As COVID-19 cases were spiking to some of their highest levels yet, state officials used at least $30 million in federal pandemic relief funds to cover payroll costs at the Oklahoma State Department of Health. The shuffling of funds freed up millions in unrestricted agency money to relocate a lab that performs vital public health testing. 

The state still faces audits as the federal government reviews how relief money was spent, and some say the decision has created transparency and accountability issues. The lab was previously cited by federal investigators and has struggled to perform routine testing since the move.

Soon after Gov. Kevin Stitt and state health officials announced in October 2020 that the lab would move from Oklahoma City to Stillwater with the help of federal relief funds, several state lawmakers said they were concerned it wasn’t an allowable use of the money. 

But using the money to cover payroll for public health and safety employees working to address the pandemic was permitted under federal rules.

With more than $50 million in pandemic-related payroll costs covered by federal relief money, the Health Department was able to use $30 million out of its budget that would have otherwise been used to pay staff to move the Public Health Lab. The Health Department spent $7 million to purchase a temporary location for the lab in Stillwater and roughly $22.5 million more on moving costs, software, lab supplies and equipment, according to the agency. 

A complaint was filed with the U.S. Treasury Office of Inspector General alleging coronavirus relief money had been used to move the lab, but investigators closed the matter in October 2021 after confirming the Health Department used its own general fund dollars, according to a Treasury official.

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Rep. Ryan Martinez, R-Edmond, vice chair of the state House Appropriations and Budget Committee, said he’s still bothered by how abruptly the Health Department moved the lab and is “almost anticipating” the need to set aside money to pay back the federal government as audits continue over the next year. 

Without a clear understanding of how agencies are spending their money and what state and federal funding is still available, Martinez said it is difficult to see the “whole picture” of the state’s budget. 

“There is a transparency issue, which I think just begs a lot of questions that are unanswered,” Martinez said. 

The Health Department did have increased payroll expenses from the pandemic and submitted appropriate documentation to use relief money to cover some of the cost, the agency said in response to questions from The Frontier.

Rep. Ryan Martinez, R-Edmond. REESE GORMAN/The Frontier

“OSDH leadership is confident that the use of CARES funding for pandemic-engaged staff payroll was clearly in line with the intent and purpose of the funding,” said Rachel Klein, a spokeswoman for the Health Department. 

Moving the lab was in the “best interest of Oklahomans,” the agency said.

“Our previous lab facility was falling in disrepair, as had been the case for several years,” the agency said in a statement. “The agency identified the need to improve efficiencies and services within the public health lab, and used the opportunities provided by additional funding to strategically meet those emerging needs.” 

But for more than a year after the move to Stillwater, the lab was plagued with staffing shortages, reduced testing capacity and federal investigations into its handling of COVID-19 testing and other screenings. The lab is still outsourcing several tests including for tuberculous, according to OSDH documents, and is no longer accredited by the College of American Pathologists after switching to an accreditation program through the Centers for Medicare and Medicaid Services. 

The state Health Department did spend nearly $260 million in Coronavirus Relief Funds on medical and public health costs, which included grants to long-term care providers, COVID-19 testing and monitoring, and surge contracts for hospitals, according to the state’s transparency website. The state also used Coronavirus Relief Funds to provide support to local businesses and money to cities and counties. 

Still, in December 2020, COVID-19 cases were on the rise, and only about 5% of ICU beds were routinely available statewide. Schools were shifting between in-person and distance learning as local case numbers fluctuated. Hospitals struggled with staffing shortages and inadequate protective equipment, said Patti Davis, president of the Oklahoma Hospital Association. 

CARES Forward, a team of state officials appointed by the governor, decided how to spend relief money from the CARES Act. Internal documents show the state planned for several months to use relief funds to reimburse the Health Department’s pandemic payroll costs so it could move the Public Health Lab from Oklahoma City to Stillwater. 

Faced with a tight spending deadline, the team saw using relief funds to cover tens of millions of dollars in agency payroll costs related to the pandemic as a viable solution to allow agencies to use state money for completing other projects, said John Budd, former chief operating officer for the state and a member of the CARES Forward team. 

When agencies received relief money to reimburse large amounts of their payroll expenses, it was “often with an understanding” that they’d use reimbursement money for specific projects that had already been agreed upon, Budd said. 

The CARES Forward team initially had roughly nine months to spend roughly $1.25 billion in relief funds. But the deadline was eventually extended. 

A report last year by a state oversight office questioned how the CARES Forward team distributed some of the money, finding that a “significant” amount of relief funds were used for pre-existing government needs, which might not meet federal standards. But team members defended their decisions and said they were ready for any audits.

The U.S. Treasury Office of Inspector General is expected to audit the state’s use of federal funds over the next year and Oklahoma’s Legislative Office of Fiscal Transparency said it is also working to finish a review of the relief spending. If the money is determined to be misspent, the state would have to pay it back to the federal government. 

Several other states also used hundreds of millions of federal relief dollars to cover payroll costs for public health and safety employees, according to the National Conference of State Legislatures. 

Lawmakers took a new approach with the latest round of $1.8 billion in federal funding to address the pandemic, giving the Oklahoma Legislature more say in how to spend the money rather than let the governor’s office control the funds. The Legislature approved funding for dozens of projects across the state in a special session at the end of September.