Detailing the Issues

by Lorrie Tevebaugh

Oklahoma City — An exiting state lawmaker is concerned that incoming legislators may not realize their first and largest task next session will be to fill a half-billion-dollar hole in the budget.

State Rep. Larry Ferguson said this year's Legislature was able to pass a budget that restored a portion of the previous year's budget cuts and promised raises to state employees, teachers, and state troopers. The Cleveland Republican said that was accomplished through the use of special onetime funds, creative accounting, and by deferring the fiscal impact of several measures until next year.

“We pre-spent a lot of money,” said Ferguson, who is completing his last term in the Legislature. He said measures such as Senate Bill 1272, which authorizes four consecutive years of salary increases for teachers at a cost of an additional $48 million for each year of implementation, didn't affect the current budget. However, the state has obligated those funds for future budgets. “We agreed to give significant pay raises to our state employees and teachers, but we didn't put any money in the budget for it.”

Ferguson said he doesn't think most lawmakers realized the financial impact of the legislation that was being approved. “When we look at each piece individually, it doesn't seem like much more money for this and that,” he said. “But when you discover there are about 15 ‘big ticket' items in the budget, it really adds up.”

Analysis of the Fiscal Year '05 budget reveals the state used $160,474 million in one-time funds to shore up the budget. The bulk of those funds, $117,340 million, was Oklahoma's share of last year's federal assistance package to help offset the effects of the recession.

That money, combined with $43,133 million primarily generated from tapping idle funds, will not be available for use toward future budgets.

“Those funds helped patch together a budget, but now that we've used them, they're gone,” Ferguson emphasized.

In order to fund state government at its existing level, the state will have to replace those funds next year with a steady source of revenue. In addition, the state will have to generate $95,532 million more to cover pay increases for state employees and teachers; $85,250 million to pay for increased health and retirement benefits to education and state employees; $80 million to meet an increase in federal health-care matching funds requirements; and $45 million to retire a portion of the Transportation Department's bond debts.

All told, the state has an additional $454,231 million in additional obligations for FY 06. If the tobacco tax bill is adopted by voters, that amount would increase to approximately $479,127 million because of a corresponding tax cut provision.

Ferguson said the recent announcement that Oklahoma's economy is on the upswing needs to be tempered with the reality of the budget situation. The Office of State Finance reported Oklahoma's General Revenue Fund collections for the year generated $208.8 million more than expected. Those funds will be deposited in the state's nearly depleted Rainy Day Fund.

“Discussion has already begun on how we can spend those funds,” Ferguson said. “It's great news, but people need to slow down and look at our financial obligations before they get too excited. When you look at how many obligations we are placing on the next Legislature, we are going to be lucky to have a ‘standstill' budget.”

Ferguson also expressed concern about how the state will meet its financial obligations during future economic downturns. “This year was a great year for revenue, and we are still short of having money to pay for expenses. Even a good year isn't going to be enough to fund everything we agreed to fund.”

The veteran lawmaker said recent comments from state officials regarding the “optimistic” shape of the state's finances were misleading. “I don't know how next year's Legislature is going to meet the obligations we left them with.”

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