OKLAHOMA CITY — A stalemate in the Oklahoma Legislature over how to fill an $878 million hole in next year’s state budget and the governor’s vow to veto any budget that includes dramatic cuts to vital public services is making the possibility of a special budget-writing legislative session more likely.
Republican and Democratic leaders say they are exchanging ideas on how to raise hundreds of millions of dollars in new revenue and balance the budget for the fiscal year that begins July 1 and avoid catastrophic cuts to state agencies. But negotiations remain unresolved with just two weeks left before lawmakers are constitutionally required to adjourn on May 26.
“We’ve got 10 days left to make this thing work,” House Democratic Leader Scott Inman of Oklahoma City told reporters on Thursday. “In fact, we’ve got about five days left to find real significant revenue.”
Lawmakers are constitutionally prohibited from considering revenue-raising measures during the final week of a regular legislative session.
“We’re in crunch time and we’ve got to make some decisions,” Republican Gov. Mary Fallin said in a statement to The Associated Press. “I’m encouraging the public to call their legislators and tell them what they want Oklahoma to be as a state.”
Failure to reach agreement on the budget will likely force lawmakers to return to the state Capitol in June to complete their work.
HOUSE SPEAKER’S PROPOSAL
Republican House Speaker Charles McCall of Atoka says there is bipartisan agreement in the House on a plan he says would raise about $400 million a year in new revenue by raising the state tax on cigarettes, limiting itemized deductions, eliminating some oil and natural gas production incentives and expanding tribal gambling in the state.
“I believe we’re making progress,” McCall told reporters. “Next week we fully expect that we will have a budget.”
On Friday, a Senate budget committee — by a narrow 19-18 vote — approved a measure to limit itemized deductions allowed on state income tax returns to $17,000 a year for the tax years 2017 through 2019, excluding charitable contributions reported on federal returns. The Oklahoma Tax Commission says the proposal is estimated to raise about $102 million a year.
But the same committee soundly defeated a separate Senate bill to expand tribal gambling, forcing the Senate to take up the House’s version of the measure or reach a new agreement on the issue that would have to be adopted by House and Senate budget committees.
Senate President Pro Tem Mike Schulz of Altus opposed the gambling proposal and said he does not support an expansion of gambling laws to allow Las Vegas-style dice and roulette games.
“I would rather have drill bits and pipe rather than marbles and dice,” Schulz said following the vote.
The cigarette tax proposal would increase the state tax by $1.50 a pack to about $2.50 and would raise an estimated $250 million in new revenue to support health care in the state.
As a revenue-raising measure, the bill requires approval by three-fourths of the 101-member House — or 76 members — for it to advance under State Question 640, a citizen-initiated ballot measure adopted in 1992. There are 72 Republican House members and 26 Democrats with three vacancies, meaning House Democrats must support the bill for it to move forward.
OIL AND NATURAL GAS REVENUE
Inman has consistently tied Democratic support for GOP-backed revenue measure to upward adjustment of the gross production tax on oil and natural gas.
A candidate for governor next year, Inman wants to increase the gross production tax from the current 2 percent for wells in the first three years of operation to 5 percent — an idea opposed by many GOP lawmakers, including Schulz, who has called it a disincentive to drilling.
Inman has said increasing the tax rate would make the energy industry “part of a shared solution” that would also increase taxes paid by middle-income workers. He has said increasing the tax rate to 5 percent would raise about $200 million in new revenue. But the Oklahoma Tax Commission estimates the increase would raise just $20 million in additional revenue next year.
Instead, GOP leaders and many oil and gas organizations, including the Oklahoma Oil & Gas Association, support passage of legislation that allows long-lateral drilling in all geologic formations including two productive areas in south central Oklahoma known as SCOOP and STACK.
Officials estimate that within the first year of passage the measure would generate about $230 million in additional state and local revenue directly from the oil and natural gas industry, create 5,900 oil and natural gas jobs that will support 13,700 indirect jobs and fuel $5.8 billion in additional economic activity in the state.
With a deadline looming and no budget agreement in sight, lawmakers are starting to question whether a special session will be required to fill next year’s budget gap — the third consecutive year the state has faced a budget shortfall and the possibility of deep cuts to state agencies.
“It’s anyone’s guess,” said Senate GOP Floor Leader Greg Treat of Oklahoma City. “If the House Democrats get serious and don’t play games, it’s a lot lower chance of having to go to special session.”
Fallin, who has threatened to veto a budget that includes sweeping budget cuts, said $400 million in new revenue would still mean cuts of about 9 percent to state agencies — 15 percent if the state’s education and human services agencies are maintained at current levels.
“Do you want four-day school weeks? Do you want Highway Patrol troopers patrolling our highways? Do you want to have sufficient officers in our correctional facilities?” the governor said.
“It’s a hard process and legislators are working,” she said. “It’s hard to find agreement and be able to get the 75 percent approval needed for revenue-raising measures, but our state really can’t afford the collateral damage we’ll receive by not having good education, public safety, health and human services, and infrastructure.”