State Budget Deal Remains Elusive After New Proposals Unveiled

Note: This post with updated 12:30 p.m. Tuesday to reflect new developments in the Legislature.

Republican lawmakers have introduced their first big-ticket revenue bills, with a month remaining in the legislative session.

But committee votes and lawmakers’ comments show it will be a tough task to find consensus – even within the Republican Party – on how to raise the nearly $1 billion that is needed to bridge the state’s budget gap and fund a pay raise for teachers.

A joint House and Senate budget committee made marginal progress toward that goal Thursday after it advanced 10 revenue bills that are expected to generate $37.5 million for next year’s budget.

The ‘Big Bill’

That work continued Monday when lawmakers voted to advance the largest revenue-raising bill that has been introduced this year.

That proposal, which legislative staff refer to as the “big bill,” would increase the cigarette tax by $1.50 per pack, raise motor fuel taxes by 6 cents per gallon and end several oil and gas incentives, including the rebate for at-risk oil wells.

According to the fiscal analysis, the legislation would raise more than $340 million and close more than one-third of the state’s $878 million budget gap. And House Budget and Appropriations Chairwoman Leslie Osborn, R-Guthrie, said sunsetting the oil and gas rebates would save an additional $50 million.

But despite getting enough committee votes to advance the measure (18-8 in the House and 26-12 in the Senate) to the full House, there is little hope for it advancing to the governor’s desk.

That’s because Oklahoma’s constitution requires revenue-raising bills to pass with three-fourths votes in both chambers. And if the committee votes are an indicator, there are not enough votes to clear that threshold.

Holding the proposal back is House Democrats’ vow to block the bill. And since Republicans lack the 76 votes needed to achieve the three-fourths supermajority vote, at least some Democrats would need to vote in favor for it to pass.

Additionally, there appears to be some resistance among Republicans, as three GOP lawmakers – Reps. John Bennett, R-Salisaw, Jason Murphey, R-Guthrie, and Kevin Calvey, R-Del City – joined the five Democrats on the budget committee in voting against the plan.

But, even with some defections within the Republican Party, the bill could pass if all Democrats come on board.

House Minority Leader Scott Inman, D-Del City, however, has repeatedly said that Democrats will stand together and oppose it when it reaches the House floor.

“They are trying to call our bluff,” he said. “But they have to have some members of our caucus vote for it, and right now I’m telling you our caucus will not support that package.”

Inman said Democrats could be convinced to at least support the cigarette tax if Republicans agree to increase the gross production tax on oil and gas.

But there has been little movement on that front, with many Republicans, particularly those in the Senate, opposed to increasing the gross production tax.

“I don’t think we’ve had a lot of support within our caucus on that,” said Majority Floor Leader Greg Treat, R-Oklahoma City.

Fate of Teacher Pay Raise Remains Uncertain

Budget disagreements aren’t limited to Republicans versus Democrats. GOP leaders in the House and Senate are also at an impasse over teacher pay raises.

The Senate effectively killed the House’s proposal to give teachers a $6,000 raise over three years when it failed to consider the bill by a legislative deadline Thursday.

After that decision, House Republicans doubled down on their pledge to fund the pay raise through the budget or a new bill. Rep. Michael Rogers, R-Broken Arrow, said: “The House will be doing our part to keep that promise, but if the Senate wants to walk away from their commitment to teachers and constituents, the House will not follow them.”

Other than providing a “framework” for future raises, Treat couldn’t say whether the Senate would find money for the salary increase.

“I don’t know what the likely outcome is,” he said. “I don’t try to predict the future out here.”

Smaller Revenue Bills Highlight Legislative Challenges

The bills the joint committee passed Thursday illustrate some of the challenges legislators face in finding new and sustainable funding sources.

The largest of the bills, which was approved by the full House on Tuesday, is a proposal to increase the tax on low-point beer. The tax is projected to generate more than $22 million next year.

But lawmakers can’t count on it raising much more than that because low-point beer likely will disappear from Oklahoma when alcohol-sale reforms go into effect in Oct. 2018.

And illustrating how industry concerns can derail attempts to find new money, legislative leaders were forced to take a new approach after some lawmakers resisted a previously approved proposal to remove the sales tax exemption on professional sports tickets.

House Appropriations and Budget Committee Chair Leslie Osborn, R-Mustang, said legislators worked with the Oklahoma City Thunder to come up with a different proposal, which would create a $1 fee on tickets $50 and less and a $2 fee on tickets that cost more.

That proposal ended up passing the joint committee Thursday. Several Democrats called it a more regressive fee than the original tax.

With lawmakers unsure of what future proposals they can pass, uncertainty is increasing as to whether the Legislature can complete its work by its constitutional deadline to adjourn; this year, it’s May 25.

Treat said rumors about the need for a special session are typical this time of year. But with Gov. Mary Fallin threatening to veto the budget if lawmakers cut too deeply or rely too much on one-time funding sources, he said he couldn’t rule out the possibility.

“It’s always an option,” he said. “But I don’t think it’s a likelihood, and I hope we get our business done … and I think we will.”

Approved by the joint committee:

HB2348: Decouples Oklahoma standard deduction from federal amounts ($4.4 million).
HB2360: Expands mixed-beverage gross receipts tax to include low-point beer ($22.699 million over 11 months).
HB2393: Applies international wire transmitter fee to Internet transfers (unknown).
HB2352: Establishes Jan. 1, 2021, sunset for historic rehabilitation tax credit and caps annual amount at $7 million ($0 but more in subsequent years).
HB2357: Increases the fee to reinstate suspended corporate instruments because of failure to file annual franchise tax returns from $15 to $150 ($775,000).
HB2358: Establishes July 1, 2022, to eliminate the eligible purchaser motor fuels discount for distributors ($0, positive return in 2023).
HB2359: Increases coin-operated machine privilege fees ($1.758 million).
HB2370: Taxes little cigars at same rate as cigarettes ($4.15 million).
HB2363: Eliminates vehicle excise tax exemption for sales to persons renting vehicles without a driver ($5.869 million).
HB2392: Increases pesticide registration license fee from $160 to $210 ($791,850).
HB2361: New fee on the initial sale of tickets to professional hockey, baseball, basketball, football, arena football and soccer. For tickets priced at less than $50, the fee is $1. For tickets greater than $50, the fee is $2 ($2.66 million).
HB2356: Increases the cigarette tax by $1.50 per pack, increases the fuel tax by 6 cents and sunsets a series of oil and gas incentives (Up to $390 million).

Support our publication