OK Department of Mental Health says they can't cover payroll, needs an additional $23 million over next two months

Following ongoing questions about a budget shortfall at the Oklahoma State Department of Mental Health and Substance Abuse Services(ODMHSAS), the agency now says they cannot cover basic payroll for Wednesday, May 7th and are short as much as $23 million for the remainder of FY'25, which ends June 30th.

The Latest

Leaders of the republican party in both the state house and senate are both sharing frustration over the issue, after multiple hearings and questions about the budget shortfalls within the agency have gone unanswered.

News9 obtained an email from House Speaker Kyle Hilbert sent to members on Thursday night, which reads:

"Apologies for the late night email. I want each of you to have as up-to-date information as I have. Very late this afternoon, Majority Leader Mark Lawson received a call from the ODMHSAS Legislative Liaison stating they have insufficient funds available to make payroll for Wednesday (May 7) and are $23 million short for the remainder of FY25. This is the first we have heard from the agency about being unable to make payroll. 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.

This evening, we received confirmation via text message from Commissioner Friesen that the report Rep. Lawson received from her legislative liaison was accurate. She stated in the text that she was first made aware of this cash flow issue yesterday after 3pm.

Obviously, we all have an abundance of questions. I just got off the phone with Pro Tem Paxton and we agreed to circle up again in the morning to discuss next steps. I will communicate with you all further information as I receive it."

The Investigation

News9 also obtained an email from Senate Pro Tem Lonnie Paxton sent to his members Friday afternoon, reading:

"Late yesterday evening, Speaker Hilbert and I were informed by the Oklahoma Department of Mental Health and Substance Abuse Services (ODMHSAS) Commissioner that they will have insufficient funds available to make payroll for Wednesday_(May 7th). and are possibly as much as $23 million short for the remainder of FY25. I am updating you with information as soon as I receive it.

As you all know, ODMHSAS is currently being investigated by four separate entities which include LOFT, the State Auditor's Office, The Governor's Office, and the House Special Committee. The senate and house appropriations chairs and vice chairs have also been in meetings with the mental health commissioner and her team as late as a couple of days ago. In all those investigations and meetings, this is the first time we have heard from the agency about being unable to make payroll.

Unfortunately, we once again find ourselves forced to respond to a crisis created by an executive agency. The situation at ODMHSAS is not an isolated oversight. It is just the latest in a long line of failures, and we are left with yet another multimillion-dollar disaster dumped at the feet of the Legislature, and ultimately the taxpayers of Oklahoma. Now, it falls to us to act swiftly and clean up the mess.

The Senate and House budget teams are already working to assess the damage and determine immediate next steps. At this point, it appears an emergency vote will be necessary to fund ODMHSAS payroll through the end of FY '25.

While this situation is infuriating, we must not lose sight of the dedicated frontline employees of the agency-those who deliver critical services to vulnerable Oklahomans. They are not at fault.

Those at fault are being investigated and we will eventually find out and take proper action accordingly.

As always, I will continue to work with all of you to find answers and solutions. I have also talked to Chairman Rader about using Mondays caucus to work our way through this situation."

The Response

Statements from lawmakers:

Gov. Kevin Stitt

Gov. Stitt sent a letter to Oklahoma House Speaker Kyle Hilbert and Oklahoma Senate Pro Tem Lonnie Paxton announcing a series of immediate, decisive steps to stabilize the Oklahoma Department of Mental Health and Substance Abuse Services (ODMHSAS) and restore public confidence following discoveries of financial and operational mismanagement within the agency. An excerpt reads:

"The troubling issues that have continued to emerge at the Oklahoma Department of Mental Health and Substance Abuse Services are the result of years of mismanagement—these challenges did not arise overnight. When I appointed Commissioner Allie Friesen, I specifically charged her with shining a light on the agency, rooting out longstanding problems, and building a more accountable and transparent department. What we are seeing now is the necessary, if painful, result of that mission being carried out with integrity and urgency."

The letter outlines three immediate actions the Governor’s office will take to stabilize ODMHSAS operations and ensure long-term reform:

1. A nationally respected, independent financial expert will be brought in to take temporary control of the department’s finances. This expert will assess the agency’s financial shortfall and produce an accurate and credible supplemental budget request for the Legislature.
2. As previously announced, the Governor will name a well-regarded attorney with experience in complex investigations to conduct a full and independent review of ODMHSAS. The investigator will report directly to the Governor’s Office and will have full authority to follow the facts wherever they lead.
3. The Governor has directed Oklahoma Healthcare Authority CEO Ellen Buettner, along with ODMHSAS officials, to conduct a top-to-bottom review of all Medicaid and federally funded functions within the agency. This effort will evaluate whether these responsibilities should be administered by a different agency or in a different manner to ensure greater accountability and efficiency.

Read the letter in full here.

Attorney General Gentner Drummond calls on Gov. Stitt to terminate state Mental Health commissioner

“The financial meltdown at the Department of Mental Health and Substance Abuse Services is nothing short of government malpractice. The agency serves many of our most vulnerable citizens who are wholly reliant on these services, and these Oklahomans deserve agency leadership capable of meeting their needs."

"Gov. Stitt should have fired his failed agency head months ago when we first learned of her incompetent leadership. I am calling on Gov. Stitt to immediately terminate Commissioner Allie Friesen and seek guidance from industry experts so he can appoint a new leader who is up to the job.”

ODMHSAS Commissioner, Allie Friesen

"ODMHSAS continues to navigate a difficult but necessary period of operational and fiscal reform. We are working closely with state leadership and the Governor's Office to ensure continuity of services and stability for our workforce while addressing long-standing structural issues that have impacted the agency.

This process, while challenging, is essential to strengthening financial systems, improving oversight, and ensuring operational integrity. We remain committed to transparency, accountability, and building a stronger foundation to better serve Oklahomans in need of mental health and substance use support."

Pro Tem Lonnie Paxton

“I have been in communication with Speaker Hilbert on the latest development regarding insufficient funds to make payroll as early as next week at the Department of Mental Health. The Senate and House budget teams are already working to assess the damage and determine immediate next steps. Last night was the first time both Speaker Hilbert and I heard from the agency about being unable to make payroll. Once we get all the details, we will develop a strategy moving forward to ensure the critical services delivered by the agency are not disrupted.”

Senator Julia Kirt, (D) Senate Minority Leader

“There are long term issues to address, but it is imperative to fix the critical situation facing us right now. Our state already ranks poorly in mental health, and cuts are making it harder for Oklahomans to get the community-based behavioral health care they desperately need.” 

House Speaker Kyle Hilbert, R-Bristow

The House Speaker released the following statement in light of new developments on needed funds at the Department of Mental Health and Substance Abuse Services:

"The House has had three public meetings with ODMHSAS and their fiscal staff attempting to determine the amount of funding the agency needs to maintain critical services and get through FY25. On March 31, the House was told that the agency would not have a cash flow issue before the end of the legislative session.

However, last night I was informed by the Commissioner that they would be unable to meet basic payroll obligations beginning next week. Since that conversation, the date for running out of funds according to the Commissioner has shifted from May 7 to May 21.

We know the services the department delivers to Oklahomans are vital and, in many cases, life and death. However, the House has no faith in the current fiscal position of the department. We have taken every step to understand the fiscal needs of this agency but frankly the systemic mismanagement that has been uncovered is appalling. We have asked the Commissioner to meet publicly with the House Select Committee on Mental Health Monday morning to explain under oath how they have reached this latest number.

We are out of time and will not accept any more delays. Individuals at ODMHSAS have known about this shortfall for months yet it is the final month of legislative session and we still do not have answers. This is unacceptable.

We will get to the bottom of how this happened and who is responsible. The people of Oklahoma deserve better than this dysfunction. Our top priority remains maintaining vital services while also being good stewards of taxpayer dollars."

What's Next

The Commissioner was asked to meet publicly with the House Select Committee on Mental Health Monday morning to explain under oath how the department has reached this latest number.