Why the Governor must veto the State budget – Part 2

Imagine the perplexity felt by the average Oklahoman. For the past four months, he has heard news story after news story detailing the state’s looming budget shortfall of $600 million. But after all of this panic, the Legislature has approved a new state budget which is of similar size as the old budget. How does this happen?

The Legislature handled this year’s budget much like a juggler who tries to juggle too many items at one time. As items start to slip, instead of letting one or two drop so he can continue his task to successful completion, the juggler careens out of control and risks dropping everything.

For the past two years, instead of downsizing appropriations, the Legislature has funded budget shortfalls in part by using “one-time money,” also known as “non-recurring revenue” from accounts not normally used for appropriations. This allowed the Legislature to avoid spending reductions without identifying a funding source to pay for the ongoing spending beyond the next year.

After last year’s budget was developed, State Treasurer Ken Miller penned an article in which he described this practice as inching the state closer to structural imbalance. He said, “Outside of government, it’s well accepted that non-recurring revenues should not be used for ongoing expenditures…”

The State Secretary of Finance agreed. He said Miller was spot-on and his critique needed to be said. The House Appropriations Chairman also concurred by stating that the state needed to get away from one-time funding practices.

Instead of moving away from this bad practice, this year’s budget doubled down and incurred massive and much greater one-time funding liabilities.

Last year, the budget took $10 million from an account used to assist counties with emergency road repairs. That money was originally intended for a time such as this when millions in damage has occurred to county roads. It was never intended for legislative appropriation.

The raided money has long been spent. Worse, now, a year later, because the Legislature did not reduce spending the previous year, it had to raid transportation funds again. This time, instead of taking $10 million dollars, the Legislature took $50 million.

Next year, the Legislature must support that $50 million of spending for which there is no recurring revenue source. Where will next year’s money come from?

The fiscally prudent action would have been for the Legislature to realize part of the shortfall this year and to hold transportation funding harmless.

Had the Legislature not raided the transportation account, it could have allowed the state budget to gradually realize the effects of the shortfall.

The Legislature has kicked the can down the road as they bet on state government revenues picking up to compensate for the failure to downsize the budget in the previous two years.

It’s a bad bet. With the drop in energy sector activity and declining gross production collections, I think it is unlikely that government revenues will substantially increase by next year.

This places next year’s government in an interesting election year predicament. The Legislature will be forced to finally pop the two-year bubble of one time funding or extend it for a third year by significantly depleting the state’s rainy day fund or perhaps once again raiding transportation funds.

I have little confidence that future transportation funding will be held harmless. For the past two years, the Legislature has demonstrated that transportation funds are no longer sacrosanct.

The Governor could stop all of this.

She should veto the budget and require lawmakers to approve a fiscally responsible budget which realizes at least a significant amount of the shortfall this year, holds transportation funds harmless, and restores the raided $10 million last year so counties can properly fix the roads devastated by the spring rains.

Ironically, this would be the best possible outcome for legislators who will otherwise likely face a budget crisis of significant magnitude during next year’s election cycle. They might have to give up three or four days of their summer vacation in order to approve a responsible budget, but they will thank the Governor next year.

Thank you for reading this article. Your interest and input are much appreciated. Please do not hesitate to email Jason.Murphey@hd31.org with your thoughts and suggestions.