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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.
What happened with the tax increase on cigarettes? It turned out to be a non-starter.
Talk of a cigarette tax increase began early in the session with a bill by Rep. Doug Cox (R-Grove) to nearly double it with an increase of $1 per pack from the current rate of $1.03. Our cigarette tax ranks 34th among the states. Rep. Cox’s bill dedicated the increased revenue to elementary and secondary schools which reflected what looked like the main budget priority when the legislative session began. Governor Fallin had recommended a $3,000 pay increase for teachers costing $178 million that would roughly match the $180 million to be raised by a cigarette tax increase. Cox’s bill was assigned to the House Appropriations and Budget Committee, but it never received a hearing.
As the session wore on, the budget hole grew larger and time grew shorter. For a long while it appeared the cigarette tax was dead, but it surfaced toward the end of session when Nico Gomez, Executive Director of the Oklahoma Health Care Authority (OHCA) proposed the Medicaid Rebalancing Act. The Act was to bring on 175,000 uninsured Oklahomans to Insure Oklahoma by accessing Medicaid funding made available by the Affordable Care Act. Gomez suggested the state match could be funded by a $1.50 per pack increase in the cigarette tax.
The “rebalancing” was to occur in fiscal year 2020 by moving 175,000 Oklahomans, mainly pregnant women and children, off Medicaid to the private insurance market with Medicaid-subsidized premiums. This would require federal approval when the time comes. Later, Gomez announced he was preparing for a 25 percent cut in Medicaid provider rates. Conveniently, the revenue from the cigarette tax could be used to shore up Medicaid provider rates for current services while OHCA was working to get the new features of Insure Oklahoma up and running.
HB 3210 was introduced by Rep. Earl Sears (R-Bartlesville) and Sen. Clark Jolley (R-Edmond) on May 12th with two weeks remaining in session. The bill provided for a $1.50 increase in the cigarette tax with the revenue “to be expended by eligible agencies on activities eligible to be matched with federal Medicaid dollars or mental health safety net services with a priority towards stabilizing reimbursement rates and/or implementing a premium assistance plan, unless otherwise provided by law.” The bill was to be followed by the Medicaid Rebalancing Act.
[pullquote]“After six years of ‘Obamacare’ bashing, it was a bridge too far for many Republicans legislators to accept the federal money, no matter the circumstances or what the governor and leadership were saying.”[/pullquote]
The governor and the House and Senate leadership expressed their support of the Medicaid Rebalancing Act and said there was interest among rank and file members of the Republican caucus. HB 3210 passed the House Joint Appropriations and Budget Committee (JCAB) but lacked enough support in the Senate JCAB to pass with the “implementing a premium assistance plan” language in it. The premium assistance language was taken out, and the bill passed both House and Senate JCAB. Since all 48 Senators sit on Senate JCAB, the move signaled that Medicaid Rebalancing was no longer part of the cigarette tax proposal.
When HB 3210 came to the House floor on May 18th — six days after it was introduced — the 30 House Democrats withheld their support in an attempt to force Republicans to accept the Medicaid Rebalancing Act with the expanded federal funding made available through the Affordable Care Act. But the ploy failed. After six years of “Obamacare” bashing, it was a bridge too far for many Republicans legislators to accept the federal money, no matter the circumstances or what the governor and leadership were saying. In the end only 40 House Republicans out of 71 voted for the cigarette tax and no Democrats; 76 votes were needed for passage. The bill was held on reconsideration, but no negotiations occurred to try to bridge the gap. At this point it would take a special session to pass the tax, but judging from pronouncements by leadership, its appears they have moved on. The effort was too little, too late.
