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Time running short for tax cuts, education funding, and state budget

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Only two weeks remain in the 2023 legislative regular session, and lawmakers are still seeking agreement on education funding and state budget for the next fiscal year.


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Dick Pryor: This is Capitol Insider - taking you inside politics, policy and government in Oklahoma. I'm Dick Pryor with Quorum Call publisher Shawn Ashley. Shawn, only two weeks are left in the regular session and one of the things Governor Kevin Stitt says he wants this year is tax cuts. Where does that stand now?

Shawn Ashley: Governor Stitt continues to encourage lawmakers to pass a tax cut, either an individual income tax rate reduction or elimination of the state sales tax on groceries, or maybe even both. Stitt asked Thursday if lawmakers won't pass a tax cut this year when they have plentiful reserves, when will they pass it? Now, none of the tax cut bills passed this year by the House got a hearing on the Senate floor. Senate President Pro Tem Greg Treat continues to say that the Senate is concerned about future revenues. Treat notes that the reserves Stitt and House Speaker Charles McCall point to can quickly go away. And he said recently, “that while times are good now, it's not a question of if, but when the state will face its next revenue downturn.

All that being said, we need to remember both chambers have passed the school choice tax credit plan, which is a tax cut for parents of private school and homeschool students. Its impact is capped at $150 million in 2024, $200 million in 2025 and $250 million in 2026 and subsequent tax years. That third year $250 million revenue loss is just a little bit more than the impact of a quarter point individual income tax rate reduction.”

Dick Pryor: The tax credit plan, teacher pay raises, and K-12 education funding remains a sticking point between the House and Senate. Efforts to reach a compromise on that fell apart Thursday. So, what's happening?

Shawn Ashley: Treat told reporters Thursday that negotiators had come to an agreement Wednesday night, but on Thursday, the House asked for more money. Speaker McCall said Thursday there was no formal agreement Wednesday and his team put a proposal in writing on Thursday for a $700 million plan. Now, that proposal is $100 million more, Treat said, than what had been agreed to on Wednesday. Now, here's what we know about their plans. They would increase common education funding by $500 million. Around $285 million of that would be for a teacher pay raise. The rest would be distributed to school districts through the state aid formula, and the formula would be changed in such a way that it benefits smaller and oftentimes more rural school districts.

The disagreement is over money that would flow through the Redbud Fund. That fund was established in 2021 to assist eligible charter schools and public school districts with low ad valorem tax bases to acquire and improve school buildings. The Senate is willing to put $100 million into the fund. The House asked Thursday for another $100 million, a total of $200 million to go into that fund, and it's really not clear what's going to happen.

Dick Pryor: In recent years, legislative leaders have unveiled their budget agreement no later than the next to last week of the regular session. That's where we are now. Is there an agreement in sight?

Shawn Ashley: It's really hard to say. Stitt, Treat, and McCall have all talked about how the education funding talks have sucked all the oxygen out of the room for budget negotiations. And that makes sense. Common education is the single largest part of the appropriated budget. Treat and McCall have said their budget teams are continuing to work on the remainder of the budget. Some budget subcommittee chairs I have spoken to have said they already have or have nearly completed their work on the budget in their subcommittee’s areas. So maybe they're closer to a final budget than we think.

Dick Pryor: The House and Senate have been slow playing non-budget bills, but it's getting to crunch time. What's on the agenda for the next five days?

Shawn Ashley: They have hundreds of policy bills to consider and those have been sitting in conference committee waiting for movement. Perhaps they will begin to move. And then there's consideration of the budget itself and this education funding deal if they can ever reach one.

Dick Pryor: A lot of moving parts right now. Thank you, Shawn.

Shawn Ashley: You're very welcome.

Dick Pryor: And that's Capitol Insider. For more information, go to quorumcall.online. You can find audio and transcripts at kgou.org and listen to Capitol Insider where you get your podcasts. Until next time, with Shawn Ashley, I'm Dick Pryor.

KGOU produces journalism in the public interest, which is critical to an informed electorate. Listeners like you provide essential funding for Capitol Insider. Make your contribution at kgou.org.

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Dick Pryor has more than 25 years of experience in public service media, having previously served as deputy director, managing editor, news manager, news anchor and host for OETA, Oklahoma’s statewide public TV network. He was named general manager of KGOU Radio in November, 2016.
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