Rising oil prices translated into healthier finances for the state of Oklahoma. But higher revenue numbers for April were overshadowed by news of financial mismanagement within one of the state’s largest agencies.
In November 2017 the Oklahoma Health Department announced a shortfall of $30 million, but an investigation by Attorney General Mike Hunter and State Auditor Inspector Gary Jones found the agency was never actually insolvent. Rather, money had been deliberately hidden from lawmakers and the agency’s board.
“The legislature has dipped into agency revolving funds time and time again in order to balance the budget, particularly in recent years,” eCapitol’s Shawn Ashley said. “In order to avoid that money from being taken, they were hiding it.”
The grand jury concluded no crime was committed, but recommended legislation to make such activity a crime under state embezzlement law.
The manufactured crisis led to emergency state funding and nearly 200 layoffs.
Service providers funded by the Health Department, including health care centers and some private agencies that provide counseling for abused children, also took financial hits.
Lawmakers will have to wait until next year’s legislative session to act on any of the grand jury’s recommendations. But, state Sen. Nathan Dahm, R-Broken Arrow, is pushing for lawmakers to return to the capitol early for a third special session to consider bills vetoed by Gov. Mary Fallin during her eight years as governor.
“She has vetoed more than 120 measures during that time, some of which Sen. Dahm says are very conservative measures,” explained Ashley.
Dahm would need support from two-thirds of each legislative chamber to prompt another special session.
Dick Pryor: Shawn, dramatic news coming out of the investigation of the state health department. There was a grand jury report and an investigative audit done by the state auditor that found ongoing financial mismanagement.
Shawn Ashley: Yes this was a seven month investigation both by the grand jury and by the state auditor and investigators office. Basically what it came down to was a series of very interesting conclusions. First of all, as the attorney general Mike Hunter pointed out, the Department of Health is not and has never been insolvent. They've always had money. However, as you will recall the legislature was told several months ago that they needed 30 million dollars to make it through this fiscal year. And they were given that money by the legislature and the governor. Put simply, the agency was moving money into a fund and then forgetting about it or not believing they could use that for the day to day expenses of the agency. The best way I can think of to explain this is it was like they were hiding money in a coffee can in the backyard and then forgetting that it was there.
Pryor: Not only did they not remember the money, apparently, but were they hiding the money or moving the money into an account that was essentially off the books to prevent the legislature from finding the money.
Ashley: That was one of the issues that State Auditor Inspector Gary Jones pointed out. The legislature has dipped into agency revolving funds. time and time again in order to balance the budget, particularly in recent years. Even the current year budget relies upon a certain amount of revolving fund money in order to make the budget balance. In order to avoid that money from being taken, they were hiding it in the coffee can in what was called a 400 fund, a restricted fund normally used for federal money so that the legislature would not look at that fund as a source of money which they could use in order to help balance the budget.
Pryor: It's also been suggested that other state agencies are doing similar things.
Ashley: That is one of the final conclusions of the report by the grand jury...The idea that there is absolutely no way that this can not be happening at other state agencies.
Pryor: What happens next?
Ashley: Well, the grand jury may look more into the agency, but at this point they have concluded there was no prosecutable offense committed. There was a lot of mismanagement. No one benefited. And no crime was committed. One of the recommendations of the grand jury, however, is that the state embezzlement law be changed in such a way that it would be a crime for a state agency to hide money from the public and from the legislature in much the same way that the State Department of Health did.
Pryor: Another fascinating story: Senator Nathan Dahm is circulating a petition for another special session. He wants to review bills that Governor Fallin has vetoed over the last seven and a half years-- the whole time she's been in office as governor. Why is he doing this?
Ashley: The primary reason seems to be Senate Bill 1212, the permitless gun carry bill, which the governor vetoed recently. He was the Senate author of that measure. He did not have an opportunity to attempt to override that veto because the legislature adjourns sine die on May 4th and she vetoed it the following week. That bill is good and dead, you might say.
However Senator Dahm also is the author of a number of other pieces of legislation that during Governor Mary Fallin's gubernatorial career have been vetoed. She has vetoed more than 120 measures during that time, some of which Senator Dahm says are very conservative measures... Pro-life measures, other pro-second amendment measures.
Pryor: Another special session seems unlikely, but this actually could work.
Ashley: It could. But he needs to get two thirds of the signatures of the House members and of the Senate in order to make that happen. But consider what happens if he does. Two thirds is the number of votes necessary to override a veto. So he would be coming into a special session to look at vetoes of the governor re-pass those bills. And if she vetoes them again probably has the votes to override those vetoes.
Pryor: There's good news regarding the state's economy.
Ashley: That's right. We saw the general revenue fund collections for the month of April were above both the estimate and the prior years collections. What we're seeing is an overall rebound in the economy particularly driven of course by the oil and natural gas industry. If you look at the financial markets right now oil is trading somewhere around 70 dollars a barrel, which is very good news for state collections. It is setting the stage where we could have the first rainy day fund deposit in a number of years.