AG says Doerflinger's Rainy Day Fund raid was legal

The official with the longest title in state government, Secretary of Finance, Administration and Information Technology and Office of Management and Enterprise Services Director Preston Doerflinger surprised many officials at the Capitol and observers around the state when news broke in March that he had completely emptied the state's Rainy Day Fund to pay the state's bills. This occurred without anyone in the Legislature being made aware, causing questions to arise from many regarding the legality of the raid.

In the wake of the controversy, Doerflinger requested an opinion from Attorney General Mike Hunter on the matter. Hunter issued his opinion today; here's the "meat" of his statement:

It is, therefore, the Official Opinion of the Attorney General that transfers pursuant to 62 O.S.Supp.2016, § 34.55(A) from the Constitutional Reserve Fund to the General Revenue Cash-flow Reserve Fund as needed to satisfy monthly allocation of appropriations do not violate OKLA. Const. Art. X, § 23, so long as:

1. Such transfers are temporary transfers to other State funds that will be returned to the Constitutional Reserve Fund, and are not permanent expenditures out of the Treasury;
2. Such temporary transfers do not alter the annual budget for the current fiscal year or alter the amounts available for appropriation from the Constitutional Reserve Fund for the next fiscal year, but instead will be returned to the Constitutional Reserve Fund before any funds are expended or transferred from the General Revenue Fund for the next fiscal year;
3. Such temporary transfers are not made to avoid declaring a revenue fai]ure and reducing appropriations as a result of a revenue failure, but instead such transfers are made based on a reasonable estimate that increased revenues later in the fiscal year will be available to both satisfy monthly allocations without reductions and repay the Constitutional Reserve Fund; and
4. Such temporary transfers do not have the practical effect of interfering with the Legislature’s ability to appropriate monies from the Constitutional Reserve Fund.

Doerflinger issued the below statement in response:

Statement by Secretary Doerflinger regarding Attorney General opinion on Constitutional Reserve Fund borrowing

OKLAHOMA CITY — On April 5, Secretary of Finance, Administration and Information Technology Preston L. Doerflinger asked the Attorney General for an opinion on borrowing from the Constitutional Reserve Fund for monthly agency allocations.

Upon today’s issuing of that opinion, Secretary Doerflinger offers the following statement:

“I asked for the opinion to seek clarity for the current administration, future administrations, legislators and the public. We are grateful to Attorney General Mike Hunter for providing that clarity. We were always confident we worked within statutory and constitutional guidelines.

“Hopefully this opinion helps settle the issue and will help leaders focus on the state’s revenue problem that forced us to borrow from the Rainy Day Fund to make allocations to state agencies. An over-reliance on one-time funding sources and the absence of significant structural budget reform promise to make the upcoming fiscal year another challenge.”

BACKGROUND AND UPDATE ON THE RAINY DAY FUND

The balance in the Constitutional Reserve Fund, also known as the Rainy Day Fund, is currently zero. The balance at the beginning of fiscal year 2017 was $240.7 million. The entire amount was borrowed to make monthly agency allocations and keep government running without deepening cuts to agency budgets.

In May, after General Revenue Fund collections were reconciled, $4.2 million was repaid to the Rainy Day Fund and then disbursed to the Department of Human Services per House Bill 2342. The next month, upon receiving and verifying May collections, $60.185 million was returned to the Rainy Day Fund and then distributed to the State Department of Education for ad valorem reimbursement by June 15 as called for by SB 842.

These actions left a balance owed to the Rainy Day Fund of $176,352,678, which will be returned when FY 2017 general revenue is reconciled after the close of the fiscal year.

That amount will be available to satisfy the remaining $83 million of Rainy Day Fund appropriations made by the Legislature and signed by the Governor for FY 2018: $32 million for the Health Care Authority per SB 844, $33 million to the State Department of Education per SB 852 and $18 million to the State Department of Education per HB 2360. That will leave the FY 2018 beginning balance of the Rainy Day Fund at $93.3 million.