Clarification on supplanting of lottery funds

The Office of Management and Enterprise Services would like to clear up misconceptions about the use of appropriations from the Lottery Trust Fund.

• At the time of the final fiscal year 2017 budget agreement, agencies appropriated FY 2016 general revenue had been cut by 7 percent due to revenue failure.
• After final reconciliation of FY 2016 general revenue collections, agencies received 2.6 percent of FY 2016 general revenue back in September.
• There was no way to anticipate agencies would receive this revenue at the time of the FY 2017 budget agreement and, therefore, no way to accurately anticipate the exact FY 2016 appropriations base.
• In February, when OMES budget analysts calculated the numbers before the State Board of Equalization meeting, a 0.3 percent gap in education funding was discovered as a result of the higher FY 2016 base than was originally considered as part of the FY 2017 budget agreement.

Lottery estimates fell by 20.5 percent in FY 2017

• FY 2016 final appropriations from the Lottery Trust Fund: $65,368,704.
• FY 2017 estimated appropriations from Lottery Trust Fund: $51,995,017.
• Difference: -$13,373,687 (-20.5 percent).

All authorized lottery funds were fully appropriated

• Education received its full allotment of lottery funds. No additional funds were removed from the lottery funds outside the statutory mechanism. No lottery funds went to the General Revenue Fund. Nothing illegal was appropriated from lottery funds.

In February, OMES budget analysts discovered 0.3 percent gap in overall education funding while preparing for the State Board of Equalization meeting.

• Total appropriations for FY 2017 were reduced by 0.5 percent when compared to FY 2016 allotments after adjustments for returned revenue after the statewide revenue failure.
• Education funding, other than lottery funding, fell by 0.8 percent in FY 2017 when compared to FY 2016 allotments.
• OMES presented the information to the Board of Equalization on Feb. 21. Article X, Section 41 of the Oklahoma Constitution and Title 3A, Section 713 of Oklahoma Statute requires the board to determine if appropriations form the Oklahoma Lottery Trust Fund were used to enhance or supplant education funding.
• For the first time, the board made a finding of supplanting in February since there were no other funds to offset the additional education reductions. The Education Lottery Trust Fund was determined to have replaced or “supplanted” the 0.3 percent, or $10,144,171.
• This Board of Equalization process is a checks-and-balances mechanism to make sure situations like this can be caught and addressed. The process worked.
• The Legislature is now constitutionally bound to appropriate the $10 million to the Lottery Trust Fund so it can be dispersed and used as statutorily required.

There is nothing illegal, no money was lost and education got its full allotment of lottery funds. OMES discovered the issue in February and reported as required to the Board of Equalization, which then carried out its constitutional duty. It’s up to the Legislature to next do as is constitutionally required.

“There’s nothing illegal about what happened. The board’s finding is a constitutional and statutory requirement to point out the issue,” said Secretary of Finance, Administration and Information Technology Preston L. Doerflinger. “As a result, the Legislature is constitutionally bound to take up the process from here and ensure the $10 million gets appropriated to the Lottery Trust Fund. This needs to be addressed before any appropriations can be made for fiscal year 2018.”