State agencies in Oklahoma will have to adjust to immediate budget cuts as the state wrestles with a major deficit.
As the Oklahoma City NBC-affiliate KFOR reported, state officials are working to reconcile a $1.3 billion shortfall – roughly 20 percent of the state’s spending from the previous fiscal year. The state’s revenue has fallen to levels not seen since 2011 when Oklahoma was in recovery from the recession.
According to State Treasurer Ken Miller, state revenue has dropped 10 percent from the previous fiscal year, or roughly $90 million, in part because of turbulence for the oil and natural gas industry. “With oil prices off their 2014 peak by some 70 percent and our state’s anchor industry in the midst of correction, we have apparently not yet found the bottom and continue to see the spillover effect in all major revenue streams,” Miller said.
The revenue loss has necessitated the midyear cuts. As reported by The Southwest Times Record, all state agencies, including the Department of Education, the Regents for Higher Education and the Oklahoma Health Care Authority, were ordered to implement 4 percent spending reductions effective immediately.
“State revenue fell 10 percent from the previous year, in part because of turbulence in the oil industry.”
This is the second round of budget cuts following 3 percent reductions in December 2015. According to Secretary of Finance Preston Doerflinger, the governor’s office is aware of the financial strain the cuts place on state resources, but sees no other recourse.
“These midyear cuts are already into the bone at some agencies, and next year’s cuts may go right through the bone unless serious actions are taken,” Doerflinger cautioned.
Total cuts for the Health Care Authority now come to $63.8 million, and the Regents for Higher Education budget will be trimmed by $56.2 million. Additionally, the Department of Corrections will lose $27.5 million from its current spending, and the Department of Mental Health will lose $22.7 million. “This deepened cut isn’t pleasant and should serve as a reality check and call to action for anyone who thinks this problem fixes itself with short term budget gimmicks,” Doerflinger told the Times Record. “This is a long-term problem that will require tough, long-term solutions.”
Impact on agency performance
According to state officials, education spending has been especially impacted by the budget shortfall. The latest round of spending reductions will drop education spending by $62.4 million, following an earlier reduction of $46.8 million in December. Calling it “a brutal time for schools” State Superintendent of Public Education Joy Hofmeister noted schools have already lost $110 million since the start of the spring semester, with additional cuts expected in the next fiscal year.
“Efforts that districts are making to cope with these cuts today will further impact the next school year, as they are forced to significantly deplete their cash fund balances,” Hofmeister said in a statement. “The Oklahoma State Department of Education has worked hard to minimize the cuts’ impact on instruction, but we are no longer able to soften the blow.”
“Schools have already lost $110 million since the start of the spring semester.”
Hofmeister added rural districts are often hardest hit by budget cuts, and many will likely be forced to switch to a four-day school week for the remainder of the year.
Other state agencies are also speaking out against the cuts. In a statement, The Oklahoma Public Employees Association said the spending reduction may result in agencies being forced to halt services the public relies on. In the statement, Sterling Zearley, OPEA executive director, said the deficit could result in staff reductions that could create unsafe conditions in correctional facilities or a shortage of nurses’ aids in veterans’ health care centers. “Unfortunately, these cuts are in every agency and the services they provide,” Zearley noted.
How Questica can help
Midyear budget changes create a unique challenge for government agencies and require complex decisions in response. Older methods of managing budgets involve inefficient spreadsheets that can make communication cumbersome and financial forecasting less accurate.
With Questica’s public sector budgeting tools, state and municipal agencies can utilize a web-based, real-time platform that streamlines and analyzes financial data from multiple sources. By allowing departments and programs to consolidate their budgeting into one system, governments can increasing transparency and improve communication.
Additionally, Questica allows for unlimited multiyear budget forecasting and budgetary change requests throughout the year. This tool allows for agencies to prepare for potential funding cuts by creating hypothetical budgeting scenarios that can be analyzed and discussed in anticipation of deficits. Furthermore, with Questica’s operating budget, capital budget and salary/position planning platforms, agencies can track and plan for specific expenditures.
Public sector agencies tackling funding cuts or budgetary shortfalls should contact Questica to learn how comprehensive budgeting software can help in the evaluation of spending alternatives, performance measurement and facilitate more informed decision making.