OKLAHOMA CITY — Republican Gov. Mary Fallin said Wednesday she will ask lawmakers to return for a special session on Sept. 25 to adjust the budget after the Oklahoma Supreme Court rejected a proposed cigarette tax, creating a $215 million shortfall.

Fallin said the high court’s decision to overturn the $1.50-per-pack cigarette tax because of a loss of federal matching funds will result in a nearly $500 million financial blow. It will mostly affect three state agencies — the Department of Human Services, Health Care Authority and Department of Mental Health and Substance Abuse Services.

“A formal call for a special session will be issued in the next few days, but I wanted to announce my intention to call a special session for planning purposes,” Fallin said in a statement. “I also want Oklahomans to know we are working diligently to address the fiscal matters of our state.”

Fallin has been meeting with lawmakers from both parties in recent weeks to discuss ways to make up for the lost revenue, but there’s no indication that any agreement has been reached by the House, Senate and governor’s office.

House Speaker Charles McCall said House Republicans want to reconsider raising the cigarette tax with hopes this time of getting the three-fourth’s vote needed for passage. McCall said passing that tax would generate about $122 million for the rest of the fiscal year, and that the rest of the lost revenue could be made up with a combination of cash and money from the state’s rainy day fund.

“The cigarette tax is the only feasible tax option Oklahomans have said they would support. It would help us replace the funds lost when the Court rejected the cigarette fee,” McCall, an Atoka Republican, said in a statement.

But any cigarette tax increase would require support from House Democrats, who have said they wouldn’t support it without an agreement to raise the tax rate on oil and gas production.

Another option lawmakers could consider for raising revenue is removing existing tax exemptions. In a separate ruling last month upholding the Legislature’s removal of a 1.25 percent sales tax exemption on vehicles sold in Oklahoma, the Supreme Court narrowly ruled that the Legislature can eliminate sales tax exemptions with a simple majority vote, not the three-fourth’s vote required to impose a tax increase.

Senate President Pro Tempore Mike Schulz said his members have been expecting Fallin’s call and will return to the Capitol to work on the budget.

“The governor sets the agenda of the special session, and while we await the details, the Senate knows the importance of working quickly to address the revenue issue so we can limit the time and cost of a special session,” Schulz said in a statement. “There are a variety of options available to legislators as we consider the path to make up for the $215 million in lost revenue.”

A special session is expected to cost the state a little more than $30,000 each day.


Follow Sean Murphy at www.twitter.com/apseanmurphy