OKPOLICY.ORG
By Dale Denwalt
Oklahoma lawmakers face some tough decisions following a court case that struck down $215 million in new revenue this month.
What can they do? Here are some options.
Call a special session
The first big decision is whether to convene a special session of the Legislature. Several of Oklahoma’s political leaders believe that’s the only way to reverse major cuts to the Department of Mental Health and Substance Abuse Services, Oklahoma Health Care Authority and the Department of Human Services.
Those agencies saw the biggest shortfall, but $1 million from the now-defunct cigarette fee would have gone to the Alcoholic Beverage Laws Enforcement Commission to police illegal cigarette sales.
David Blatt with the Oklahoma Policy Institute said the court’s impending decision on another bill passed this year, the automobile sales tax, will be an important ruling. If the justices uphold the tax, which is technically a reversal of the sales tax exemption on vehicle purchases, then lawmakers have similar options available to them.
But the judicial branch might nix the tax.
“Then their problems are vastly compounded,” Blatt said. “Then the budget hole is over $300 million and they can’t resolve it through closing other exemptions.”
Spread the cuts around
In a special session, legislators could re-appropriate the state budget so that the cuts would be spread out to other agencies. That way, for example, the state’s mental health agency wouldn’t take a 23-percent cut from state appropriations.
The fee was also responsible for 7 percent of state money sent to the Health Care Authority, which manages the state’s Medicaid program. The Department of Human Services will see a 10-percent cut in state appropriations if nothing is done.
Find new recurring revenue
Finding and approving a new revenue source will be difficult for the Legislature, which struggled to fill last year’s budget shortfall without a political compromise. The cigarette fee, which the court ruled was an unconstitutional tax, was introduced and adopted in the last week of session after talks broke down between Republicans and Democrats.
Tax exemptions and credits
The government could put a moratorium on selected tax incentives to provide a temporary boost in revenue. Lawmakers on both sides of the aisle have cited the need for an in-depth evaluation of incentives, and an independent panel is now in its second year of methodically reviewing exemptions, credits and rebates.
Under former Gov. Brad Henry, lawmakers in 2010 agreed to suspend more than two dozen tax credits for two years. The move was expected to save $25 million.
However, many incentives have been popular among pro-business legislators who say that they spur economic growth.
Wait until February
Lawmakers are scheduled to head back to the Capitol in February for their 2018 session, and they could take up the shortfall then. Options on that table include a supplemental appropriation if there’s enough money in the treasury, or another dip into the rainy day fund.
Senate President Pro Tem Mike Schulz has said the agencies told him they can temporarily operate without disruption to services. However, it’s not clear how long they can delay the cuts without risking a major budget blow at the end of this fiscal year.
The affected agencies have been asked to submit budgets that reflect the revenue loss.
Jonathan Small, president of the Oklahoma Council of Public Affairs, said the government should leverage the “ingenuity” of agencies and the state’s budget office.
“They figured out a way to borrow from the Constitutionally protected rainy day fund,” he said, referring to the temporary transfers made without legislative approval. “So they can use creativity in other ways (to make it to February).”
He cited revenue that could come from reversing wind farm incentives and dipping into the Tobacco Settlement Endowment Trust, which uses earnings from an endowment to provide health improvement grants and encourages healthy lifestyles.
He criticized groups that call for tax hikes, like Democrats who proposed a special session to raise 1.4 billion partly from an oil and gas production tax increase.
“For us, the most important thing to remember is that revenues are down because Oklahomans are hurting. It’s important that the Legislature not do anything that damages the economy,” Small said.
Do nothing
While unpalatable for many at the state Capitol, lawmakers could let the cuts stand.
Blatt said the Legislature adopted a budget that was against the rules for how to raise revenue, so it’s up to them to fix it.
“We now have a huge budget hole and the obligation to come back and make it right,” he said. “We can’t continue to cut further into the budgets of our health and human services agencies. And we shouldn’t just try to spread it out to other agencies that have also endured major cuts in recent years.”
http://newsok.com/several-paths-for-oklahomas-latest-budget-shortfall/article/5560727/1
