In a mounting financial crisis, the Oklahoma Department of Mental Health and Substance Abuse Services told legislators Thursday it would not be able to make payroll this month.

The agency initially reported it would run out of money to pay its employees on May 7, then changed the date to May 21. Its latest statement walked back the claim completely but did not illustrate where the funds to pay its more than 2,000-person staff were found.

The state’s mental health department has been under intense scrutiny since a possible $63.7 million shortfall was identified in early March. The news spurred several investigations into the agency, including a series of select committee hearings.

House Speaker Kyle Hilbert, R-Bristow, said lawmakers learned about the latest budgetary concern late Thursday, when the agency’s legislative liaison called Majority Leader Mark Lawson, informing him the department had “insufficient funds” to make payroll and is $23 million short for the remainder of this fiscal year.

“This is the first we have heard from the agency about being unable to make payroll,” Hilbert wrote in an email to House members 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.”

Earlier that day in a press briefing, Hilbert told reporters he and other lawmakers have been frustrated by the department’s lack of transparency.

Also frustrated, Attorney General Gentner Drummond called on Gov. Kevin Stitt to “immediately terminate” agency head Commissioner Allie Friesen late Friday.

Drummond accused Friesen, who has been leading the mental health department since January 2024, of being an “incompetent” leader.

Gov. Stitt, who appointed Friesen, pushed back against Drummond’s claims.

“I’ve tasked Allie Friesen with the difficult job of shining a light on an agency that has operated in darkness for far too long,” Stitt wrote. “Anytime bureaucracy is disturbed, those committed to the status quo will try and stop truth from being revealed. The same thing is happening to President Trump as he tries to clean up the bureaucracy in DC. Commissioner Friesen is going to continue to do this work.”

Stitt said he will bring in an independent financial expert to temporarily take control of the department’s finances. The expert has yet to be named, but Stitt said his appointee will “determine the full extent of the department’s shortfall and produce an accurate, credible supplemental budget request.”

He also said an attorney will perform a full review of the department and directed Oklahoma Healthcare Authority CEO Ellen Buettner to evaluate all the agency's Medicaid and federally funded functions.

Payroll shortage 

Responsible for building next year’s state budget before the end of May, lawmakers said they needed a better understanding of the agency’s financial standing.

Friesen and her interim Chief Financial Officer, Skip Leonard, assured House members, to finish out the fiscal year, the department would only need a $6.2 million special appropriation to make it through July.

“Is it your testimony again today that $6.2 million is what you believe the Department of Mental Health and Substance Abuse Services, knowing all those factors, is indeed sufficient for you to fulfill your duties through June of 2025?” committee chair Lawson asked Leonard on April 24.

Leonard said yes.

Eight days later, the number has jumped to $23 million.

At the same hearing, Leonard told lawmakers, under oath, next year’s budget request would be in front of them within a week. The department has not yet delivered.

“We have, you know, just two to three weeks now to try to come to a budget resolution,” Hilbert said at Thursday’s briefing. “The department still hasn't told us what their ask is.”

Hilbert said Friesen met House and Senate budget leaders for a private meeting earlier this week, but failed again to illustrate how the department was able to reduce its initial reported shortfall amount from $63.7 million to $43 million.

“We know the services the department delivers to Oklahomans are vital and, in many cases, life and death,” Hilbert wrote in a press release Friday afternoon. “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.”

He said Friesen has been asked to appear in front of the select committee for a second time to “explain under oath how they have reached this latest number” Monday morning.

The department issued a statement late Friday after news of the shortfall came to light.

“Our leadership team remains boldly focused on righting the wrongs within a system that has desperately required reform for decades,” the statement reads. “We are insistent on radically shifting the culture of the agency to allow for transformation into a mental health system that is focused on excellence across all divisions.”