How Governor Fallin wants to fill Oklahoma’s budget hole (Capitol Updates)

Photo by Michael Vadon / CC BY-SA 4.0
Photo by Michael Vadon / CC BY-SA 4.0

Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1991. He currently practices law in Tulsa and represents clients at the Capitol. You can sign up on his website to receive the Capitol Updates newsletter by email.

Governor Fallin released her FY-17 budget proposal last Monday, and the numbers are revealing. The current year’s appropriated budget (after adjustment for the revenue failure) is $6,995,206,189. In December the State Equalization Board established that only $6,050,85,3353 will be available for appropriation for FY-17. This would require a cut in state budgets of $944,352,836, an average of 13.5% if applied to all agencies across the board. [NOTE: With new estimates released yesterday, the budget hole has now grown to $1.3 billion.] This would mean a $329,142,667 cut to common education, a $44,674,310 cut to mental health and a $127,399,027 cut to the Oklahoma Healthcare Authority to provide the match for federal Medicaid dollars for doctors, hospitals, nursing homes, home health care and other programs.

The governor, however, proposed to spend $6,943,087,759, a cut of $52,118,430, only 0.75 percent or less than 1 percent. The only area in state government that would see an increase is common education. She recommends an increase of $105,274,292 which is still less than the $178 million she says it would take to give teachers the $3,000 raise she is recommending. Most other agencies would get a 3 percent or 6 percent cut.

Since the constitution prevents the state from borrowing money, where is she going to generate the extra $890,969,329 she proposes to spend? And how realistic are her proposals? There’s not enough room here to list all of them, but here are the big ticket items: First, she proposes tax increases totaling $466.9 million. This includes taxing some unidentified services that are now exempt from the sales tax ($200 million), adding $1.50 per pack to the tax on cigarettes ($181.6 million), and eliminating the so-called “double deduction” for state taxes on the state income tax return ($85.3 million). “Sin” taxes like the cigarette tax are usually the first to be considered in a tax increase, but whether the legislature will go along with raising sales and income taxes is anyone’s guess.

To raise the remaining $424 million to fund her budget the governor proposes a series of policy and bookkeeping changes. Whether they will actually produce the money proposed will be for the Board of Equalization to decide if the changes are actually adopted and passed by the legislature. Some of these include taking agency revolving funds ($125 million), taking money from self-funded agencies that pay their expenses from fees, generally from the people they regulate such as the Cosmetology Board and the Board of Realtors ($125 million), allowing more of the end-of-year June collections to be spent in the current year rather than carried over to the following year ($120 million), and eliminating certain unidentified “pass through” appropriations that are put in agency budgets to contract for services ($19.7 million). Few of these things will be easy to do.

The governor was certainly correct to acknowledge that the state needs more revenue to preserve important state services, and she has shown leadership in stepping up to make proposals to help solve the problem. If the legislature doesn’t like her proposals, we’ll see if they come with their own. No doubt if she wants a budget that looks anything like the one she proposed, she’ll have to fight for it, and she may have to agree to some legislative proposals she doesn’t love.

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Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1990. He currently practices law in Tulsa and represents clients at the Capitol.

3 thoughts on “How Governor Fallin wants to fill Oklahoma’s budget hole (Capitol Updates)

  1. My recommendation is that the perks provided to executive leadership, from the Governor on down; vehicles, cell phones, expense accounts, unnecessary travel, be reviewed and determined if actually needed. We also have Educational Administrators that receive in my opinion, some of the same that are not necessary; let them deduct their mileage if using their own vehicle; let them use their own cell phone; let their be a restriction on expense accounts. EVERYONE NEEDS TO TIGHTEN THEIR BELT.

  2. Will there be any cuts to the 3 to 4 billion in tax breaks, tac incentives & tax credits given to large corporations throught the corporation commission. That are unreported by law as to where those tax dollars are spent by the corporations that they are given.

  3. Let’s add a tax onto each and every bottle of soda and water sold as well as beer. That alone would generate more revenue than any of the other taxes proposed. Other more progressive states have done that and no one stopped buying those products. It would be a more fair tax as it would be spread over a wider segment of the population. Stacking another $1.50 “sin tax” onto cigarettes is not a fair solution since it clearly targets a limited portion of the population.

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