Under scrutiny, Oklahoma leader points finger for $43M deficit, contract cancellations
OKLAHOMA CITY — Oklahoma's mental health department faces a $43 million deficit, and letters canceling some provider contracts were sent without the agency head's knowledge, the agency's commissioner said during a special legislative hearing Thursday.
Oklahoma lawmakers questioned Commissioner Allie Friesen for hours amid reports of financial disarray at the Oklahoma State Department of Mental Health and Substance Abuse Services and outrage over provider contracts being 'cut' or 'canceled.' She was one of 11 witnesses called by the committee to testify under oath.
Friesen, who was appointed by Gov. Kevin Stitt in January 2024, said her administration inherited a 'chaotic' situation and former agency leaders failed to make proper budget requests of the Legislature, leading to financial shortfalls.
'What this administration will not tolerate is, 'Make it look good and don't show anybody the bad,'' she said.
The extent of the shortfall has been under question, as officials originally believed it was $63 million. Friesen said further investigation after the deficiency was initially brought to her attention found it was $43 million.
Some providers who have contracts with the agency have said they received notice that their contracts were altered or terminated retroactively, meaning funds for services already provided may not come.
Letters referenced 'incentive or bonus payments,' Friesen said, and some providers 'independently' decided to lay off staff and close facilities.
'As soon as I realized that those are functioning not as a bonus, but rather as a core component of care, we pivoted,' Friesen said. 'And we realized that we needed to quickly ask for a supplemental (appropriation), and we need to make sure that these providers have what they need.'
The agency requested a $6.2 million supplemental appropriation Monday to ensure 'balanced budget and the continued delivery of essential behavioral health services' for the current fiscal year. It was unclear how the agency planned to fill the rest of the deficit.
Other letters canceled contracts for three Tulsa-area certified community behavioral health clinics in relation to a protest to a request for proposal, or RFP.
Friesen said these letters were sent by the Office of Management and Enterprise Services without her or her general counsel's knowledge.
Christa Helfrey, a spokesperson for OMES, said in a statement after the hearing that the process has been reviewed to ensure there is 'no potential lapse in communication or services for Oklahomans' and the agency is 'committed to assisting all agencies with the procurement process.'
Rep. Mark Lawson, R-Sapulpa, who chaired the special committee said there is 'an ongoing dispute' over the process for soliciting bids for services in the Tulsa area that some claim was unfair. He said notices of cancellation, effective May 10, from OMES were sent to Family and Children's Services, CREOKS Health Services, and Grand Mental Health, all of which are involved in the dispute.
Tulsa District Attorney Steve Kunzweiler, who testified Thursday, questioned why all three cancellations were for providers in the Tulsa area and whether they were retaliatory against contractors who 'challenged' the agency's RFP.
In its budget proposal this year, the Mental Health Department requested $569 million from the state Legislature for the 2026 fiscal year, a 48% increase from last year's appropriation. Friesen said the agency is working on an amended budget request to present to the Legislature.
The Legislature must approve a state budget by the end of session in May.
House budget chair Trey Caldwell, R-Faxon, previously told Oklahoma Voice the agency's past administration had been paying prior year bills with new money, and it caught up with them.
The agency has several ongoing financial strains, including a recently approved consent decree expected to cost between $26 million and $45 million over three to five years, and the construction of a new inpatient behavioral health hospital that's $124 million over budget.
Friesen reported Thursday that the agency has reduced the competency restoration waitlist to 154 individuals, which is a 33% reduction from the time the lawsuit that led to the settlement was filed.
A total of four staff members left the agency in December and were asked, but 'not required,' to sign what Friesen referred to as both 'nondisclosure agreements' and 'settlements' during her testimony.
The agency's former chief financial officer, Richard Edwards, previously told Oklahoma Voice he resigned under threat of termination and was being used as a scapegoat for the financial issues.
The agreements did not resolve legal issues or complaints, Friesen said. Lawmakers requested to see the agreements, which Friesen said she will provide within the week, pending a review of their confidentiality.
A handful of investigations into the agency have been requested, including to the state auditor, the Legislative Office of Fiscal Transparency, a 'special investigator,' and Thursday's special House committee.
Ahead of Thursday's hearing, House Speaker Kyle Hilbert, R-Bristow, said lawmakers weren't sure how it was going to end and just wanted to 'dig in' to find out 'what in the world is going on.'
'Let's get some answers,' Hilbert said. 'And obviously there's a lot of talk about the numbers, and that certainly matters, the budget matters. But we also have to talk about the people at the end of those numbers that are impacted by the decisions that have been going on.'
Investigations from the state auditor, the House, and LOFT are all in communication and collaborative efforts, he said. He was unsure what the plans of the special investigator were.
Commissioner Friesen on Thursday also briefly referenced an investigation from the Office of the Inspector General, a federal agency that's tasked with rooting out fraud, waste and other abuses and to improve Medicaid and Medicare efficiency.
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Stitt said Wednesday that if the committee finds something that needs to be 'fixed,' he'll be the first to take action. He reiterated his stance that funding for the agency is not being cut and said some contracts were under review where the request for proposal process 'wasn't done accurately.'
'What you're seeing now is because (Allie) got rid of her CFO, and she got rid of, like, four or five of her lieutenants, and then everything started coming up,' he said. 'So sometimes, when you have people with agencies that have been there for 30, 40 years, they're moving the ball pretty good. They understand how this, how this building works, and they're paying every invoice so nobody squawks.'
After meeting for over three hours, House lawmakers said they planned to continue the hearing next week.
The Mental Health Department's interim chief financial officer, a former chief of staff, the director of the Legislature's fiscal oversight body, a few providers, and the purchasing director for the state will return next week to testify.
Reporter Nuria Martinez-Keel contributed to this story.
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