Gov. Mary Fallin announced this week that Oklahoma will face a revenue failure during the current fiscal year. At the same time, Republican lawmakers are backing away from one of Fallin’s proposals to bring more revenue into the state - a $1.50 tax increase on cigarettes.
The state will not bring in as much individual income, corporate income and sales tax collections this fiscal year as the state equalization board had budgeted for.
This revenue failure will result in a 0.7 percent mid-year cut to all state agencies, causing the Oklahoma Department of Education to lose $11.1 million, and the Department of Corrections to lose $2.34 million, among others.
eCapitol news director Shawn Ashley told KGOU state agencies have begun taking steps to budget through June 30 for the money they are going to lose.
The budget hole for next fiscal year is also expected to increase by $9.3 million, which could make it even more challenging for lawmakers to fund state agencies.
“That’s not a terribly large number, but when you consider, for example, right now, as a result of the revenue failure, $11.1 million is being cut from education, $9.3 [million] is a pretty big number even when it’s spread out among all those other agencies,” Ashley explained.
Governor Fallin’s proposals to increase revenue through tax increases on services, cigarettes and motor fuel are being met with some resistance.
This week the number of Republican legislators who have stated their opposition to Fallin’s proposed tax increases nearly doubled from 14 to 27.
“I’ve spoken with a few of those individuals and they indicate that there are more who simply haven’t come out in the open with their opposition to this, so that’s making it harder and harder to pass tax increases,” Ashley said.
The Senate appropriations committee passed a REAL ID bill on Wednesday to comply with federal security measures on state-issued IDs. Since the Senate appropriations committee is made up of the entire Senate, Ashley expects it will pass on the floor.
The Senate is also looking to make changes to mining laws that have been on the books since the 1930s.
Sen. Nathan Dahm, R-Broken Arrow, authored Senate bill 479 to repeal provisions that make it illegal for a convict to work in mines and other similar out of date laws, because he says new health and safety regulations for mining trump many of the old statutes.
The deadline for passing bills out of a committee is Thursday, March 2nd.
INTERVIEW HIGHLIGHTS
On this fiscal year’s revenue failure:
As a result, agencies will see the amount they receive each month reduced by 0.7 percent. For an agency like the State Department of Education, that means an $11.1 million cut. For the Department of Corrections, that’s a reduction of about $2.34 million.
On how next year’s budget hole increase will affect funding state agencies:
That’s not a terribly large number, but when you consider, for example, right now, as a result of the revenue failure, $11.1 million is being cut from education, $9.3 [million] is a pretty big number even when it’s spread out among all those other agencies. As a result, if you simply took that money and tried to appropriate two state agencies, what they receive this current fiscal year, you would have to cut more than 12 percent from those appropriations.
On the status of a cigarette tax:
Right now it seems to be on hold. It made it out of the House Appropriations and Budget Committee, but has yet to be heard on the House floor.
FULL TRANSCRIPT
Dick Pryor: Shawn, the state equalization board affirmed a revenue failure resulting in a 0.7 percent cut in monthly allocations for the rest of the fiscal year, meaning the state needs to make up about $34.6 million. How is that determined and what is the effect on agencies?
Shawn Ashley: What happens is that the Oklahoma Tax Commission and the Office of Management and Enterprise Services look at the current collections for the fiscal year that runs through June 30th. And they project how those collections are going to come in through the remainder of the year. What they are seeing is that our individual income tax collections will not be as high as they originally expected, nor will our sales tax collections. On the bright side of things, they did see improvements in some of the gross production tax numbers and a few of the other smaller taxes, but not enough to offset that decline that they are anticipating. As a result, agencies will see the amount they receive each month reduced by 0.7 percent. For an agency like the State Department of Education, that means an $11.1 million cut. For the Department of Corrections, that’s a reduction of about $2.34 million. As a result, this week, those agencies and all the others began implementing taking the steps necessary to not spend whatever money they’re going to lose.
Pryor: And the budget hole expected for next fiscal year is actually bigger than originally thought.
Ashley: It’s bigger than originally thought, but not that much bigger than originally thought. The overall increase was only about $9.3 million. That’s not a terribly large number, but when you consider, for example, right now, as a result of the revenue failure, $11.1 million is being cut from education, $9.3 [million] is a pretty big number even when it’s spread out among all those other agencies. As a result, if you simply took that money and tried to appropriate two state agencies, what they receive this current fiscal year, you would have to cut more than 12 percent from those appropriations. Or as Preston Doerflinger, the governor’s Secretary of Finance, pointed out you could fund the top agencies, but pretty much not fund anything else.
Pryor: That’s because it’s about $878 million less than projected.
Ashley: That’s right. That’s a combination of not only what the shortfall in terms of revenue collections, but what was taken from the rainy day fund and revolving funds last year.
Pryor: What is the status of legislation to raise the cigarette tax?
Ashley: Right now it seems to be on hold. It made it out of the House Appropriations and Budget Committee, but has yet to be heard on the House floor. We saw this past week the number of Republicans who are expressing their opposition to tax increases grow nearly double from 14 to 27. I’ve spoken with a few of those individuals and they indicate that there are more who simply haven’t come out in the open with their opposition to this, so that’s making it harder and harder to pass tax increases.
Pryor: The real ID law is close to passage.
Ashley: That’s correct. The bill passed the Senate appropriations committee and now heads to the Senate floor. It seems like its passage is quite likely because the Senate appropriations committee is made up of the whole Senate, so its passage there should reflect what’s going to happen on the Senate floor.
Pryor: The Senate energy committee has passed a massive repealer of mining laws. Why is that an issue?
Ashley: That’s correct. Sen. Nathan Dahm, a Republican from Broken Arrow, is well known for his review of state statutes. He simply reads statute books sometimes. And in the course of looking at the state’s mining laws, he found that it was illegal to hire a convict to work in mines. And he began looking at the other statutes around that particular one and found that many of them were outdated and had not been updated since the 1930s. As a result, he proposed a bill that repeals a large section of those old mining laws. During consideration in the Senate energy committee, he pointed out that there are many new laws on the books that deal with health and safety in mines and mining regulation that trump these old laws that are sitting there just filling up space, so he moved to have them repealed.
Pryor: What should we watch in the days head?
Ashley: I think we will see some movement, as we talked about, on real ID. Perhaps we will begin to see some movement on the cigarette tax and a few of the other revenue measures. But it’s the end of committee work and then we really get busy on the floor.
Pryor: eCapitol news director Shawn Ashley, thank you.
Ashley: You’re very welcome.
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