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Legislature Plans To Move Quickly To Address Nearly Billion-Dollar Budget Gap

Finance secretary Preston Doerflinger (left), House Speaker Jeff Hickman (center), and State Sen. Clark Jolley (right) address the budget situation and revenue failure during a Deember 17, 2015 news conference at the state Capitol.
Joe Wertz
StateImpact Oklahoma
Finance secretary Preston Doerflinger (left), House Speaker Jeff Hickman (center), and State Sen. Clark Jolley (right) address the budget situation and revenue failure during a Thursday news conference at the state Capitol.

Oklahoma budget officials sounded a dire financial alarm this week – low oil prices have driven state government revenues to failure.

Lawmakers and state finance officials say a projected $900 million hole in next year's state-appropriated budget could grow closer to $1.1 billion when adjusted for one-time expenditures used to plug a hole in the current state budget.

Those numbers will be officially presented to the state Board of Equalization on Monday. Three of the state’s top finance leaders met with reporters at the state Capitol on Thursday to detail the shortfall.

Crude oil has dipped below $35 a barrel, the lowest price since February 2009, the last year a revenue failure was declared in Oklahoma. Plunging oil prices are pulling down nearly every one of the state’s major sources of tax revenue.

“When one out of every four or five dollars the state collects is associated with the oil and gas industry and that industry sees the price fall 70 percent, when there are 11,600 Oklahomans are out of work and have lost their jobs, the effect is going to be profound,” House Speaker Jeff Hickman said.

Senate Appropriations Committee Chairman Clark Jolley said he doesn't think the situation will improve between now and the BOE’s second meeting in February.

"We expect it to be a worse projection, because the rolling average on oil and natural gas is just going to go lower. It's not going to get better,” Jolley said.

Secretary of Finance Preston Doerflinger said almost every major tax category is in decline, says eCapitol’s Shawn Ashley:

Only corporate income tax revenues are forecast to improve through the remainder of the year, but Deputy Budget Director Shelly Paulk noted that revenue source is volatile. Part of the increase, she explained, is because of the low level of collections in FY2015. Comparable and in some cases higher percentage declines in collections are forecast for FY2017 compared to the FY2016 estimate, according to information to be presented Monday to the board.

What Are The Options?

Jolley says lawmakers are discussing ideas to shore up next year's budget. Funding for agencies will be cut across-the-board for the remainder of the fiscal year. Some agencies could be consolidated, others are considering voluntary employee buyouts.

Doerflinger told reporters cuts to state agencies as a result of the projected revenue failure in the current fiscal year likely will range from between 2 percent and 4 percent.

He said the dollar figure totals about $157 million to get back into an acceptable cushion to keep the budget in balance.

“We'll probably cut a little more than $157 million to give an extra cushion and somewhat soften next year's reductions,” Doerflinger said.

Lawmakers could also pull from the state’s savings account, known as the Rainy Day Fund, if Gov. Mary Fallin calls a special session before February. Fallin’s spokesman Michael McNutt told The Journal Record’s Dale Denwalt that Fallin hasn’t talked with Hickman or Senate President Pro Tem Brian Bingman about the idea.

“Obviously we couldn’t do it in December, I don’t think, because she’d have to give some notice,” McNutt said. She also hasn’t discussed tapping the RDF, he said. If a special session were called, he said, it would probably have to be in January, just a few weeks before session officially begins. Earlier this year, Fallin asked state agencies to turn in budget reduction plans showing how they would cut 10 percent for this and next fiscal year. Cabinet heads are reviewing the plans, but not every agency turned in a plan before the Dec. 1 deadline. She also put a halt to nonessential out-of-state travel, urged agencies to sell unused property and placed control of the state’s aircraft under one department.

The Oklahoma Public Employees Association, which represents state workers, said the news of possible budget cuts threaten state workers, according to Denwalt:

“Oklahoma has 2,880 fewer state agency employees in fiscal year 2014 than it did in fiscal year 2009 due to budget reductions,” Oklahoma Public Employees Association Director Sterling Zearley wrote in a media release. “However, the need for services provided by departments like Transportation, Corrections, Veterans Affairs, Mental Health and Substance Abuse, (and) Health and Human Services remains high.” OPEA said it has pushed lawmakers to look at corporate tax incentives to see if the incentives result in their intended economic benefit to the state. Zearley also said that private contracts should be cut or eliminated. “It should not just be state employees and their agencies who are cut,” he wrote.

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Brian Hardzinski is from Flower Mound, Texas and a graduate of the University of Oklahoma. He began his career at KGOU as a student intern, joining KGOU full time in 2009 as Operations and Public Service Announcement Director. He began regularly hosting Morning Edition in 2014, and became the station's first Digital News Editor in 2015-16. Brian’s work at KGOU has been honored by Public Radio News Directors Incorporated (PRNDI), the Oklahoma Association of Broadcasters, the Oklahoma Associated Press Broadcasters, and local and regional chapters of the Society of Professional Journalists. Brian enjoys competing in triathlons, distance running, playing tennis, and entertaining his rambunctious Boston Terrier, Bucky.
Joe was a founding reporter for StateImpact Oklahoma (2011-2019) covering the intersection of economic policy, energy and environment, and the residents of the state. He previously served as Managing Editor of Urban Tulsa Weekly, as the Arts & Entertainment Editor at Oklahoma Gazette and worked as a Staff Writer for The Oklahoman. Joe was a weekly arts and entertainment correspondent for KGOU from 2007-2010. He grew up in Bartlesville, Okla. and studied journalism at the University of Central Oklahoma.
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