May 24, 2016

Seven Takeaways From Tuesday’s Budget Deal

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It will take a day or two for lawmakers to digest the details and assess the impact of the big budget deal unveiled Tuesday by Gov. Mary Fallin and legislative leaders. But several immediate implications appeared clear.

Budget Cuts Were Reduced by About Two-Thirds

The governor and legislative leaders came up with $970 million in new funds to reduce the state’s unprecedented $1.3 billion budget gap. Overall, appropriated spending would be reduced by 5 percent, compared to prospective budget cuts that would have been roughly three times that size in the absence of new revenue. Some of the new money consists of one-time fixes; some comes from longer-term changes.

K-12 Education, Health Care and Prisons Got a Break

Legislative appropriations to common education would be trimmed by 2 percent, compared to the budget approved a year ago. State health programs across the board would see a similar 2 percent reduction, and Oklahoma’s Medicaid agency would get a 2 percent increase to avoid big cuts in doctor reimbursements and nursing home support. The Corrections Department would break even.

Other State Programs Will Get Squeezed

Most state agencies would face bigger cuts. Many are slated for 12-percent reductions. Several programs would take 16-percent hits, including higher education, the state Arts Council and the Oklahoma Educational Television Authority. The appropriated budget of the Transportation Department would fall by 16 percent, too, but the cut would be offset in part by a proposed bond issue.

The Legislature Punted on Teacher Pay

A last-minute effort to craft a legislative alternative to University of Oklahoma President David Boren’s penny sales tax initiative went nowhere. Boren’s proposal, which appears likely to appear on the November general election ballot, would generate more than $500 million a year. Some of that would be earmarked for common school teacher pay raises, and some for higher education and career tech.

The Deal Relies in Part on Borrowed Money

The governor and legislative leaders plugged $200 million of the budget gap by proposing a big bond issue to help pay for planned improvements to roads and bridges. That, in turn, would free up money to support other state services. In recent years, many conservative lawmakers have been reluctant to approve debt increases.

Some Constituencies Got Clipped; Others Didn’t

Operators of low-volume oil and gas well operators would lose $111 million in tax rebates under the budget deal. Low-income parents who work would forfeit $26 million in annual refunds. Wind industry firms, however, were spared any additional cuts in their state tax breaks. Tobacco interests torched a proposed $158 million cigarette tax hike.

Medicaid Expansion Appears Comatose

A campaign by the Oklahoma Health Care Authority and many health industry advocates to create a state alternative to the Medicaid expansion proposed by the Obama Administration was effectively scuttled. The Medicaid “rebalancing” plan might have made Oklahoma eligible to receive hundreds of millions of federal dollars, but would have required the state to raise new revenue through a tobacco tax hike.