Senate and House leadership reached a budget deal this past week to stabilize the Fiscal Year 2021 budget to the fullest extent possible under the dwindling state revenue caused by the COVID-19 pandemic and low oil and gas prices.
Governor Stitt and the Board of Equalization certified a nearly $1.4 billion revenue shortfall for the 2021 budget in April, which was a steep contrast to the $85 million revenue decrease that was estimated in February. After the certification, the governor floated the idea of seven percent across-the-board cuts, which would have been catastrophic to some of our state agencies and the core services they provide, especially during a pandemic.
In the budget we passed, the maximum reduction in agency operating budgets was about four percent or less, and total spending is reduced by nearly $238 million, which is three percent less than what was allocated to spend in 2020. We used money from our state’s savings, cut one-time spending and temporarily redirected non-appropriated funds to reduce the revenue shortfall.
Education was heavily prioritized in this budget, and we worked diligently to ensure our schools received as little of a cut as possible. While it was impossible to hold their budget flat, common education only received a two and a half percent cut. The State Department of Education will see a spending reduction of $78.2 million, but with the injection of $200 million in federal relief dollars from the CARES Act, education will actually receive a budget increase for the year. Per pupil funding and teacher pay should not change, and these are very much a priority for the legislature.
It’s important to remember that education encompasses a little more than half of the state budget delegated by the legislature, meaning about 53 cents of every dollar we appropriate will go to our schools. This translates to $3.9 billion of the $7.7 billion total budget going to education. The remaining funds are divided among all of the other state agencies and services, including health care, social services, transportation and more. If education funding would’ve been held flat, health care facilities, mental health services and roads and bridges would’ve received even larger cuts. Crafting the budget is a balancing act, and we cannot spend more money that we have. With all scenarios considered, this budget is fair and provides adequate funding for our services to continue.
Governor Stitt has the ability to mitigate other areas of the budget with federal COVID-19 emergency funds and with his authority to manage agencies. Our state has received more than $1.25 billion in federal relief funds for COVID-19 related expenses, which is much more than the nearly $238 million reduction in spending for the year.
It's also important to remember that if the economy picks back up and remains strong in the months to come, we may end up with more revenue for 2021 than what was projected by the Board of Equalization. If this is the case, the legislature could restore funding for agencies based on actual revenues.
In closing, I’d like to remind you that Oklahoma has been in this position before and we survived. However, unlike year’s past, we had access to the largest savings account in state history to help stabilize the revenue shortfall, thanks to the legislature’s wise decision to save excess revenue last year. Moving forward, it’s still incredibly important that we practice fiscal responsibility and transparency to ensure our state’s stability for years to come.
As always, please reach out if there is anything I can help you with. You can contact me via email at Marty.Quinn@oksenate.gov or via phone at 405-521-5555.