Lawmakers are in the final stretch of Oklahoma's 60th regular legislative session and state budget talks are ramping up. However, concerns over state agency spending and federal funding cuts mean uncertainty lies ahead, along with differing ideas on where tax dollars should be prioritized.
The State Budget is the one issue lawmakers are constitutionally required to approve before the legislative session ends on May 31.
But lawmakers can't move forward on a budget without first knowing what new and costly proposals will be approved this year. And compared to last session, they are behind schedule.
Senate Republican leadership says budget talks will pick up pace moving forward, as they increase the pace of negotiations with the House.
Most Republicans, regardless of the chamber they are in, share a similar starting position, which aligns with Gov. Kevin Stitt's: flat budgets for state agencies and, possibly, a state income tax cut.
Stitt has called for a half percent cut and a pathway to zero income tax this year. Senate Pro Tem Lonnie Paxton, R-Tuttle, said last week that any cut to the income tax comes down to one thing. "Can we afford it?" Paxton said.
He said Stitt really wants to see something happen, and while the governor does have the power of the veto pen if he doesn't like what the legislature comes up with, ideally, he won't have to use it this year.
"We're trying to work with him, trying to work with everybody," Paxton said of the Senate Republican Caucus. Besides the governor, that means his fellow Republicans in the House and Democrats in both chambers.
House Minority Leader Cyndi Munson says the flat budget and tax-cut combo is unrealistic.
"We want to protect core services of government," Munson said at her weekly press conference last week. "We don't want to see any massive cuts, and understand that a flat budget is a cut."
Munson, and other Democrats say rising prices, federal funding cuts and serious concerns around how state agencies are spending should mean more money saved or distributed to plug any gaps in essential services, not used as political leverage.
The conversation around state income tax cuts and other budget concerns
To cut income taxes or not to cut income taxes? That is the budgetary question of the day in the Oklahoma legislature. State income tax cuts are a commitment many Republicans made to their constituents on the campaign trail.
For years, Stitt has pushed the idea too, saying it's the next step in making Oklahoma a more "business-friendly" state, trusting residents with their own money and ensuring the state doesn't "fall behind" others that have already lowered or eliminated their personal and corporate income taxes. Last year, Republicans cut the state sales tax on groceries, which they've touted on the campaign trail.
This year, House Bill 1200, sponsored by Rep. Cody Maynard, R-Durant, and Sen. Dave Rader, R-Tulsa, has the most traction among efforts to cut the state income tax. It proposes establishing a flat tax rate of 4.7% on earned income exceeding $7,500.
The bill would also trigger a quarter-of-a-percent cut to the rate when the state sees a $400 million increase in total state revenue in a given year compared to the previous year.
The elimination of the grocery sales tax last year has resulted in a loss of about $370 million in general revenue. Paxton says the state has felt the pain of those cuts, but that it can still manage to level out.
"We're fully absorbing the grocery sales tax cut that we did last year," Paxton said. "And fully absorbing that means we're underwater a little bit, but not bad…We have plenty of savings to pull in there so we can keep our agency budgets level."By 2028, the cuts in HB 1200 would result in Oklahoma losing $305 million in yearly general revenue funds, according to a legislative fiscal impact report.
The state has about $4 billion in various savings accounts, which lawmakers are relying on to offset revenue losses resulting from tax cuts. Assuming both the state grocery sales tax cut and a flat 4.7% are in effect at the same time, the state would be losing around $675 million in revenue each year, which is markedly higher than the $400 million trigger for subsequent rate cuts.
Senate minority leader Julia Kurt said an income tax cut is a bad idea for Oklahoma.
"What does it mean to limit growth?" Kirt said. "If you're talking about a growing population, increased costs, we have to be real about what's going to be cut."
Her comments come amid reports of a $43 million hole in the Oklahoma Department of Mental Health Services budget, nearly $600,000 in questionable bonuses awarded to state education department staff in 2024 and 2025 and swirling uncertainty around rising prices and federal cash cut-offs by the Trump administration.
Kirt and Munson both said that there is too much the state should or could be paying for for Republicans to be talking about an income tax cut.
"We can say everyone benefits, but we know who benefits the most when income taxes are cut," Kirt said. "It is the wealthiest individuals. So we have to look at the balance there, of the benefit to middle-class families, to lower-income families, compared to the benefit of public safety, schools and the other things that we benefit from, from our tax revenue."
There is also concern about possible federal funding cuts to state agencies, which could result in the dissolution of essential social services for vast swaths of Oklahomans. It's something that's already happening and members of both parties say they're watching closely.
Munson said she worries about more federal cuts impacting the state.
"There are real ramifications to what's happening at the federal level and how that's going to trickle down to the state," she said.
