An income tax cut isn’t happening this year. Gov. Kevin Stitt has agreed to give up on his demands and not veto a budget proposal by lawmakers, as long as they can ensure funding for some of his top priorities.
Stitt’s concession moved budget talks into overdrive.
The governor said he’s willing to sign a state budget that leaves a personal income tax cut out if lawmakers in the House and Senate agree to certain appropriations in the state budget.
“Preserve the current funding structure for the Quick Action Closing Fund, preserve the tribal litigation fund, cap the percentages around judicial pay at around 7% for district courts only,” Stitt said. “And then we can get the framework for business courts across the finish line.”
“If we can, we can put those four things in here, and we get this done today, then I will not veto this budget,” he said.
Leaders of both chambers called the governor’s requests reasonable, indicating that a final agreement was near hours before striking a deal.
“I appreciate what you're saying here,” Senate Pro Temp Greg Treat said. “I think that's a good framework for discussions.”
They shifted some state agency appropriations around to accommodate, breaking only for lunch, and by about 2 p.m. arrived at a final budget agreement to send to Stitt.
What Stitt gave up, and what he got in return
Stitt started the meeting by asking lawmakers to help him make Oklahoma more business-friendly. He said the four items he requested in exchange for giving up on an income tax cut all work toward that end.
The first item Stitt mentioned was his Quick Action Closing Fund. This is a pot of money for the governor to pay companies to convince them to move to Oklahoma. It was established in 2011 by House Bill 1953.
More money in this fund means more leverage for Stitt in negotiating business deals on behalf of the state. Stitt wants to inject it with another $20 million.
Sen. Greg McCortney, R-Ada, asked him to clarify.
“So you're not asking for a flat budget on that,” McCortney said. “You're asking for a new $20 million appropriation.”
Stitt used the opportunity to negotiate.
“I'm glad you asked that. Because I will absolutely take it down to a flat budget, if we get a tax cut,” Stitt said. “You want to make that trade? We'll do it right now. If we don't do the tax cuts, then yeah, I think $20 million for economic development is a good request.”
McCortney said nothing and moved on to other questions about the fund and dollars in it for years without amounting to anything.
Stitt reassured lawmakers and the public that committed dollars won’t leave the account until a company keeps its end of the deal.
“We're not opposed to having those conversations at all and putting time limits on there,” he said. “But also some of these projects do take a time, you know, to get approval, acquire land, put their engineering together. But I think it's a fair point.”
The State-Tribal Litigation Fund is another pot of money the state uses to sue tribal nations and defend itself from their lawsuits. It was established in 2021 by House Bill 2951.
These lawsuits can be over anything from criminal jurisdiction, license plate or gaming compacts and natural resources.
The last two items, establishing a system of business courts in Oklahoma and increasing judicial salaries by 7% are connected.
Stitt said a business court could help companies sort out complicated legal matters in a way that’s faster, fairer and without bogging down other court dockets. He mentioned it during his 2024 State of the State Address in April, but it didn’t come back up during the legislative session.
“This is going to be a business-to-business dispute over a certain threshold – over $2 million, $5 million,” Stitt told a gaggle of reporters following the final agreements. “Those are details that will be worked out.”
He explained his vision of the court would mean judges were experts in complex corporate legal matters like contract disputes and shareholder rights issues. Things, he said, that “a more sophisticated business judge” would be in charge of overseeing at the District Court level.
House Majority Floor Leader Jon Echols affirmed he’s been working on language for such a court system throughout the legislative session. State statute, however, already includes language directing the Oklahoma Supreme Court to create this sort of system, and although the law took effect in 2004, it appears no action was taken by Supreme Court members to carry it out.
Either way, to prop up a new court system, Oklahoma must offer competitive pay to judges and district attorneys. That’s where the pay increase ties in, at least in part.
Next steps in the state budgeting process
Ideally, that joint budget proposal would land on the governor’s desk and be signed before the legislature is scheduled to adjourn next Friday. That’s per the Oklahoma Constitution, and if lawmakers work fast, it’s still possible.
Fiscal staff for each chamber are working to write a joint budget measure based on the agreements made during public discussions.
That measure will show total appropriations to state agencies, infrastructure projects and various capital improvement funds, pay raises for educators and law enforcement, an accounting of a slash to the state’s portion of a sales tax on groceries and various other state-funded programs.
Each chamber must carry that measure through a Joint Committee on Appropriations and Budget, or JCAB, and vote for it on the floor before they send it to the governor.
Stitt’s signature must be on the finalized budget by May 31 or the legislature must gather for a special session to resolve whatever might cause a delay.
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