Oklahoma counties get crucial new budgeting tool

Key Takeaways

Oklahoma counties are about to get something that officials in most other states take for granted. As of July 1, they’ll be able to set aside money in rainy day funds for natural disasters and save money for capital reserves.

The state has had a rainy-day fund for nearly 40 years, but counties have had to rely on a tenuous workaround if they wanted to carry over their budget surpluses.

“We could designate a surplus as a carryover, but its use wouldn’t be restricted,” said Jason Carini, treasurer of Rogers County. “The plan was only as good as our elected officials, because we could carry over $2 million, then new county commissioners could come in, see that and want to spend it on something else than what their predecessors planned for.”

The law allows for half of the fund to be used for declared natural disasters, one-eighth can cover revenue shortfalls and one-eighth can cover a revenue failure declared by the Board of Commissioners. The remaining quarter can be saved for capital expenses.

“We haven’t had many revenue failures because our revenue is based on ad valorem taxes, but you never know what will happen in a few decades,” Carini said. “The state’s rainy-day fund came from an oil bust in the ‘80s, so the Legislature then saw a need for it. Once we had a sympathetic state representative and state senator, everyone got on board.”

Research by the Pew Charitable Trusts found it was both unusual for states to prohibit counties from creating their own rainy-day fund and that Oklahoma counties’ reliance on sales tax would make them more susceptible than the average county to larger revenue declines.

The bill passed unanimously in both chambers and Gov. Kevin Stitt (R) signed it in April.

“The only hesitancy we heard from the Legislature was asking if this would be a slush fund for the county,” said Jacob McHughes, assistant commissioner for Cleveland County. “It’s exactly the opposite because it standardizes budgeting.”

“The state used its rainy-day fund a few years ago to cover shortfalls, so that really demonstrated why counties needed the same tool.”

Cleveland County suffered a damaging hailstorm two weeks after the bill was signed.

“We had tried working through the state auditor’s office, but a new statute made it more clear,” said Rod Cleveland, a Cleveland County commissioner. “We could save money in a capital improvement fund, but it had to be tied to a future expense. It just wasn’t the way we wanted to do things. We wanted an actual statutory savings plan.”

Although counties are reimbursed by the Federal Emergency Management Agency for federally declared disasters, they have to front the money to pay for repairs and recovery. So too must counties cover their operating expenses between the start of their fiscal years in July and when they collect property taxes in December.

“We will be able to float our budgets without borrowing,” Carini said. “That will save us interest in the long run because we won’t have to borrow against our expected revenue.”

Though not every county will be able to save at the same level, the option is there.

“Not all counties can do it because their cost of government is really stressed at what they bring in in revenue,” Cleveland said. “I told them that this is even better for you guys because even if it’s tens of thousands of dollars, it’s still a start and you can build up. Once you set up the discipline of savings, then it becomes a part of your estimate every year.”

Carini noted that the ball got rolling for this bill during conversations with Cleveland during their trip to one of President Trump’s county official visits to the White House in 2019.

“I feel like we’re finally getting to a place where we can get on good financial footing, not just for Rogers County,” Carini said, “but for all the counties in Oklahoma.”