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Capitol Insider: The $215 Million Question

Sep 8, 2017

Will the Oklahoma Legislature get behind a cigarette tax in the upcoming special session?

 


Oklahoma Speaker of the House Charles McCall (R-Atoka) says the House Republican caucus will offer the tax to remedy a $215 million hole created after the Oklahoma Supreme Court found a cigarette fee unconstitutional.

McCall told eCapitol news director Shawn Ashley, “The cigarette tax is the only feasible tax option Oklahomans have said they would support.”

The speaker has called on Democrats to support the plan.

“That is probably the $215 million question,” Ashley said. “House Democrats in particular have been explicit in saying that they also want to see changes made in the gross production tax.”

McCall said if the cigarette tax fails to receive the three-quarters vote necessary in the legislature, it would be sent to a vote of the people. If approved by popular vote, the revenue would not be available in time to fill the current budget hole. McCall said targeted cuts would be used to make up the difference in the current budget hole.

The Oklahoma Supreme Court’s decision to uphold the vehicle sales tax opened another option for legislators: repealing existing tax incentives. The court found that rolling back an incentive is different than creating a new tax, and only requires a 51 percent vote for passage.

At the beginning of the last legislative session, Governor Mary Fallin offered a list of tax incentives she said could be eliminated in order to increase revenue. Ashley says that solution will not likely be used in the special legislative session.

“Those were mainly pushed aside,” Ashley said. “It seems for the most part that legislators are not interested in doing that, particularly moving into next year, which is an election year.”

Governor Fallin said this week she plans to call a special legislative session beginning September 25.

 

Full Transcript

Dick Pryor: This is Capitol Insider, an insider's guide to Oklahoma politics and policy. I'm Dick Pryor with the eCapitol News Director Shawn Ashley. Shawn, Governor Fallin has put everyone in the state on notice. She plans to call a special session of the legislature beginning September 25 to address the budget. So lawmakers now are on the clock to get a plan together by then.

 

Shawn Ashley: I think she's really had them on the clock since August when the Supreme Court ruled that the tobacco cessation fee was unconstitutional, which created the $250 million hole. Fallin has met with both Republican leaders and Democratic leaders, trying to get them to move forward on putting together a plan. But, I think you're right. The clock is really ticking now before they return to the Capitol to reconvene sometime September 25.

 

Pryor: Speaker of the House Charles McCall says his priority is to pass an increase in the cigarette tax and he's calling on Democrats to support it. Will they, without strings attached? And will the House Republican caucus go along?

 

Ashley: That is probably the $215 million question. House Democrats in particular have been explicit in saying that they also want to see changes made in the gross production tax, to see it increase, as well as consideration of changes in the income tax rate for upper-income earners. Republicans however, have been vehemently opposed to that. Speaker McCall said this past week that he does not want to see a $1 billion tax increase passed on Oklahoma residents. So, it seems like his cigarette tax proposal will be the one to move forward but who knows who is going to support it.

 

Pryor: Speaker McCall says if they can't pass the cigarette tax increase they will send it to a vote of the people, but that will not fix this year's budget hole. So, will it mean more cuts? We're hearing 3to 4percent.

 

Ashley: If they can't raise additional revenue that would be collected during the current fiscal year which ends June 30 of 2018, they're going to have to reduce those budgets. House staff has asked for various numbers from state agencies Senate staffs have asked and the Office of Management and Enterprise Services has also asked. I've heard that some agencies have even been asked “How much money could you do without? What could you donate to help re-balance this budget?”

 

Pryor: The Oklahoma Supreme Court gave legislators an opening to fix the systemic and persistent revenue shortfalls by finding that removing tax exemptions is not a tax increase. That requires a supermajority vote. How likely is it legislators will do that during this special session?

 

Ashley: It seems that that's not very likely to happen. Governor Fallin proposed a number of tax exemption eliminations in her executive budget for the current fiscal year when it was introduced back in February. But those who are mainly pushed aside. It seems for the most part that legislators are not interested in doing that, particularly moving into the next year, which is an election year.

 

Pryor: The special session has to last at least five days at a cost of $30,000 per day. But, it could take longer.

 

Ashley: Exactly. As a result of the Supreme Court decision it has been made very clear to the state legislature that you cannot pass a revenue-raising measure in the last five days of the legislative session. So, they'll have to meet at least five days after they pass the last revenue-raising measure if they pass one such as the cigarette tax.

 

Pryor: So it could take 10 days or even longer.

 

Ashley: It could take 10 days. It could take longer if a revenue-raising measure is pushed off later into the special session.

 

Pryor: A glimmer of good news in all of this, Treasurer Ken Miller has reported revenue collections are higher this year than in the previous 12 months, with the energy sector being the primary driver.

 

Ashley: That's exactly right. For the past 12 months they've seen nearly $80 million of growth in revenue collections, a big chunk of which came in the month of August alone. And part of that was the result of some of the revenue-increasing measures that were approved during the last legislative session.

 

Pryor: It's really getting interesting at the state Capitol.

 

Ashley: It's going to be a fun month of September and into October, most likely.

 

Pryor: Thanks Shawn. That's Capitol Insider. Catch us on KGOU.org and get the Capitol Insider Podcast on iTunes. E-mail your questions to news@KGOU.org or contact us on Twitter @KGOUnews. Until next time, with Shawn Ashley, I'm Dick Pryor.

 

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