The Oklahoma Supreme Court upheld a 1.25 percent sales tax on motor vehicles Thursday.
The state legislature had already allocated the $100 million in expected revenue from the sales tax for the current fiscal year.
Oklahomans have traditionally paid an excise tax in lieu of a motor vehicle tax. However, in the last legislative session, lawmakers voted to remove the sales tax exemption. A group of car dealers and others sued the state, arguing lawmakers passed the bill without following the rules for passing tax increases.
The Oklahoma Supreme Court sided with the state in the 5-4 decision, ruling that removing a tax exemption is not the same as creating a new tax.
eCaptiol news director Shawn Ashley says the Supreme Court decision gives budget negotiators a clear picture of the $215 million budget shortfall at hand, following the reversal of a cigarette fee.
With the court ruling that rolling back tax exemptions does not constitute a new tax, the Republican majority now has a path to raise revenue with a simple majority.
“The Oklahoma legislature can look at any of the nearly $10 billion of tax exemptions that exist as a way of raising revenue,” Ashley told KGOU. “Rather than needing 75 percent to eliminate any of those exemptions and generate that revenue, they simply need 51 percent.”
During the last legislative session, Governor Mary Fallin encouraged lawmakers to raise revenue by eliminating existing sales tax deductions.
"This ruling provides us with clarity in dealing with this fiscal year's budget,” Fallin told eCaptiol.” While pleased with today's ruling, it's important to keep in mind we must still deal with the immediate problem of the loss of $215 million from the earlier high court ruling that struck down the proposed smoking cessation fee.”
Prison Population Grows
Oklahoma's prison system now has a record-high number of inmates. There are now just over 63,000 inmates in the state's prisons, according to a Department of Correction’s count August 31. Corrections director Joe Allbaugh told the Oklahoman the prison system has added 2,000 inmates in the last eight-and-a-half months.
"I am concerned, very concerned," Allbaugh said. "We need to do something before something seriously happens... The state will end up paying a price and I'm hoping that price of delaying criminal justice reform does not come in the way of costing individuals their lives."
A proposal to release nonviolent offenders back into the community early under supervision is expected to be taken up this month.
This week, the state was the subject of an article by the Guardian titled ‘Oklahoma isn't working. Can anyone fix this failing American state?’
The 2,500-word story highlights problems in the state, including teacher pay, four-day school weeks, crumbling infrastructure and earthquakes.
KGOU’s Dick Pryor asked Ashley, “Are policymakers paying attention to this image of Oklahoma and stories such as these? And does it matter?”
Ashley said responses from Oklahoma officials are likely mixed. However, he said Fallin will likely have to answer for the negative attention.
“When she travels to France for the air show she knows people there will have seen this article and she knows that she's going to have to correct some of the ideas that they have about the state of Oklahoma,” Ashey said.
Dick Pryor: This Capitol Insider, an insider's guide to Oklahoma politics and policy. I'm Dick Pryor with the eCapitol News Director Shawn Ashley. Shawn, a majority of the Oklahoma Supreme Court has found that vehicle sales tax constitutional because it involved eliminating a tax exemption. How does that rationale affect revenue generation going forward?
Shawn Ashley: Well, what it means is that the Oklahoma legislature can look at any of the nearly $10 billion of tax exemptions that exist as a way of raising revenue. Now, rather than needing 75 percent to eliminate any of those exemptions and generate that revenue, they simply need 51 percent in order to do that. Now, that was the majority's view. The minority disagreed with that and suggested in their dissent that that was not what voters intended when they passed State Question 640.
Pryor: Now that the vehicle tax case has been decided, what's next in filling the state's budget hole?
Ashley: Well, now we know exactly how much it is--approximately $215 million--and it's expected that Governor Mary Fallin in the coming days will call a special legislative session.
Pryor: Does the latest Supreme Court ruling make it more likely that legislators will fix the budget problem with more cuts?
Ashley: Well, that is one thing they are looking at. The Senate staff, for example, has contacted state agencies and said, “What impact would a nearly 3.2 percent budget cut have on your agency for the remainder of the fiscal year if that were implemented?” But like the court pointed out and like House Minority Leader Scott Inman pointed out, they do have the opportunity to look at revenue-raising measures by eliminating tax exemptions with only a 51 percent vote as a way of addressing that. Governor Mary Fallin is encouraging them to do that. She has suggested publicly that they need to look at revenue-raising measures. Secretary of Finance Preston Doerflinger has also made similar suggestions. So what they would like to see them do is now, in a special session, look at those revenue-raising measures rather than trying to tackle them during a regular session in 2018, which is an election year and makes them much more politically difficult to approve.
Pryor: So politics comes into play?
Ashley: Oh, most definitely. It would be easier to approve a tax increase now and eliminate a tax exemption of some sort, and get that revenue, and have state agencies functioning properly now, than it would be to do so in the spring.
Pryor: Corrections director Joe Allbaugh is warning that something has got to give because the state is continuing to incarcerate more people, 2000 more this year.
Ashley: Yes. In fact, during September the Board of Corrections is expected to take up a plan that corrections staff has been putting together that would allow some inmates who are nonviolent in sort of the last year of their incarceration, and are deemed not to pose a threat to the community, to be released back into that community and supervised either through G.P.S. or direct one-on-one supervision. He has pointed out that many of the criminal justice reform measures that have been passed so far simply have not slowed the number of inmates coming into the front door. In fact, what we saw over the last eight-and-a-half months are numbers that were much greater than were anticipated. So, they simply don't have a place to put these individuals. So, as people are coming in the front doo,r Allbaugh has said it looks like we'll have to begin to push some out the back door. But we'll have to continue to monitor them in the community.
Pryor: Recently the Guardian newspaper from England did a story headlined “Oklahoma isn't working. Can anyone fix this failing American state?” Now, like it or not, this is how much of the world is going to see Oklahoma. Are policymakers paying attention to this image of Oklahoma and stories such as these? And does it matter?
Ashley: I think some are. And then there are probably some who are not. Governor Mary Fallin, for example, before she joined the state legislature, worked in business development. When you consider her time in the legislature, she has worked on economic development issues as lieutenant governor. She did that as governor. She's continued to do so. She is concerned about the perception of the state. So when she travels to France for the air show she knows people there will have seen this article and she knows that she's going to have to correct some of the ideas that they have about the state of Oklahoma. I think there are some other people, however, who sort of think that the state ends at the border and they view these as local problems to be dealt with locally, or that it's not that big of a problem. It's just the result of things we are trying to fix. And eventually we'll get it right.
Pryor: That's Capitol Insider. Email your questions to news@KGOU.org. Until next time, with Shawn Ashley, I'm Dick Pryor.
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