(Reuters) - Oklahoma state officials said on Tuesday they have a budget agreement for the 2017 fiscal year that closes a $1.3 billion budget gap while avoiding the draconian cuts to schools, hospitals and health care providers that many had feared.
Oil-rich Oklahoma has been battered by a sharp decline in oil production tax revenues amid a collapse in global crude prices.
The agreement, which was announced by Governor Mary Fallin and legislative leaders, includes $969.3 million in revenue from a variety of cuts tax credits and adjustments to recurring revenue.
The rest of the deficit is being absorbed through budget cuts.
"This agreement closes a sizeable portion of a monumental budget hole and prevents the dire, unacceptable outcomes so many Oklahomans have feared may happen this session," Fallin said.
Public schools and health care providers had braced for cuts of 20 percent to 25 percent, which could have led to four-day school weeks and mass closure of rural hospitals and nursing homes, according to Senate President Pro Tempore Brian Bingman.
But cuts to higher education and transportation helped the state stave off cuts to common education funding and hospitals, said Preston Doerflinger, the state's secretary of finance, administration and information technology.
"The absence of various revenue measures required deeper reductions to higher education and transportation in order to avoid truly unacceptable funding levels for K-12 schools and hospitals," he said.
"Transportation and higher education have superior financial positions compared to the rest of government and can absorb reductions far better than common education and health care could," Bingman said.
The legislature is expected to pass the budget agreement by Friday, when the legislative session is scheduled to end.
Reporting by Rory Carroll; Editing by David Gregorio