Leaders at Oklahoma’s mental health agency have told lawmakers the cash crunch is so severe, the agency may have trouble meeting its payroll obligations this month.

The Department of Mental Health and Substance Abuse Services, which is under four legislative or executive investigations or audits, said on Thursday afternoon its latest budget shortfall for the current fiscal year has now reached $23 million. The shortfall has varied widely in the past few months, from a high of $63.7 million to as low as $6.2 million at the end of last week.

The agency told legislative leaders earlier this week that it has insufficient funds to make payroll on May 7. A special House committee investigating the budget issues is expected to meet again on Monday.

“This is the first time we have heard from the agency about being unable to make payroll,” House Speaker Kyle Hilbert, R-Bristow, told House members in an email Thursday evening. “On March 31, in a meeting in my conference room, I specifically asked if there would be any cash flow issues before the end of May and was assured there would not be.”

In a statement Friday, Mental Health Commissioner Allie Friesen said the agency continues to navigate a difficult but necessary period of operational and fiscal reform. Gov. Kevin Stitt appointed Friesen as commissioner in January 2024.

“We are working closely with state leadership and the governor’s office to ensure continuity of services and stability for our workforce while addressing longstanding structural issues that have impacted the agency,” Friesen said in a written statement.

The typical monthly payroll is about $12.5 million, including benefits, agency spokeswoman Maria Chaverri said Friday.

House Hearings Probe Finances Officials with the Legislative Office of Fiscal Transparency testified Monday before the House committee and said the mental health agency had filed 12 budget revisions for the current fiscal year, which ends June 30.

“One of our key observations is that the agency’s budget on paper does not correspond with how they actually spend money,” said Regina Birchum, LOFT’s executive director. “That is why it’s been so difficult, quite frankly, to get to a number. The agency built a budget and they have a series of account codes for which they’re budgeting funds for specific purposes.

It appears to be just on paper. In practice, there’s a high degree of fungibility in the agency.” The agency, the state’s fourth-largest by number of employees, has a dual mission of offering direct mental health patient care and supervising hundreds of third-party vendors who provide behavioral health services.

Birchum said the mental health agency has 195 separate accounts for various agency expenditures. LOFT’s review found 115 of those accounts were over budget, which meant they had more money expended from the account than was initially budgeted. Another 66 accounts were under budget.

“What this tells us is the agency is not trueing up its actual expenditures with its budget,” Birchum said.

The mental health agency does not have a revolving fund, which would allow it the flexibility to carry over money from one fiscal year to the next, she said.

“The agency has stated this is intentional; they believe every extra dollar they have should go out to providers,” Birchum said. “But we would note that the agency in practice has been having a revolving fund by over-encumbering funds to different account codes. I suspect the reason an agency might do something like that is to give themselves budget flexibility.”

The Legislature asked LOFT on March 6 to undertake a review of the mental health agency’s finances to get to the bottom of the current fiscal year budget crunch and get an idea for what the agency might need for the fiscal year 2026 budget. The House formed its select committee on April 15.

Birchum, whose office is working on a full report, offered highlights at Monday’s hearing. Top leaders at the mental health agency previously testified at two earlier hearings of the House select committee. Lawmakers on the committee have been frustrated by the agency’s evolving explanations for the shortfall.

In addition to the legislative investigations, Stitt in March asked State Auditor and Inspector Cindy Byrd for a special audit of the mental health agency. Last month, Stitt said his own office would appoint a special investigator into the mental health agency’s financial problems.

Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or pmonies@oklahomawatch.org. Follow him on Twitter @ pmonies.