Everything you should know about Oklahoma’s special sessions

Governor Mary Fallin called two special sessions of the Legislature in 2017-18.  The first was aimed at filling a $215 million hole to the budgets of three health agencies – the Department of Mental Health and Substance Services, Department of Human Services, and Oklahoma Health Care Authority – that was triggered by the Supreme Court decision striking down the smoking cessation fee passed in May. The Governor  also insisted that special session provide long-term budget solutions. The second special session began in December 2017 and then ran concurrently with the 2018 regular session from February through mid-April. In late March and early April, the House and Senate passed a series of revenue and funding measures aimed at providing raises for teachers and other workers, as well as boosting operating support for schools. The second special session adjourned on April 19th.

This page will continue to be updated to reflect the most recent developments.

 (Last Updated: April 20, 2018, 9:00 am)

Quick Summary

The first eight-week special session convened on Monday September 25th and adjourned on Friday November 17th. After efforts to pass a “grand bargain” revenue plan fell short, Gov. Fallin used her line-item veto authority to veto all but five sections of the General Appropriations bill, stating that the bill “does not provide a long-term solution to the recurring budget deficits”. The non-vetoed section provided enough revenue to avert imminent cuts to the three health agencies. The Governor announced she would call a new special session “in the near future.”

In December, lawmakers convened in the second special session and passed supplemental funding measures for the Oklahoma Health Care Authority and Department of Human Services. Special session reconvened on February 5th, concurrently with regular session, to address a series of bills that emerged from the Step Up Oklahoma plan. Following the failure of the main Step Up revenue bill, HB 1033xx, legislative leaders turned to closing out the FY 2018 budget by introducing a new General Appropriations bill, HB 1020xx, that filled most of the remaining shortfall for the three health agencies by spreading $46 million in cuts across all appropriated agencies.

On March 26th, the House passed a set of bills that give teachers and other school employees and state workers a pay raise, as well as increasing operating support for schools. Most of these increases will be funded with new revenue approved in HB 1010xx, which passed the both chambers with enough votes to clear the three-quarters supermajority requirement for revenue bills. The Legislature also passed pay raise bills and the FY 2019 education appropriation bill. The Senate subsequently voted to approve bills that expanded collections from online sales and from tribal gaming, while repealing a new lodging tax that was part of HB 1010xx. A group opposed to tax increases, Oklahoma Taxpayers United!, has announced plans for a veto referendum to challenge HB 1010xx.

The Senate adjourned special Session on April 17th and the House followed suit April 19th.

Proposals to avert/end a teacher and state employee walk-out

In early March, the Oklahoma Education Association, which represents nearly 40,000 teachers and school employees, called on the Legislature to support a proposal to increase funding for public education and state services. The association warned that “If the Legislature cannot fund education and core state services by the legal deadline of April 1, we are prepared to close schools and stay at the Capitol until it gets done.” The Oklahoma Public Employees Association, which is the largest group representing state employees, announced that their members would join the teachers’ walkout on April 2nd unless lawmakers passed a significant state employee pay raise.

On March 26th, House leaders unveiled and quickly voted to approve a set of bills intended to provide teachers, school support staff, and state employees a pay raise, as well as increasing school operating support.

The House passed two main revenue measures to fund the increases:

•  HB 1010xx increases the cigarette tax by $1.00 per package and changes how other tobacco products are taxed; raises the motor fuel tax by $0.03 per gallon for gasoline and $0.06 per gallon for diesel fuel; raises the initial gross production tax rate from 2 percent to 5 percent for the first 36 months of production, and assesses a new $5.00 per night hotel occupancy tax. The bill is projected to raise $475 million in FY 2019, of which $448 million will be available for appropriation.  The bill managed to win supermajority support in both chambers, passing the House 79-19 and the Senate 36-10, and has been signed by the Governor. Senate passage was based on an agreement to rescind the new hotel tax, which lowers the bill’s fiscal impact by $44 million in FY 2019 . HB 1012xx, the vehicle to repeal the hotel tax, passed the House on March 29th and the Senate April 6th and was signed by Governor Fallin.
• HB 1011xx  caps itemized deductions at $17,000 per year but excludes charitable contributions and medical expenses that are deductible for federal income tax purposes. HB 1011 is expected to generate $94 million, of which $84 million may be appropriated for FY 2019. HB 1011 also passed both chambers and was signed by the Governor.

The House and Senate gave overwhelming approval to three pay raise measures, which were signed by the Governor:

• HB 1023xx adjusts the minimum teacher salary schedule to provide increases of 15.8 percent to 18.25 percent for certified education personnel (except superintendents), depending on their years of experience and degree level. In dollar terms, the raises range from $5,000 for a first-year teacher with a bachelor’s degree to $8,395 for a 25-year teacher with a doctorate. The average salary increase is $6,100. The bill is projected to cost $353.5 million in FY 2019. An amendment to HB 1023 that was part of the final bill requires districts to provide the full pay raise to all teachers, including those who were already paid above the minimum salary schedule.
• HB 1024xx provides raises to state employees ranging from $2,000 per year for employees currently earning under $40,000 per year to $750 per year for workers earning over $60,000 a year. The measure is expected to cost $63.8 million.
• HB 1026xx provides a raise of $1,250 to all school support employees, at a cost of $52 million.

In addition, the House passed HB 3705, a regular session bill, that funds the State Department of Education for FY 2019. The Department’s total appropriation will be $2.912 billion, which represents a $480 million increase, or 19.0 percent, from their FY 2018 appropriation. In addition to funding for teacher and support satff pay raises, the Department receives an additional $50 million to fund textbooks and instructional materials ($33M) and restore cuts to this year’s education budget ($17M), along with some $24 million to cover increased health benefit costs.

Following passage of the funding increases and tax measures, teachers in many school districts launched a walkout on April 2nd. Two additional funding measures passed both chambers during the first week of the walkout and were signed by the Governor.

•  HB 3375:  Amends state-tribal gaming compacts to include nonhouse-banked games, commonly referred to as ball and dice. HB 3375 has an estimated fiscal impact of $24M in FY 2019, with revenue dedicated to the HB 1017 Education Reform Fund;
•  HB 1019xx: Requires third-party retailers operating through online sites such as Amazon.com to collect sales tax. HB 1019xx has an estimated fiscal impact of $19.56 in FY 2019 and $20.5M in subsequent year,s with the money dedicated to the HB 1017 Education Reform Fund.

Despite pressure from teachers and their supporters over the course of the walkout, Republican legislative leaders refused to consider additional revenue measures. After nine days of a strong presence at the Capitol, the Oklahoma Education Association called for an end to the teacher walkout on April 12th. The Oklahoma Public Employees Association announced they would no longer be participating in walkouts that same day. Most school districts that had been closed during the walkout resumed classes the week of April 16th.

Following the end of the walkout, the House gave final passage to HB 1014xx, that allocates increased motor fuel tax revenue to the ROADS Fund in lieu of  income tax revenues that will be directed to the General Revenue fund as of FY 2020. HB 1010xx specifies that after FY 2019, revenue from the $1 increase in the tobacco tax – $144 million – that is initially going to the Generate Revenue Fund will be apportioned to a new Health Care Enhancement Fund, which will be dedicated for health care purposes (HB 1016xx). If that money is added to existing health care funding, other revenues will be needed to pay the recurring cost of the pay raises and school operating expenses, as well as any future increases. See also our fact sheet that looks at whether new spending commitments have been fully funded. 

In total, lawmakers approved increased spending commitments of $543 million, along with new revenue of $531 million that is available for appropriation in FY 2019 (see our Infographic). See OK Policy’s blog post on the education funding package here, our statement here and a summary by the Oklahoma State School Boards Association here.

The Senate adjourned special session sine die on April 17th, followed by the House on April 19th. The second special session lasted four months, during which the House met for 32 days and the Senate met for 30 days. 

Opponents of tax increases have signaled their opposition to file a veto referendum petition that could prevent the main revenue bill, HB 1010xx, along with the teacher and state employee pay raise bills, from taking effect.

Earlier in March, Republican leaders introduced various teacher pay and revenue proposals.

• On March 12th, the Senate introduced floor amendments to two bills intended to generate revenue for teacher and state employee pay raises. An amendment to HB 1033xx would raise the gross production tax on oil and gas wells from 2 to 4 percent for the first 36 months of production, and increase the state sales tax from 4.5 to 5.5 percent. An amendment to SB 861 would make groceries exempt from the state portion of the sales tax. The bills were not brought up for consideration and Senate leaders announced later in the week that they would not move ahead with sales tax changes.
• On March 14th, the Senate unveiled and quickly scheduled late-night votes on floor amendment to three bills that would have provided a teacher pay raise (SB 133), restored the refundable state Earned Income Tax Credit (SB 861) and raised the cigarette tax, motor fuel tax, and gross production tax (HB 1033xx). The first two measures, which needed simple majorities, passed but were contingent on passage of HB 1033xx, which fell short of gaining the three-quarters approval needed for  revenue bills.
• On March 15th, House Speaker Charles McCall held a press conference to unveil a multi-year teacher pay plan that lacked a clearly-defined funding streams.

The Step Up Oklahoma plan and its aftermath

On January 11th, the Step Up Oklahoma coalition, a group of business and community leaders, introduced a plan that proposed $791 million in new recurring revenues (since revised to $750 million), along with a set of governance reforms. The new revenues, from multiple revenue streams, were intended to provide a $5,000 raise for all teachers and principals, fill the current budget hole, and generate an additional $367 million to stabilize the budget and fund essential services (See OK Policy’s analysis of the plan here.) The Governor amended the call of the second special session on  January 19th to include most elements of the Step Up Oklahoma proposal.

On February 12th, the main bill (HB 1033xx) based on the Step Up Plan failed in the House of Representatives to win the three-quarters support needed to pass revenue bills (See our statement on the House vote on HB 1033xx). Later in the week, a revised General Appropriations bill, HB 1020xx,  was introduced that cut most agencies’ FY 2018 funding by 0.66% for a total cut of $46 million. HB 1020xx filled most of the remaining hole in the budgets of the three health agencies affected by the loss of revenue from the unconstitutional smoking cessation fee.  Click here for a comparison of initial and revised FY 2018 appropriations that includes all cuts and supplemental funding. HB 1020xx has now passed both chambers and been signed by the Governor.

Lawmakers and the Governor also approved four other bills: 

• HB 1021xx instructs the Department of Human Services to fully funds various programs in FY 2018;
• HB 1022xx, provides the Oklahoma Health Care Authority with $31.8 million as a FY 2018 supplemental and $110.0 in FY 2019 to support graduate medical education at the OU and OSU medical schools after the federal government withdrew federal Medicaid funds for these programs;
• HB 1034xx places a $5 million annual cap on the income tax credits for coal production;
•  HB 1036xx places a $2 million annual cap on income tax credits for railroad reconstruction expenditures.

Tax and Budget bills

A series of revenue bills based on the Step Up plan passed out of House and Senate JCAB February 8th.

HB 1033: This is an omnibus tax bill, defined as a “general revenue bill,” that includes a $1.50-per-package increase in the cigarette tax; changes to the taxation of little cigars and chewing tobacco; a $0.06 per gallon increase in the motor fuel tax; an increase in the tax rate on gross production from 2 to 4 percent for the first 36 months of production, with a broadened definition of production recovery products that would be re-eligible for the 4 percent rate after 24 months of inactivity; and a new $1 per megawatt hour tax on wind production. HB 1033 is projected to generate $20 million in FY 2018 and $581 million in FY 2019.  As a revenue bill it requires 3/4 support in both the House and Senate. HB 1033 passed on a vote of 63-35 on February 12th; although the bill did not receive the 3/4 support needed to take effect, it could be sent to a vote of the people if passed by the Senate. See our statement on the House vote on HB 1033.

HB 1037: The committee substitute for HB  1037 restores full refundability to the state Earned Income Tax Credit and lowers the standard deduction; however the standard deduction is frozen at 2017 levels for taxpayers with incomes below $50,000 for married couples filing jointly, $37,500 for single heads of households, and $25,000 for single filers. The bill is projected to have a net revenue gain of $25 million according to the House estimate and $41 million according to the Senate estimate.  HB 1037 is not considered to be a revenue bill and thus needs only a simple majority to pass. See our statement in support of HB 1037. In addition to the provisions in HB 1037, the new income tax plan includes capping itemized deductions at $17,000, excluding charitable contributions. The vehicle for this provision is HB 2403 of the 2017 regular session, which passed the House but wasn’t heard by the full Senate.

HB 1030:  Provides a $5,000 increase to the teacher salary schedule. The pay raise is projected to benefit 49,412 certified personnel at a cost of $289 million.

Other bills put caps on the total amount of tax credits that can be claimed under the coal credit (HB 1034), zero emission credit (HB 1035), and railroad construction credit (HB 1036); expand allowable gaming under the state-tribal gaming compact (HB 1031), and change apportionments to the ROADS fund (HB 1032). These all require a simple majority to pass.

Government Reform Bills

The bills that have been introduced in special session are:

HB 1027: Gives the Governor appointment authority for the directors of seven agencies (Department of Agriculture, Office of Juvenile Affairs, Department of Mental Health and Substance Abuse Services, Health Department, Oklahoma Health Care Authority, Department of Corrections, and State Tourism and Recreation Department) and makes the agency’s boards and commissions advisory only.

HB 1028: Changes how salaries for agency directors are set.

HB 1029: Establishes an Office of  Accountability with a 15-member staff appointed by the House Speaker and Senate Pro Tem to oversee agency operations and budgets. 

All three bills passed out of the House Rules committee on  February 8th and are eligible to be considered by the full House.

What did lawmakers do in the second special session?

The Governor’s initial executive order calling the second special session, issued on December 15th, limited it to one single issue: to provide funding to the Oklahoma Health Care Authority (OHCA), the state’s Medicaid agency, for FY 2018 to avoid provider rate cuts. The Executive Order was amended on December 18th to include funding for the Department of Human Service. The House and Senate convened on Monday, December 18th and recessed on Friday, December 22nd. Both chambers passed two bills that were then signed by Governor Fallin on December 22nd.

• SB 1xx appropriates $17.7 million from the General Revenue Fund to the Oklahoma Health Care Authority. This supplemental funding is expected to keep the agency fully funded through April but leaves it $30 million below its initial FY 2018 funding level. Background: In late November, OHCA announced it would move ahead with 6 percent cuts in reimbursement rates to most providers and 1 percent cuts to nursing facilities, along with eliminating Medicare crossover coinsurance and deductible payments for nursing facilities, effective January 1st. After passage of SB 1, OHCA’s Board rescinded these cuts days before they were to take effect. OHCA stood to lose $70 million – 7 percent of its total state appropriation – when the smoking cessation fee was overturned by the Supreme Court in August. The agency initially voted to enact reimbursement rate cuts of 9 percent to most providers, and 4 percent cuts to nursing facilities, that would take effect in December without additional appropriations. In the first special session, OHCA received $22.9 million from the non-vetoed sections of HB 1019, leaving it $47.1 million below its initial FY 2018 appropriation. 
• SB 2xx appropriates $26.5 million from the General Revenue Fund to the Department of Human Services. This supplemental funding is expected to keep the agency fully funded through April but leaves it $16 million below its initial FY 2018 funding level. Background: DHS initially faced the loss of $69 million, or 10 percent of its state appropriation, when the smoking cessation fee was struck down in August. The agency released a plan that included cuts to a wide range of services for children, seniors, and individuals with disabilities and sent out letters to over twenty thousand clients notifying them that the program providing them in-home care would be terminated December 1st.  The agency received $27 million from the non-vetoed sections of HB 1019 in the first special session, but remains $42 million below its initial FY 2018 appropriation. Without additional funds, DHS was expected to provide notice in early February of a new round of cuts to home- and community-based waiver programs to take effect in March. The ACLU of Oklahoma and the Oklahoma Disability Law Center previously filed a lawsuit, which remains ongoing, challenging DHS’ authority to terminate home- and community-based services for individuals with disabilities.

The Department of Mental Health and Substance Abuse Services, which is the third agency affected by the loss of cigarette tax revenue, received $53.3 million in the first special session, leaving it $21.5 million below its initial FY 2018 appropriation. It has enough funding to operate until April without cuts.  

The  $44.2 million for the two agencies in SB 1 and SB 2 were appropriated out of revenues accruing to the General Revenue Fund from a bill passed in the first special session that accelerated the expiration of a tax break on horizontal wells drilled prior to July 2015 (“legacy wells”) (HB 1085).

What did Gov. Fallin do with the budget passed in the first special session?

On Nov. 17th Gov. Fallin vetoed all but five sections of the General Appropriations bill, HB 1019, sent to her earlier that day (see her veto press release here). Among the sections of HB 1019 that she vetoed is one (s. 170) that repealed the General Appropriations bill (SB 860) from the regular 2017 session. The veto of the repealer provision means that all of the initial FY 2018 appropriations bill remains in effect, except for the sections appropriating $214 million to the three health agencies from the unconstitutional smoking cessation fee. This makes the remaining, non-vetoed sections of HB 1019 effectively an addendum to the GA bill passed in regular session.

The five sections of HB 1019 that were left standing are those that:

• Transferred $80 million from the County Improvement for Roads and Bridges Fund (CIRB) to the Special Cash Fund (s. 146). This is on top of $50 million taken from the fund in May.
• Appropriated money from the Special Cash Fund to the Oklahoman Health Care Authority ($67 million in s. 76), the Department of Mental Health and Substance Abuse Services ($88.3 million in s. 82) and Department of Human Services ($79.0 million in s, 91);
• Appropriated $30 million to the State Health Department from prior year General Revenue (s. 169)

The $80 million from the County Improvement for Roads and Bridges Fund was transferred to the Special Cash Fund and has been divided between the three agencies whose appropriations were maintained in HB 1019. (For a detailed discussion, see below: “Where does the line-item veto leave state agencies?”)

With the Governor’s actions, a total of $133.3 million in one-time revenue will have been appropriated in Special Session.

• $23.3 million from the Rainy Day Fund to the Department of Mental Health and Substance Abuse Services
• $80 million in Special Cash from CIRB divided between OHCA, DMHSAS and DHS;
• $30 million in prior year GR to the State Health Department.

There is also $48.7 million in additional FY 2018 General Revenue collections that are expected to be generated by HB 1085, which raises the gross production tax on “legacy wells”. That money was spread out among various agencies in HB 1019; the Governor’s line-item veto of HB 1019 means that the $48.7 million remained available for appropriation. The Legislature appropriated $43.5 million of this amount to DHS and OHCA in the second special session (see above).

Where does the line-item veto leave state agencies?

The three agencies affected by the loss of $214 million in smoking cessation fee funds –  Department of Mental Health and Substance Abuse Services, Oklahoma Health Care Authority, and Department of Human Services –  saw their monthly allocations cut beginning in October.  In order to maintain a balanced budget, the agencies announced massive cuts they would be forced to enact effective December 1st without additional funding from the Legislature.

The new General Appropriations bill (HB 1019) passed by the Legislature in the final days of special session largely filled the combined $214 million hole for the three agencies. The Governor’s line-item veto of HB 1019, along with money appropriated in an earlier bills from the Rainy Day Fund, provided a combined $103.3 to the three agencies, leaving them $110 million below their initial appropriations. With the additional $43.5 million provided to DHS and OHCA in the second special session, the three agencies remained a combined $66.5 million below their initial funding levels but are expected to be able to operate through April without enacting cuts (see above, “What did lawmakers do in the second special session?”).

The line-item veto of the bulk of HB 2019 leaves funding for all other state agencies at their initial FY 2018 levels – with the exception of the Health Department, which received a $30 million supplemental appropriation.

What was in the budget sent to the Governor?

The Legislature passed a new General Appropriations bill (HB 1019) that provided total funding for FY 2018 of $6.818 billion, which was $30.0 million less than the initial FY 2018 budget. The new budget provided:

• Cuts of 2.44 percent to most state agencies compared to initial FY 2018 funding. Since we are already five months into FY 2018, agency allocations would be some 4.2 percent less than anticipated for the remainder of the year.
• The three agencies that were directly affected by the loss of smoking cessation fee revenues and that were set to implement massive cuts in services beginning December 1st received smaller cuts. The Oklahoma Health Care Authority received a $15 million (1.46 percent) cut; the Department of Human Services received a $4 million (0.57 percent) cut and the Department of Mental Health and Substance Abuse Services received a $3.68 million (1.12 percent) cut.
• Twelve agencies received no cut compared to their initial funding: Common Education, Land Commission, School of Science and Math, Election Board, Tax Commission, Health Department, Rehabilitation Services, ABLE Commission, Corrections, Medicolegal Investigations, Court of Criminal Appeals, and Indigent Defense System. Two other agencies received smaller cuts – Juvenile Affairs (0.55 percent) and District Attorneys Council (0.5 percent).
• The Health Department received a $30 million supplemental appropriation.

See our comparison of overall and agency-level funding that looks at funding trends since FY 2009.

In addition to $30 million in net overall cuts, the new budget included the following additional revenue (all revenues were contained in the GA bill, HB 1019, unless otherwise noted):

• $23.4 million from the Rainy Day Fund (HB 1081);
• $53 million in prior year General Revenue that carried over from FY 2017;
• $30 million transferred from the County Improvement for Roads and Bridges Fund (CIRB);
• $30.2 million from the Unclaimed Property Fund and agency revolving funds;
• $48.5 million from accelerating the expiration of a tax break on horizontal wells drilled prior to July 2015 (“legacy wells”) (HB 1085). Production from these wells will now be taxed at 7 percent rather than 4 percent once the new law takes effect rather than as of July 2019.

Overall, the new budget used an additional $136.6 million in one-time revenues; combined with one-time revenues in the initial budget, the total is $510 million.

Other components of the comprehensive revenue plan that failed to gain 76 votes during Special Session (see below) – including increases in tobacco taxes and motor fuels tax, an increase in the gross production tax on new wells, restoration of the state earned income tax credit, and raises for teachers and state employees – were not part of the final budget.

Click here for OK Policy’s statement on the budget, “New budget is a squandered opportunity of massive proportions”.

What happened over the course of the first special session?

Week 8: After the failure of the comprehensive budget plan in Week 7, House and Senate leaders began to move forward with a new budget that relied on some $140 million in additional cash, a higher gross production tax on “legacy wells,” and cuts of up to 2.44 percent on most agencies to fill the $215 million shortfall. (See our statement on the plan here). A new General Appropriations bill, HB 1019X narrowly passed out of House and Senate committees Tuesday. It passed the full House, 56-38, on Wednesday and the Senate 29-16 on Friday.  Click here for agency-level appropriations under HB 1019. The House and Senate then adjourned special session sine die. The Governor signed the bill raising the gross production tax on legacy wells (HB 1085) while using her line-item veto authority to  veto all but five sections of HB  1019 on Friday evening

Week 7: On Monday, November 6th, the Governor signed HB 1081, appropriating $23.2 million to the Department of Mental Health and Substance Abuse Services.  Also on Monday, the Senate met and passed HB 1035 by a bipartisan vote of 37-5. HB 1035 includes a $1.50 cigarette tax increase, a $0.06 fuel tax increase, and a 4 percent gross production tax on new wells. The bill is the cornerstone of a comprehensive budget plan, also dubbed Plan A+ and the Grand Bargain, that would allow for pay raises for teachers and state employees and restoration of the state earned income tax credit. An identical measure to HB 1035, HB 1054,  passed the full House 71-28 on Wednesday, but fell 5 votes short of the 76 votes needed to pass a revenue bill. HB 1054 was held on a motion to reconsider, which expired on November 13th.

Week 6: On Monday, Oct. 30th, the House met in full session and passed several bills that would appropriate $106 million from the Rainy Day Fund and carryover funds to the three health and human service agencies affected by the lost smoking cessation fee revenue. On Tuesday, the Senate passed one of those bills, HB 1081, appropriating $23.2 million to the Department of Mental Health and Substance Abuse Services.  Also on Tuesday, the House passed a bill (HB 1085) to raise the gross production tax to 7 percent on certain existing wells that are now taxed at 4 percent, a measure projected to raise $50 million in FY 2015.  On Friday, Speaker McCall issued a press release urging the Senate to pass the House’s revenue measures. The Senate still appears committed to holding out for the comprehensive budget proposal that stalled in Week 5 (see below).

Week 5: On Monday, Oct. 23rd Gov. Fallin and Republican legislative leaders announced a budget plan that includes various revenue increases but does not raise the gross production tax or income tax, which Democratic legislators have insisted on (see next section). Their plan also included raises for teachers and state employees and restores the refundable portion of the state earned income tax credit. Four bills to implement the Republican budget plan passed out of JCAB on Tuesday. The main revenue bill – HB 1035 – was heard by the full House on Wednesday; the 54-44 vote in favor was less than the required 75 percent support for a revenue bill. On Thursday, the Senate passed a bipartisan resolution calling on the House to amend HB 1035 to raise the gross production tax on new wells to 4 percent from 2 percent. House and Senate committees also passed a number of “Plan B” revenue bills that require only a simply majority.  On Friday, HB 1054, which was a new  version of HB  1035 that included a higher initial gross production tax rate of 4 percent for 36 months, failed on a 11-11 vote in the House JCAB committee, with all but one Democrat joining 5 Republicans in rejecting the measure.

Week 4: With the Capitol shut down for electrical upgrades, there were no legislative meetings the week of October 16th.

Week 3: There were no legislative meetings the week of October 9th. At the end of the week, Gov. Fallin issued a press release stating  that she is “disappointed in the lack of progress” in reaching an agreement.

Week 2: There were no legislative meetings the week of October 2nd.

Week 1: The Governor called for the Legislature to convene in special session that began Monday, September 25th. House and Senate members introduced a total of 196 bills and resolutions prior to start of session. Most bills were filed as “shell bills” authored by the chairs of the Appropriations committees in the House and Senate or by the House Speaker. Shell bills cover some broad topic but do not yet contain specific language, which must be added later in the process. Most budget and tax bills were assigned to the Joint Committee on Appropriations and Budget (JCAB) or to the Rules Committee.

Both chambers met briefly on Monday, September 25th and Tuesday, September 26th to allow all bills to be introduced. Several JCAB meetings were scheduled throughout the week; however, the only bill heard in JCAB was HB 1099, a bill to provide for a $1.50-per package cigarette tax, which passed both the House and Senate committees on Sept. 26th.

On Wednesday, Sept. 27th, House Speaker Charles McCall announced that the House would recess and would not meet again that week, and the Senate followed suit. The House Rules Committee met on Thursday, Sept. 28th and approved two bills: HB 1093 a measure to add new verification requirements for the Medicaid program, and HB 1074, a measure to exempt semi-trucks and other vehicles from the newly-enacted motor vehicles sales tax.

What are the possible outcomes of special session?

Over the course of special session, four outcomes all seemed possible. With the Governor’s line-item veto of the budget bill passed in Special Session, some new variations of these options will again shape the debate in a second special session and/or in the 2018 regular session.

• Excise Taxes Only: On October 23rd, Republican leaders unveiled a plan that included a mix of increased excise taxes on tobacco, motor fuels and alcoholic beverages that would take a 3/4 vote to pass but did not provide for more progressive revenue sources that Democrats have insisted on (see section above for more details). The Republican plan passed the House on Oct. 25th but failed to gain the 3/4 support needed for a revenue bill. The plan also included pay raises for teachers and state employees, and restored the refundable state earned income tax credit.
• The Bipartisan Bargain: Under this scenario, both parties agree to multiple revenue sources that fully or mostly fills the $214 million budget hole, avoids further budget cuts, and provides a teacher pay raise. One initial proposal included an increase in the tobacco tax and motor fuels tax, a higher initial tax rate on gross production tax, a new top income tax rate on high income earners, the expansion of the sales tax to selected services, and the end of the sales tax exemption for wind turbines. This proposal failed to gain approval from legislative Republicans.  In late October, Senate Republicans and Democrats came together to support a 4 percent initial gross production tax rate along with the other components of the excise taxes plan discussed above. This comprehensive  plan, also dubbed Plan A+ or the Grand Bargain, initially failed to pass out of a House committee but passed the Senate as HB 1035 on November 6th on a 37-5 vote. The House took up an identical measure, HB 1054, on Nov. 8th; it fell five votes short of gaining the three-quarters supermajority needed to pass a revenue bill.  (see above, What has happened so far in special Session, Weeks 5 and 7).
• The Simple Majority: Following the narrow failure of the bipartisan bargain, Republican leaders put together a plan that included revenues that only require a simple majority and thus do not need support from Democrats.  This approach – now referred to as “Plan B” or “cash and cuts” – was favored from the start by House Republican leaders but was resisted by Senate leaders and the Governor, who are averse to increasing next year’s budget hole.  In the version announced November 13th, the plan raises $185 million in additional revenue by tapping the Rainy Day Fund and agency revolving funds, using carryover funds from last year, and raising the gross production tax on wells currently taxed at 4 percent. It also includes $60 million of budget cuts, with most agencies cut 1 – 2.5 percent, but some agencies exempted. Click here for agency appropriations under HB 1019.   Governor Fallin promised to veto any budget that includes cuts to state agencies; on Nov. 8th, after the failure of HB 1054 in the House, she pledged to veto a budget bill with “draconian cuts”. On Nov. 17th she made good on her veto promise by striking down all but five sections of HB 1019.
• The Doomsday Option: If a new budget isn’t passed in special session, the full $214 million cut would be absorbed by the three health care agencies, which would also lead to the loss of hundreds of millions in matching federal funds. As more time passes without an agreement, these agencies are beginning to move forward with enacting cuts that will begin to take effect December 1st.

Why is the Legislature in special session?

In August, the Oklahoma Supreme Court struck down a bill (SB 845) passed by the Legislature in May that assessed a $1.50-per-package cigarette fee. The Court ruled that the bill violated the constitutional requirements for “revenue bills,” including that they must be approved by a 3/4ths vote of the Legislature. The ruling left a $214 million hole in the budget of three state agencies that had been set to receive the smoking cessation fee money: the Department of Mental Health and Substance Abuse Services ($75 million), Oklahoma Health Care Authority ($70 million), and Department of Human Services ($69 million). See “What has been the impact of failing to reach a budget agreement” above for a discussion of how agencies are being affected by the loss of smoking cessation fee revenue.

Governor Fallin responded to the Supreme Court ruling by calling a Special Session for September 25th.

What issues can be addressed in special session?

A special session is restricted to those matters specified in the Governor’s call; however, the Governor may amend the call during special session. In her Executive Order calling the 2017 special session, Governor Fallin recommended that lawmakers:

• Address the immediate budget shortfall created by the loss of the $215 million cigarette fee revenue.
• Have the option to address a long-term solution to continuing budget shortfalls.
• Address the need for more consolidation and other efficiencies in all areas of state government.
• Clarify intended exemptions to the new 1.25 percent sales tax on vehicles.
• Address a needed pay increase for K-12 public school teachers.

Since then the Governor amended the call of special session to include:

• State employee pay raise.
• Low-income tax relief (refundability of the EITC)
• Supplemental funding for the State Department of Health

Other proposals are not within the purview of the special session.

How long will special session last?

There is no constitutional limit on the length of special sessions. However, a special session called during one Legislature cannot extend past the swearing in of the next Legislature (January 2019 in the current case). Special Sessions can run concurrently with regular sessions. The Legislature may adjourn without acting on the issues that it has been asked to address

If lawmakers do reach agreement on measures to pass in special session, it will take a minimum of five days for bills to be introduced, considered, and passed. Also, the Constitution (Article V, Section 33) prohibits revenue bills from being passed in the last five days of session, so the special session may need to be held open for an additional week after any revenue bills are approved.

The House and Senate adjourned the first special session on November 17th. After vetoing most of the new budget passed by the Legislature, Gov. Fallin promised to call a second special session “in the near future.”

What is the cost of Special Session?

Legislators are entitled to per diems for all days they are in session, but only on days when each Chamber actually convenes. The daily cost has been estimated to be about $30,000. Legislative leaders have said they will absorb the cost of special session from their existing budgets.

Where can I find bills filed in Special Session?

You can look up bills from the Legislature’s website under the Legislation tab. Be sure to choose 2017 Special Session, which is currently the default option.

What can I do to have an impact on lawmakers in Special Session?

We encourage Oklahomans to contact your own two legislators, the House Speaker, the Senate President Pro Tem and the Governor to insist that they use Special Session to find a fair mix of recurring revenues needed to avert deeper cuts, invest in key priorities, and put the budget on a sustainable path. You can find all the resources you need from the advocacy alert on OK Policy’s website and from Together Oklahoma. The Save our State Coalition has created a Blueprint for a Better Budget that lays out a comprehensive budget plan.