State Revenue Failure: A Three Percent Opportunity

Do you remember a few days ago when I posted The Next Cut is the Deepest? Well, it’s here. And it’s real. And it’s spectacular.

Do you also remember how I posted the meme of Ralphie from A Christmas Story – the one where he drops the lugnuts?

We may need to kick it up a notch.

State Finance Director Preston Doerflinger just announced that all state agencies will receive a three percent cut to their state aid for the current fiscal year. That doesn’t mean that future state aid checks to districts will be cut by three percent. That means districts – unless the SDE has some triggers in place to mitigate the impact of this cut to schools – will have a three percent cut that is retroactive to July 1. Immediately, Superintendent Hofmeister issued a response:

Superintendent Hofmeister comments on education funding cut due to state revenue failure

OKLAHOMA CITY (Dec. 23, 2015) — State Superintendent of Public Instruction Joy Hofmeister made the following remarks today after the Office of Management and Enterprise Services announced state agencies will receive a 3-percent cut for the remainder of Fiscal Year 2016 as the result of a state revenue failure. That amounts to a $46.7 million reduction in funding for preK-12 public education between January and June of 2016.

“Now that we know the extent of the cut for the remainder of the fiscal year, school districts will soon be able to plan accordingly. The reduced funding was inevitable in the wake of the revenue failure, but I know that the Oklahoma State Department of Education and district leaders statewide are committed to lessening the impact on students as much as possible.

“School districts will not be affected equally. Some districts rely on state aid for upwards of 90 percent of their budget. Others, particularly those in western Oklahoma, will feel very little impact from this cut. Within the next two weeks, districts across the state will receive a mid-year adjustment that reflects the revised figures.

“It is unrealistic to suggest there will not be some adverse effect on students, but Oklahoma educators will do what needs to be done to protect classroom instruction.”

She’s correct. There will be adverse effects on students. There’s no way around that. As a superintendent, my mind is already spinning. So much for a break, right?

Just yesterday, we were looking at our recently released mid-year adjustments. Can you believe I was actually happy that my district only had a 0.27% reduction? Still, that’s $111,000 and change, but given the projections, I was ready to make some small immediate cuts.

Tonight, I looked up the mid-year adjustments posted yesterday and added a couple of columns at the end of the OSDE spreadsheet. The first shows how much three percent would cost districts based on the mid-year adjustment figures. The second shows the combined impact of mid-year adjustments and the revenue failure – if it actually results in three percent cuts in state aid. Overall, eight districts are set to lose more than a million dollars in funding right now.

District	Mid-year Adjustment	Revenue Failure at Three Percent	MYA plus Revenue Failure
TULSA	$ (1,918,675)	$ (2,757,041)	$ (4,675,716)
OKLAHOMA CITY	$ (1,286,610)	$ (3,211,787)	$ (4,498,397)
MOORE	$ (584,397)	$ (1,857,802)	$ (2,442,199)
EDMOND	$ (1,347,901)	$ (949,502)	$ (2,297,403)
PRYOR	$ (1,948,714)	$ (47,832)	$ (1,996,546)
ARDMORE	$ (1,343,274)	$ (198,540)	$ (1,541,814)
MID-DEL	$ (111,425)	$ (1,233,121)	$ (1,344,546)
LAWTON	$ 537,886	$ (1,566,827)	$ (1,028,941)

Of these eight districts, Lawton was actually set to get an increase mid-year. Now – again, this is if the SDE has no way to cushion the blow – they have to find a way to absorb more than a million in cuts during the next six months.

As the Oklahoma Policy Institute points out, not all agencies are hit with the same percentage of cuts exactly. The three percent applies only to legislatively-appropriated funds. As with many agencies, the OSDE gets some funds off-the-top before the Legislature begins the appropriations process.

This year, of total state appropriations of $7.138 billion, just over three-quarters – 76.4 percent – came from current year General Revenue. The remaining $24.6 percent, or $1.681 billion, came from other funds, including the HB 1017(Education Reform) Fund, Constitutional Reserve Fund, the Cash Flow Reserve Fund, the State Transportation Fund, agency revolving funds and numerous other sources. In some case, the funding sources for specific agencies are set out in statutes; in others, the Legislature simply decides each session on the mix of funding streams.

Another $46.8 million lost in state aid? Someone’s going to have to adjust that bar chart showing how we lead the nation in cuts to education since 2008.

Announcing that the bottom had fallen out this week, Doerflinger described the revenue failure as an opportunity. Here’s where that comes in.

Looking at other funds available to us, I could quickly come up with about $440,000 in savings for my district in direct costs. That would be about a third of the deficit we are facing for the current school year. The problem is that they are funds that we can’t move into our general fund.

• Professional Development (PD)
• Reading Sufficiency Act (RSA)
• Achieving Classroom Excellence (ACE)

Right now, we have the perfect opportunity. We desperately need money. We know the ACE program doesn’t work. We know that RSA is a paperwork morass that does more harm than good to children. And while I appreciate good professional development as much as anyone, something tells me that right now, our teachers would love to have some of that taken off their plates. We just can’t afford nice things.

Call a special session for the first week in January. End ACE and RSA. Allow districts to move those balances to the general fund. It doesn’t plug the whole hole, but it’s something. And right now, I’ll take something.

Come on. Opportunity awaits.