KGOU

Capitol Insider: Without Tobacco Tax, ‘We’re Back To Where We Were In May’

Aug 11, 2017

The Supreme Court of the State of Oklahoma has ruled that a fee on cigarettes approved during the 2017 legislative session is unconstitutional.

In a ruling released Thursday morning, the court concluded that the "Smoking Cessation and Prevention Act of 2017," which included a $1.50-per-pack fee on cigarettes, was a revenue-raising measure and therefore violated the state constitution.

“Justice Patrick Wyrick, the newest member of the Supreme Court, in fact writing for the majority, pointed out that there was no question at all by the text of the bill itself that this was a revenue raising measure and therefore it was subject to Article V, Section 33 of the Oklahoma Constitution,” eCapitol’s Shawn Ashley told KGOU.

Article V of the Oklahoma Constitution states that all revenue-raising legislation must be passed before the last five days of the legislative session, originate in the House of Representatives and be subject to either a three-quarters majority vote by lawmakers or a vote of the people. 

Ashley writes:

The junior justice also wrote that the fee is not intended "…to cover the cost of administering a specific regulatory program. The $225 million is proportionate to the amount of revenue the Legislature needed to balance the budget rather than to the cost of administering the state's cigarette regulatory regime."

The cigarette fee originated in the Senate, was approved on the last day of session and passed with only a seven-vote majority in the House and a 10-vote majority in the Senate. The legislation was expected to generate $215 million in revenue for the state, helping to fill a projected $878 million fiscal year 2018 budget gap.

Wyrick noted the court previously had upheld regulatory schemes that generated incidental revenue. "…but a quarter-of-a-billion dollars per year is hardly 'incidental' when the imposition of a new financial burden on the people is the avowed aim of the measure (albeit in aim designed to reduce smoking)."

The state legislature narrowly avoided a special session when it passed a handful of revenue measures before the end of its regular session in May. Those measures included the cigarette fee, a tax on motor vehicle sales, a registration fee for hybrid and electric vehicles and a freeze on standard deductions for the state income tax. Now, those measures are being challenged in the state Supreme Court. The court heard arguments on Tuesday, and the decision on the cigarette fee is the first to be handed down.

With $215 million now missing from the state budget, Gov. Mary Fallin may declare a special legislative session to find new ways to generate revenue.

In a statement released on Thursday, Fallin expressed her disappointment in the Supreme Court's decision and her concern about the Department of Human Services, the Department of Mental Health and Substance Abuse Services and the Oklahoma Health Care Authority, the agencies that would have received most of the revenue generated by the fee.

"These agencies and the people they serve cannot sustain the kind of cuts that will occur if we do not find a solution. My belief is we will have to come into special session to address this issue," Fallin said.

“The problem is, we're back to where we were in May during the legislative session. Republicans are not particularly supportive of revenue-raising measures and may be unwilling to consider them in a special session,” Ashley said.