Gov. Mary Fallin proposed bold changes to Oklahoma's budget, the criminal justice system, and said she wants lawmakers to get behind a $3,000 pay raise for teachers during her 2016 State of the State address.
The $900 million-and-counting budget shortfall lawmakers will have to deal with hangs over everything this session, but Fallin remained optimistic even as she cited a two-year, 70 percent drop in oil prices that's affected state revenue.
"We can do it," the governor repeated.
Fallin delivered a budget proposal she says uses recurring revenue, and no one-time funding to balance the budget. Last year lawmakers used a variety of one-time sources, like tapping the state's constitutional Rainy Day Fund savings account, and agency revolving funds, to close a $611 million shortfall.
"We need to keep the Rainy Day Fund as flush as we can because the energy sector downturn may last longer than anyone ever expected," Fallin said.
To close the gap, Fallin said most agencies will see their state appropriations reduced by 6 percent. The Department of Human Services, the Oklahoma State Health Department, the Oklahoma Health Care Authority, the Department of Mental Health and Substance Abuse Services, the Department of Public Safety, the Oklahoma School of Science and Mathematics, and the Office of Juvenile Affairs - all agencies Fallin called "critical core services" - will only see a 3 percent cut.
"There aren't any easy choices, probably, this session when you find yourself in this environment," said House Speaker Jeff Hickman, R-Fairview. "But I think it's just a matter of setting priorities and making decisions about which direction you want to go."
Fallin plans to raise $181.6 million through a new personal consumption tax on cigarettes. Both of her parents were smokers who died from smoking-related causes, and she reiterated a goal from past State of the State addresses to improve Oklahoma's health ranking.
"Smoking is Oklahoma’s leading cause of preventable death and it costs our state $1.6 billion in related health costs each year," Fallin said. "Our smoking rate has dropped 19 percent since I took office, but one in five Oklahomans still smokes."
Fallin also proposed raising $125 million from non-appropriated agency revenue sharing, $19.7 million by eliminating non-statutory, non-critical pass-through appropriations, $125 million by automatically reconciling some state agency revolving funds, $40 million by reallocating apportionments back to the General Revenue Fund, and $200 million by modernizing the state sales tax code.
House Minority Leader Scott Inman says he's shocked by Fallin’s proposal to pull back some sales tax exemptions while standing by income tax cuts.
"They haven’t supported public education, health care and public safety. And so today she rolls out a tax plan that doesn’t roll back the tax cuts or the tax credits that she had offered up that put us into this mess," Inman told reporters after the speech. "Instead she chooses to shift the tax burden from those folks in Oklahoma who can best afford it to the poorest and some of the middle class families in Oklahoma.”
Inman said the sales tax proposal would have a greater impact on lower income earners.
“To shift $900 million worth of a tax burden on middle class families is unconscionable and our caucus will oppose each and every effort until she comes to the table with a serious tax plan to reform income tax devastation that she has helped oversee," Inman said.
Fallin says the pool of sales tax exemptions equals $8 billion. Plugging the budget hole could be particularly tough in an election year. In the past, lawmakers have been unwilling to tamper with most of the billions of dollars in tax exemptions, deductions and credits provided by the state.
"The last couple of years, particularly last year, [we] pulled every last rabbit out of every last hat to do things like not cut education, which we didn't do last session, to set priorities and make this budget work," Hickman said. "But we're not only out of rabbits, we're out of hats. So at this point, we're going to have to make some difficult decisions."
The left-leaning think tank the Oklahoma Policy Institute called Fallin's budget proposal a good starting point.
"Oklahoma should adopt these ideas along with other common sense revenue options, such as canceling an income tax cut that was never meant to happen in these conditions, repealing wasteful tax breaks like the double deduction for state income taxes, enforcing combined corporate reporting to prevent multi-state corporations from shifting their Oklahoma profits to out-of-state tax shelters, and accepting federal dollars to expand health coverage to working families," the organization said in a statement.
Fallin also promised to reform the state’s criminal justice system. She proposed an additional $20 million in annualized money to corrections this fiscal year and another $10 million next year.
"Correctional officers put their lives on the line. We have to help them," Fallin said. "For the sake of public safety, we have to get additional money to the Department of Corrections."
Fallin calls the situation in Oklahoma prisons "very serious." #oksots16
— Kate Carlton Greer (@katecgreer) February 1, 2016
Fallin also proposed more flexibility in sentencing criminals and said she wanted to scale back mandatory minimum sentences, but Senate Minority Leader John Sparks, D-Norman, called Fallin’s proposals on criminal justice reforms “just rhetoric.”
"If the Republican legislators move on that, it'll be the biggest surprise of the session," Sparks said.
Fallin also wants to lower Oklahoma's mandory sentences for drug possession. She wants district attorneys to have the discretion to file any first drug offense as a misdemeanor, and reduce the mandatory sentence by half. She also wants to to raise the value of a felony crime from $500 to $1,000.
"The $500 benchmark has been in place since 2002, and it needs to be raised," Fallin said. "A teen who steals someone’s smartphone today could be branded for life as a felon because smartphones cost more than $500; twenty years ago, most cell phones cost less than $100."
Fallin said the proposals to overhaul the criminal justice system were recommended by a 40-member task force. Oklahoma's prison system is at 119 percent capacity, with the highest female incarceration rate in the nation, and in the top five for men.
Also, 1/3 of women in Oklahoma's nation-leading female incarceration rate have a controlling drug distribution or possession charge
— Graham Lee Brewer (@grahambrewer) February 1, 2016
Boosting Teacher Pay
Oklahoma has some of the lowest average salary levels for public school teachers, and a common refrain is Oklahoma loses teachers to neighboring states like Texas and Arkansas. In the lead-up to the 2016 session, several lawmakers and interest groups have offered plans to address this, and Fallin unveiled her proposal during the speech.
"This budget appropriates $178 million in new money for a permanent $3,000 teacher pay raise for every teacher in this state," Fallin said. "And we can do it without raising the state sales tax rate to the highest level in the state."
That was a nod to the proposal from an effort led by University of Oklahoma president David Boren - a one-cent sales tax proposal supporters say would raise $615 million per year for education. State Sen. David Holt wants to give teachers a $10,000 pay raise through new growth, tax reform, and removing what he called administrative efficiencies - essentially school consolidation.
Holt said in a Facebook post he was thrilled with Fallin's plan.
The governor also relayed some less popular ideas, including consolidating underperforming elementary schools with larger districts. She also said she supports Education Savings Accounts - which is sort of like a school voucher system - "100 percent."
Fallin also proposed allowing districts to use building funds for teacher pay and benefits if they choose.
State Superintendent of Public Instruction Joy Hofmeister said she is grateful the governor is working toward solving the teacher shortage.
“We are very pleased with this idea of addressing it," Hofmeister said. "The details of how we do that are something we are very interested in exploring and asking some more questions and learning a little bit more about the details.”
Fallin also wants lawmakers to allocate an additional $11.3 million to the Department of Human Services to fully fund the state's plan for improving the state's foster care system for children.
"It's important to keep our commitment for the sake of the thousands of Oklahoma foster children who deserve better futures than they would have otherwise," Fallin said.
The Pinnacle Plan was developed in 2012 as part of a settlement to a class-action civil rights lawsuit over the treatment of children in state custody. Last year, Fallin launched an initiative called Oklahoma Fosters that encourages people to foster or adopt children in state custody. The governor says the plan's working.
Fallin also asked for a second $120 million dollar bond issue to repair and renovate Oklahoma's nearly 100-year-old state Capitol.
Two years ago, state lawmakers approved a $120 million bond issue to repair the Capitol. Fallin says the bond money helped builders launch the project but that contractors have said they think it will take another $120 million to complete the work.
"Interest rates remain low, and the new bond wouldn’t be issued until 2018, when 40 percent of our existing bond principal rolls off the books, so we can do this in a way that doesn’t affect next year’s budget," Fallin said.
In December, officials chose Manhattan Construction and JE Dunn Construction to handle the project, which includes new plumbing, electrical and mechanical systems.
Inman said Fallin never addressed two big issues - that 1 in 5 Oklahomans don’t have health insurance, and the state is rattled by earthquakes that scientists believe are linked to the oil and gas industry’s wastewater injection wells.
“There are houses shaking all over this state. And not one moment did she stand up and say, ‘Earthquakes are shaking and damaging property values all across this state. Let’s work together to make sure we can protect for what is, for most of our citizens, the most important and the most significant investment they make in their entire lives.',” Inman said.
Information from the Associated Press was used in this report.