Winners and Losers in the Failed Vote on Tax Package

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David Fritze/Oklahoma Watch

The Oklahoma House gallery was packed Wednesday as representatives spent hours discussing and debating a tax package to address the state's severe budget shortfall. The measure fell short.

In the end, the backing of more than 45 health-care, education and public-policy advocacy groups – along with the support of a bipartisan group of current and former state leaders – wasn’t enough Wednesday.

After four hours of debate and vote wrangling, the Oklahoma House came up five votes shy of passing a tax package expected to yield hundreds of millions of dollars – a bill that could have closed the curtains on a roiling special session without the need for painful budget cuts.

The proposal to increase taxes on motor fuel, tobacco products, low-point beer and oil and gas production was one of Oklahoma’s most consequential and closely watched votes in years.

Its passage would have put a major dent in the state’s budget problems by generating more than $130 million for the fiscal year that ends June 30 and $441 million next year. It also would have led to the likely passage of bills giving teachers and state employees a raise and restored a cut to the earned income-tax credit.

But its failure means the special session, which now is in its seventh week, will continue without a clear end. GOP leaders say they will now shift to a Plan B scenario that calls for tens of millions in budget cuts and the use of one-time revenues. But it’s uncertain how that will shake out.

The defeat of the tax package also means several groups stand to win or lose as a result of the Legislature’s action.

LOSERS

Education Community

Next year, Oklahoma teachers could have reason to commemorate an anniversary: It will have been 10 years since they received an across-the-board pay raise.

During the past two legislative sessions, state leaders assured educators that a salary hike was almost a cinch. But on Wednesday, teachers’ hopes were dashed again, leaving many angry, even bitter, if social media is an indicator. Exactly a year ago, voters rejected a state question that would have imposed a penny-on-the-dollar sales tax to fund a teacher pay increase.

“Today’s defeat of HB 1054x is a huge blow for Oklahoma’s dedicated teachers, public servants and the citizens of our state. It is an understatement to say we are disappointed,” said Pam Deering, executive director of the Cooperative Council for Oklahoma School Administration.

The revenue package included a $3,000 salary increase and was endorsed by state Superintendent of Public Instruction Joy Hofmeister, superintendents of the two largest school districts, and many education advocacy groups. Education advocates now wonder if the failure will drive more teachers out of state or the profession.

““The longer the teacher shortage crisis goes unanswered, the more devastating its effects will be. Our kids continue to pay the price,” Hofmeister said in a written statement.

“Once again, political gamesmanship and partisan politics have won the day at the expense of Oklahoma children and families,” said Shawn Hime, executive director of the Oklahoma State School Boards Association.

Health-Care Community

Health-care providers and patients across the state face the effects of an unknown amount of budget cuts.

Unless the Legislature acts, the entire $215 million that was lost when the Oklahoma Supreme Court overturned a cigarette fee passed earlier this year would fall on the Oklahoma Health Care Authority, the Department of Mental Health and Substance Abuse Services and the Department of Human Services.

Health officials and advocates say the loss of funding for these services would be catastrophic for thousands who rely on state-funded services.

GOP leaders have already moved to secure $23 million in rainy day funds for mental health, and lawmakers have vowed to find more money and spread out cuts among other agencies to minimize the harm these three agencies will see.

But Senate Pro Tempore Mike Schulz, R-Altus, said Wednesday’s vote means “cuts to mental health and other services will be much more severe” than lawmakers had planned.

The amount of cuts remains unknown. But health-care groups are already planning for worst-case scenarios.

The Mental Health Association of Oklahoma, for example, posted on its Facebook page after the that “the lack of leadership exhibited today will likely result in our most vulnerable citizens losing access to essential services and supports that promote recovery and wellness of people served.”

Republicans

Republicans and Democrats have sparred frequently this special session as both parties accused each other of blocking budget agreements.

House Speaker Charles McCall, R-Atoka, put the blame on Democrats for failing to bring 75 percent of their caucus to support earlier proposals.

But this time it was Republicans who lagged Democrats in the share of members voting to approve the latest revenue-raising proposal.

House Bill 1054 failed 71-28 – short of the 76 votes that represent required three-fourths of the 101-member House. Of that amount, 48 of the 70 Republicans present, or 68.5 percent, voted for the bill and 23 of the 28 Democrats, or 82 percent, voted for it.

Rep. Emily Virgin, D-Norman, said after the vote that the blame should lie on Republicans after they “failed utterly to bring the votes that were necessary.”

The defeat also threw into sharp relief the divide within the Republican Party. The 22 GOP lawmakers who voted against it defied calls to approve the measure from Gov. Mary Fallin and GOP leaders in the House and Senate.

Rep. Leslie Osborn, R-Mustang, went as far as to say during floor debate that those who voted against the proposal, including members of her own party, deserve to be voted out.

Beyond Wednesday’s vote, anger at Democrats remained over the protracted impasse of the special session.

McCall and other GOP leaders have accused Democratic leaders of being obstructionist, suggesting the stalemate could have been resolved long before Wednesday’s vote. Democrats said their stance was a principled one against an overly regressive tax plan. Former House Minority Speaker Scott Inman – who a few weeks ago quit that role, said he will resign in early January and vanished from the Capitol – suddenly appeared Wednesday, voted no and left.

WINNERS

Oil and Gas

Holding signs and wearing stickers, scores of energy industry employees crowded the Capitol rotunda before the bill’s presentation. Several made their way inside the House gallery for the debate and vote.

The Oklahoma Independent Petroleum Association issued a legislative alert to its members, with employees from Continental Resources, JMA Energy and Templar Energy among those heeding the call.

Tim Wigley, OIPA president, said the average member company at his organization has about 11 employees. He said raising the gross production tax rate jeopardizes investment and future drilling activity.

“I think you saw from the amount of people that we had out here today that came out to protect their jobs and defend what they do, then I’m pleased with the vote,” Wigley said. “We have tough times in this state, but I don’t think we have tough times because oil and gas doesn’t pay enough in taxes.”

Wigley said his members are frustrated with the uncertainty on oil and gas tax rates.

“We can’t operate on ‘definite maybes’ when you’re looking at rigs that cost $6 million to $10 million,” Wigley said. “You need certainty, especially because of the intense costs going into drilling a modern rig.”

Big Tobacco

Tobacco companies and their lobbyists at the State Capitol also breathed a sigh of relief after the vote.

The failure was the latest defeat within the past few years of a bill that includes a $1.50-per-pack cigarette tax.

The idea to increase cigarette taxes has been popular with lawmakers from both parties, and it has been one of the tax increase proposals that polled well with voters.

But the proposal was barely mentioned during the four hours of floor debate as other parts of the bill and the broader political discussions took center stage. The end result is that without any overt lobbying or public advocacy, cigarette companies and retailers that oppose the tax once again came out unscathed.

Anti-Tax Republicans

Republicans who believe Oklahoma has a spending problem instead of a revenue problem also could chalk up a victory.

Many of the 23 GOP lawmakers who voted no said their reasons were simple: Their constituents don’t want to see higher taxes.

Rep. Kevin Calvey, R-Oklahoma City, one of the most vocal members of this group, repeated his call that the state needs to audit agencies and look for “efficiencies” instead of looking at tax increases.

“We need to drain the swamp,” he said, echoing the familiar slogan used by President Donald Trump during his campaign.

After the vote, Majority Floor Leader Jon Echols, R-Oklahoma City, who voted for the bill, defended the votes of GOP members who voted against it by saying they “have a true belief” that tax increases aren’t the answer.

He added that the demand of these Republicans to audit state spending and find cuts will be will be part of the next steps the Legislature makes.

  • Alma Mercer

    and we as tax payers say ya, the last thing oklahoma citizens need is more taxes . instead get this house in order , go threw departments and make cuts , waist and abuse of the system , we are already seeing this in health care as misappropriated funding and possibly fraud , each department needs to be gone threw , and cut . we as citizens want less government and smaller government . I my self want education audited . 6.3 billion dollars is just alittle steep for a state that is our size . and we the tax payer want more transparency as to where these said figures are being allotted ? So I suggest all of you up their get busy with departments and see what we can eliminate. its not the time for increase , but it is the time for reorganization. our states in big trouble , and our debt go’s deeper then the figures given . we sent you their to organize and make oklahomas government more stream line , not to increase ! you were their to cut , not make things worse . Our money , our taxes . now do your jobs ! Changes , restructure ! now get to work .

  • cswisher

    Even the DOK’s own poll shows overwhelming support of an increase in GPT. But I won’t be holding my breath for it.

    All those heartfelt calls for audits and efficiency…from lawmakers who’ve been at the Capitol for years and could have worked on this before now.

    I sat and watched the questions, the debate, and the vote. Then tried to explain it to my daughter, who fears for her friends on Advantage waivers…her friends who are home health care workers. Our friends who will lose out-patient mental health services.

    But Audits!! Efficiency!!

  • Lynda Barksdale

    Go to ballotpedia.org and look at all the salaries of the state legislators in all 50 states. Oklahoma does quite well. There are only about 15 states who make more money, Our legislators serve a “hybrid” term (70%) for their annual time on the job. If we are so desperate for funding in out state, we need to make sure the legislators’ salalries are increased by a vote of the people and not the legislators themselves. Also, the cost of a special session is another added expense to the taxpayers lining the legislators’ pockets. Wonder why they can’t resolve issues in the regular session and want a special session for that extra pay.

  • Three Dollar Bill

    If the lobbyslature decides to raise the GPT, will Nickels & Harm promise to leave the state? http://kfor.com/2017/05/24/report-shows-how-much-oklahoma-legislators-received-from-the-oil-and-gas-industry/ … Report shows how much Oklahoma legislators received from the oil and gas industry
    POSTED 1:47 PM, MAY 24, 2017, BY DALLAS FRANKLIN, UPDATED AT 01:48PM, MAY 24, 2017
    OKLAHOMA CITY — A new report shows how much Oklahoma legislators received from individuals, trade groups and political action committees related to the oil and gas industry.
    A report from Oklahoma Watch shows that sitting lawmakers took in more than $683,000 in campaign donations from January 2015 to March 2017 from the oil and gas industry.
    Republicans received more than 90 percent of those donations.
    The twenty Oklahoma legislators who received the most campaign funds from oil and gas companies:
    Charles McCall, R-Atoka, $33,751
    Bryce Marlatt, R-Woodward, $25,701
    Greg Treat, R-Oklahoma City, $23,197
    Adam Pugh, R-Edmond, $19,801
    Weldon Watson, R-Tulsa, $17,001 i
    Dan Newberry, R-Tulsa, $16,050
    Zack Taylor, R-Seminole, $15,575
    Todd Thomsen, R-Ada, $15,550
    Mike Schulz, R-Altus, $15,000
    Mike Sanders, R-Kingfisher, $13,751
    Scott Biggs, R-Chickasha, $13,751
    Kevin Calvey, R-Oklahoma City, $13,701
    Julie Daniels, R-Bartlesvile, $13,700
    Jon Echols, R-Oklahoma City, $13,250
    Greg McCortney, R-Ada, $12,401
    David Rader, R-Tulsa, $12,050
    Scott Inman, D-Del City, $11,500
    Katie Henke, R-Oklahoma City, $11,350
    James Leewright, R-Bristow, $11,000
    Terry O’Donnell, R-Catoosa, $10,300