Public school officials were misguided in December when they began bracing for state funding cuts in February related to a specific revolving fund for schools, state officials said Tuesday.
It turns out that the anticipated reduction of at least $19 million isn’t likely to happen after all because state budget officials recently discovered that the 1017 Fund, a dedicated source of revenue for education, began the fiscal year with a cash balance of $43.8 million from previous years.
The exact amount of these latest funding reductions for schools was expected to be publicly revealed after the Oklahoma State Board of Equalization met again on Tuesday. When that didn’t happen, the Tulsa World asked state education and budget officials why.
Answers weren’t easy to come by.
Education officials initially said the question should be directed to state budget officials.
State Budget Director Jill Geiger and John Estus, public information officer at the Office of Management and Enterprise Services, explained that the cash balance hadn’t been included in previous monthly reports from the Board of Equalization.
In December, that board projected a $19 million revenue shortfall in the 1017 Fund for the current fiscal year. Shortly thereafter, Office of Management and Enterprise Services officials went on record saying such a shortfall would have to be matched by a comparable budget cut for schools.
That occurred because the Board of Equalization had not been working with reports that showed the $43.8 million cash balance, Estus told the World on Tuesday.
“Had state Department of Education or Office of Management and Enterprise Services done the reconciliation at that time, the carry-forward funds would have been revealed. When we heard the concerns about the fund, we did the reconciliation and, thankfully, it showed the carry-forward,” said Estus.
“We are in unprecedented times. Everyone is uneasy. What looks certain one day can change the next.”
Geiger said the 1017 Fund’s revenue streams have been running about 3 percent below projections, but that the cash balance should make up for the deficit.
Asked to comment for this story, State Superintendent Joy Hofmeister said the information about the anticipated funding cut from the 1017 Fund originated with state budget officials.
“Once our agency was told by OMES to anticipate a $19.1 million revenue failure for the 1017 Fund, we began preparing schools to anticipate the coming loss,” she said.
“We still have concerns and will continue to monitor the 1017 funding stream for Fiscal Year 2016, ending June 30, as well as additional concerns for the 2017 school year,” she added.
House Bill 1017, the Education Reform Act of 1990, was passed into law to fund a range of education initiatives through increased taxes. The law permanently established the 1017 Fund, or Education Reform Revolving Fund, as a dedicated source of revenue that can be appropriated only to the Oklahoma State Department of Education.
The fund is generated through a combination of personal and corporate income taxes, sales taxes, use taxes, cigarette and tobacco taxes, and tribal gaming and horse track gaming revenues.
This year, the 1017 Fund is expected to provide more than $700 million for the operation of Oklahoma’s public schools. Even though schools dodged this particular bullet, state budget officials say public schools are nowhere near out of the woods yet.
In January, $47 million in state funding was cut for public schools’ current year budgets because of sharp declines in revenue collections in the state’s general fund.
Estus said at least one more round of cuts for schools related to deepening revenue shortfalls in the general fund should be expected before Fiscal Year 2016 ends on June 30.
Shawn Hime, executive director of the Oklahoma State School Boards Association, previously served as finance director at the Oklahoma State Department of Education and said it was an “anomaly” for the 1017 Fund cash balance not to be included in all Board of Equalization reports.
“As 1017 is a revolving fund, I would expect all parties to know about a cash balance and that cash balance to be reported out. I can’t say if it was OMES or the state Department of Education where the anomaly comes from,” Hime said.
“It’s interesting that we’ve been talking about this since December and nobody let anyone know,” he added. “It’s a big surprise we have $43 million sitting in a fund at a time when we are cutting budgets.”
This particular oversight may come as a relief to schools, but Hime said it reveals a need for a close examination of Oklahoma’s budget practices.
“It’s great news for schools because it looks like the general revenue fund is going to be cut again,” Hime said.
“It is very difficult for school boards and school leaders to prepare a budget when we have monthly changes and so much uncertainty. I think this is a time for us to take a step back and look at our budgeting process for the future.”