Lawmaker response to the $1.2 billion in state agency revolving funds
[UPDATE below]
In case you missed it, I’m re-posting a version of my Sunday story about how state agencies have a combined $1.2 billion holed up in their revolving funds.
It looks like some lawmakers are already taking action, including Rep. Jason Murphey, R-Guthrie, who announced on Twitter yesterday that he plans to amend House Bill 1086 to ask the Office of State Finance to post monthly revolving fund balances on the state’s new data.ok.gov site.
Then, the Associated Press reported yesterday that Republican legislative leaders were close to a deal to divert $5.2 million in a Corrections Department revolving fund to make up a shortfall in the current fiscal year. [UPDATE: Read the Tulsa World story on March 3 by Barbara Hoberock.]
If you go to our Revolving Fund balances, you’ll see on Page 6 the Corrections Department had about $7.15 million in their Corrections Industries revolving fund as of December 2010.
Here’s the part of the document that deals with the Corrections Department: (Click for a larger version)
The Corrections Industries fund grew from $1.8 million in 2008 to $5.56 million in 2009. I’m not sure what limitations are on that fund, but the Corrections Department seeks additional money each year to deal with prison overcrowding. Spokesman Jerry Massie said the Corrections Industries fund has a current balance of about $6 million. Lawmakers are meeting today to go over a possible agreement, he said.
Here’s Sunday’s story:
By PAUL MONIES
Database Editor
pmonies(at)opubco.com
As Oklahoma lawmakers and Gov. Mary Fallin grapple with an estimated $500 million shortfall in the annual budget, state agencies have a combined $1.2 billion stashed away in their revolving funds.
Leading the way is the Transportation Department’s revolving fund for county roads and bridges, which had more than $159 million. The University of Oklahoma Health Sciences Center had almost $63 million in its education and general revenue revolving fund. The boll weevil eradication revolving fund had a balance of $2 million.
At the other end of the scale, the minority business development revolving fund at the Commerce Department had just $1. The Agriculture Department’s junior livestock auction revolving fund totaled $43.
Those figures are from the Office of State Finance, which provided the December balances for the last three years for more than 500 revolving funds at state agencies. The information was collected via an open records request by The Oklahoman.
Revolving funds are not part of the annual appropriations from the general revenue fund and are usually funded by fees or other sources, said state Comptroller Brenda Bolander. Depending on how they were set up, some revolving funds have designated functions and can only spend money on certain activities.
Other revolving funds might collect fees for one purpose and divert a portion of those fees to the state’s general revenue fund, Bolander said. That’s how revolving funds work at some of the regulatory boards such as the accountancy board.
Lawmakers tap revolving funds
Still, spending from many revolving funds is at the discretion of each state agency. Lawmakers also tap revolving funds to make up shortfalls in other agencies. That can pave the way for some interesting accounting games during budget negotiations, said Jonathan Small, fiscal policy director at the Oklahoma Council of Public Affairs, a conservative think tank based in Oklahoma City.
“The revolving funds are where a lot of this discussion needs to be had,” said Small, a former budget analyst at the Office of State Finance. “That’s a whole lot of money for us to be hearing that oxygen masks are going to be taken off children and old people are going to be lying in the street.”
Many times, the revolving funds are an afterthought in budget discussions, Small said.
“In the budget hearings, most of the discussion is about what appropriations the agency needs and not necessarily their other funding sources,” Small said. “A lot of times the members don’t have a clue about what’s in an agency’s revolving fund. The agency knows way more about what’s in there and what’s spent than the legislator does.”
The money from the wire transmitter fee revolving fund at the Oklahoma Bureau of Narcotics and Dangerous Drugs Control was central to recent allegations of bribery against former Democratic state Sen. Debbe Leftwich and Rep. Randy Terrill, R-Moore.
Revolving fund allegations
Prosecutors allege Terrill won legislative approval last year to move money from the wire transfer fee fund to the state medical examiner’s office to pay for a new position that was offered to Leftwich as a bribe. In exchange, Leftwich would agree not to run for re-election to her Oklahoma City senate seat and clear the way for a Republican candidate backed by Terrill, prosecutors charged.
Both have denied wrongdoing.
That wire transfer fee revolving fund comes from a flat, $5 fee up to the first $500 wired from places such as Western Union, plus one percent of any amount above that. The fee is not charged for wiring money from banks.
The wire transmitter revolving fund, which was created in 2009, had a balance of $2.59 million at the end of December, according to the Office of State Finance.
Darrell Weaver, director of the narcotics bureau, said about 30 percent of his agency’s funding comes from annual appropriations by the Legislature. The rest comes from fees that go to his agency’s revolving funds.
“We need those funds to be able to operate,” Weaver said. “For me, it’s just trying to keep revenue sources to keep my agency going and be effective.”
Transportation funds
By far, the largest chunk of money in revolving funds comes in the state Transportation Department. The department had 12 revolving funds with a combined balance of more than $253 million in December 2010.
Mike Patterson, deputy director of the Transportation Department, said that money goes to a variety of transportation projects. Among those are rural transit subsidies, machinery and equipment leased to counties, and general road and bridge construction.
Patterson said lawmakers haven’t recently tapped Transportation Department funds for other uses because there is broad support for improved roads and bridges. But last year, as part of the budget deal, $65 million from the department’s revolving funds was exchanged for extra authorization to sell $65 million in bonds.
“We traded cash for bonds then, and the governor’s budget for 2012 has a similar deal for $100 million,” Patterson said. “Both of those we can handle. We’ll have to make a few tough decisions in terms of some operations, but we have such a large amount of bondable activities that we can handle the $100 million.”
Higher education
OU’s Health Sciences Center’s main revolving fund had more than $63 million as of December. Catherine Bishop, OU’s vice president for public affairs, said the fund is the main source of general operations for the Health Sciences Center in Oklahoma City. Money for that fund comes from a range of sources, including state appropriations, student tuition and fees, endowment revenue distributions and overhead reimbursements from grants and contracts, she said.
Joe Harris, director of the Oklahoma Boll Weevil Eradication Office, said his agency’s revolving fund was set up by state law for ongoing operations and to provide contingency funds if another boll weevil outbreak happens in the state. Boll weevils can devastate cotton crops.
“We’re self-funded by the cotton producers, so we’re not a drag on the state’s budget in any way,” Harris said. “We and other cotton-producing states that have eradication programs have contingency money set aside on the off chance that we do have an emergency. Hopefully we don’t have to ever use that emergency money.”
Harris said money for the revolving fund, which had a December balance of $2 million, comes from a $2-per-acre fee on cotton harvested and sold.
At more than 500 revolving funds, the number of revolving funds probably could be revisited, especially when some have low balances and little activity, Bolander said.
“We are usually pretty strict with the agencies,” Bolander said. “We will not give them a revolving fund unless they have legislation authorizing it. There are a few exceptions, but our general rule is: fewer funds are better.”
Written by Paul Monies
Follow @pmonies
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nice follow up Paul