would be cutting this year. We would be in a different situation.”
House Appropriations and Budget Committee Chairman Kevin Wallace, R-Wellston, also noted that the Legislature used a significant amount of one-time funding in the FY21 budget that did pass.
“There still is a gap that was created by using one-time funds,” Wallace said.
For the FY21 budget, lawmakers spent $7.8 billion. For the coming fiscal year budget, they are authorized to spend $8.4 billion.
However, officials noted that much of that $8.4 billion comes from one-time funds, such as unexpected carryover and the diversion of road and pension funds.
“When you withdraw all the cash that’s currently within the FY22 overall budget that I presented, our kind of baseline, recurring revenue is $7.4 billion,” said John Gilbert, a budget and revenue analyst with the Office of Management and Enterprise Services.
He added that does not account for new spending obligations created by expansion of Medicaid to include able-bodied adults. The measure narrowly approved by voters in June to expand Medicaid provided no funding source for the expansion, which may cost $246 million to $374 million annually.
Stitt noted that the spending levels authorized by the board include one-time cash sources of $1.03 billion that will not be available in the following FY 2023 budget year, and does not bring state government back to its previously projected pre-pandemic levels.
“Moving forward, the Legislature will still have difficult decisions to make regarding the budget,” Stitt said, “but my team is committed to working alongside our legislators to ensure we remain fiscally responsible with Oklahomans’ hard earned tax dollars.”
House Speaker Charles McCall, R-Atoka, said the state is positioned to handle its budget challenges.
“Use of existing savings, spending less than authorized, and other responsible measures helped stabilize last year’s and this year’s budgets during the peaks of the pandemic,” McCall said. “Those actions also gave state agencies a full 18 months to prepare for what we can now see will be very workable, smaller-than-expected reductions in next year’s budget.
“Oklahoma has solved far bigger budgetary challenges before and will do so again,” McCall continued. “Governor Stitt’s leadership and smart legislative budgeting have positioned Oklahoma to have an adequate state budget as it continues fighting the pandemic while mourning those lost to it.”