What now?

A week ago we wrote: “At this point (barring further surprises), special session is likely to conclude with a new budget that averts the doomsday scenario facing the three health and social services agencies but does not address Oklahoma’s chronic budget problems.”

Since then, there have been several surprises, moments of new hope and great disappointment — but the prognosis remain about the same. This post is intended to get readers caught up on where we are and where things may be headed. For a full overview, see our regularly updated frequently asked questions about special session.

Recapping recent events

Last week, the House 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 cigarette fee revenue. The Senate passed one of those bills, HB 1081, appropriating $23.2 million to the Department of Mental Health and Substance Abuse Services, which the Governor has now signed.  The House also 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.  Last Friday, Speaker McCall issued a press release urging the Senate to pass the House’s revenue measures, but the Senate remained committed to holding out for a comprehensive budget deal.

This week began with the Senate passing HB 1035 by a bipartisan vote of 37-5. This bill included a $1.50 cigarette tax increase, a 6 cent fuel tax increase, and a 4 percent gross production tax on new wells. This comprehensive revenue plan would generate $140 million in FY 2018 and $455 million in FY 2019 once the tax increases were fully phased in. Portions of the new revenue would be dedicated to a $3,000 teacher pay raise and a $1,000 state employee pay raise effective in August 2018 and to restoring the refundable state Earned Income Tax Credit. On Wednesday, an identical measure, HB 1054, won the support of more than 70 percent of the House but fell five votes short of the 76 votes needed to pass a revenue bill. Forty-eight of 70 Republicans and 23 of 28 Democrats supported the bill; click here to see how your Representative voted and here to read OK Policy’s statement on the vote. HB 1054 was held on a motion to reconsider, which means it could be brought back for another vote later in the week.

Where we are now

With the failure of HB 1054, there is no consensus on what happens next. House and Senate leadership are intensely divided on how to proceed, and there are acute conflicts between the parties and within the caucuses in the House especially. Meanwhile, the doomsday clock ticks ever louder as the December 1st effective date rapidly approaches for agency cuts — which include termination of the ADvantage waiver for individuals with severe disabilities, 9 percent rate cuts for most Medicaid providers, and elimination or stark reduction of outpatient services for those with mental illness and addiction.

At this point, there remain several possible outcomes to special session:

• The House could try again to pass HB 1054, which would require persuading at least 5 of the 27 Representatives who voted no to change their vote. Leadership could try adding new components to the existing package to sway wavering lawmakers.
• A new comprehensive package could be offered that could gain 3/4 support in both chambers. This might involve ditching the increased gross production tax rate on new wells (unpopular with Republicans) and proposed higher motor fuel tax (unpopular with Democrats and the public) and adding something else that could attract votes from Democrats (see our list of revenue ideas, which includes several progressive revenue options), along with the $1.50-per-pack cigarette tax and a higher gross production tax on “legacy wells.”
• Some variation of the “cash and cuts” plan still appears to be the likeliest outcome. The measures passed last week by House Republicans, which include using $83 million in carryover cash from last year and raising the gross production tax on legacy wells, would generate $156 million and money could be tapped from agency revolving funds, leaving a shortfall of some $30 million, which would likely be spread out over “non-essential” agencies. Senate Republicans and the Governor have resisted this approach because of its reliance on one-time funds, which will deepen a budget hole for next year that is already projected to be $400 to $600 million. If the Senate will not agree to the use of more one-time money, the shortfall could remain close to $100 million, which could lead to cuts of 1.5 percent to 3 percent for agencies (see our discussion here).
• The doomsday scenario of massive cuts to the three health agencies beginning December 1st if the Legislature does nothing.

The doomsday scenario remains unlikely, but the odds increase with every passing day. Just as importantly, every passing day without an agreement escalates the pressure on thousands of health care providers across the state who have received notice of cuts and are weighing which programs they must eliminate and which staff they must lay off in three weeks time. It adds unbearable anxiety to hundreds of thousands of Oklahomans with disabilities, mental illness, and severe health problems, and their loved ones, facing the loss of the services they depend on for their continued health. We must not forget that, whenever lawmakers reach a solution and whatever it looks like, their failure to get their work done in the past seven weeks has come with a heavy price.