The state of Oklahoma is prepared for expected harsh cuts to federal money coming to state agencies that could be triggered this week if Congress and the president can't agree on how to deal with the national deficit, Gov. Mary Fallin said.
Agency heads have been told to make “strategic targeted cuts” to absorb the projected $137 million in loss of federal money coming to the state, she said.
“We're ready as far as prioritizing what our spending has been, know where our most important services need to be maintained,” Fallin said. “We're doing the best we can.
“No doubt we have to get our federal spending under control,” she said. “We have way too much debt in our nation.”
The reductions are due to begin Friday, but their immediate effects are unlikely to be severe because they will be phased in gradually over seven months.
Civilian defense cuts
However, the governor said she is concerned about projected defense cuts; the Defense Department is estimating civilians working at military installations in Oklahoma could lose a total of $129 million in pay from April through September if automatic spending cuts are triggered Friday.
The worst-case scenario, officials said, is employees would have to be furloughed for 22 days from April until the end of the fiscal year on Sept. 30, which would amount to a 20-percent pay cut in that time period. Uniformed personnel are exempted, but there will be few exemptions for civilians.
The Air Force has estimated as many as 16,000 civilian workers may have to be furloughed at Oklahoma's three bases, with most coming at Tinker Air Force Base. The Army has an estimated 7,700 civilian workers at Fort Sill and at its ammunition plant in McAlester.
Fallin said estimates are that Oklahoma, which has five military installations, could lose up to 20,000 jobs, which would include 8,000 military and aerospace-related positions.
“We know that the military will take some pretty hard hits with their five military installations,” Fallin said. “That's worrisome for our state, especially with our aerospace and defense industries.”
An Oklahoma company has told her it already has lost one federal contract and will have to cut jobs, she said.
“So it's already starting to happen in Oklahoma,” Fallin said.
The “federal cliff,” or sequestration, could result in Oklahoma losing $137 million in direct federal funding as a result of the automatic, governmentwide spending cuts set to take effect Friday. Oklahoma finance officials have said the projected loss of federal funding includes $50 million in funding for education and more than $40 million for health and human services.
Several federal funding streams would not be affected by the looming cuts, including funds for Medicaid, transportation, Social Security payments, food stamps and most veterans' programs.
The state has nearly $600 million in its savings account, the Rainy Day Fund, but Fallin is reluctant to tap that fund to make up for the lost federal funding.
“All options are on the table at this point,” she said. “It's important that we maintain a healthy Rainy Day Fund. Certainly we've grown that back from the previous economic downturn and we need to preserve that as much as possible.
“I'm going to encourage our agencies to find cost savings,” Fallin said.
This is the second time in two months that the country is heading close to the “fiscal cliff;” Congress and the president late last year extended the original Jan. 1 deadline to March 1 on how to agree to reduce the budget deficit and the $16 trillion national debt.
House Speaker T.W. Shannon, wary that cuts in federal spending to states may be a trend for several years, has introduced legislation that would require state agencies to develop a contingency plan to prepare for a 25 percent reduction in federal funds.
House Bill 1917 would require agencies to develop plans in the upcoming fiscal year that starts July 1, said Shannon, R-Lawton.
“The federal spending machine has spiraled out of control, and the Congress and the president are either incapable or unwilling to do what needs to be done,” Shannon said. “The endless mandates and the lack of leadership from Washington, D.C., have left the states dangerously dependent on federal funds and on the verge of a fiscal emergency.”
The House of Representatives States' Rights Committee voted 9-1 last week to pass HB 1917. It now goes to the House Calendar Committee, which will determine whether it gets a hearing in the House.