OKLAHOMA CITY (AP) — Almost halfway through the 2016 legislative session, Oklahoma lawmakers are still not sure how to resolve the most critical issue they face — closing an estimated $1.3 billion hole in the state budget for the coming year.
Should they abolish tax credit programs enacted to lure new businesses to the state, or authorize deep cuts to state agencies that would impact public education and public safety?
Should they issue bonds for public projects like roads and bridges to free up revenue previously dedicated, or instead raise new revenue or roll back income tax cuts enacted in recent years?
Legislative leaders have no consensus on how to manage the state’s budget crisis amid a steep drop in revenue from oil and natural gas production that has essentially wiped out about 20 percent of the state’s spending power when compared to last year’s levels.
“The battles ahead are going to be on how to fill the hole,” Republican Senate President Pro Tem Brian Bingman said as the House and Senate approached Thursday’s deadline for completing work on bills and resolutions in their house of origin. Lawmakers must adjourn on May 27 — and have until then to complete work on a state budget for the fiscal year that begins on July 1.
“Obviously, we’re in a cash-flow situation,” said Bingman, of Sapulpa. “That will be the strong discussions that we have.”
Gov. Mary Fallin set the fiscal tone of this year’s legislative session on its first day in a State of the State address that called on lawmakers to increase revenue or risk dramatic cuts to state services. Some of her suggestions have already been rejected.
Fallin’s executive budget recommends about $910 million in what she described as “recurring revenues,” including $181 million from a proposed increase in the cigarette tax from $1.03 to $2.53 per pack. But legislation to enact the proposal was pulled from consideration by a state House committee because it had no support.
Its author, Rep. Doug Cox, R-Grove, said after withdrawing the bill last month that some lawmakers still did not recognize the need to create new sources of revenue to plug the massive budget hole.
“… We cannot cut our way out of this,” said Cox, an emergency room physician. “I don’t think I’m going to get the votes until everyone realizes we need a revenue stream.”
Other proposals to increase state revenue have also proven to be a hard sell for lawmakers in an election year. House members narrowly approved legislation that allows collection of the state’s 4.5 percent sales taxes on transactions between an Oklahoma buyer and out-of-state online retail site. The bill passed with 51 votes — the minimum required to pass a bill in the 101-member House.
The measure’s author, Rep. Chad Caldwell, R-Enid, said the measure removes a financial incentive for shoppers to buy outside of the state and makes collection of the state sales tax more consistent.
“It also will add money to our state to be invested in schools, roads, law enforcement and other services upon which we all depend,” said Caldwell while stressing the measure is not create a new tax.
In spite of the budget hole, measures that would rein in hundreds of millions of dollars’ worth of tax incentives and credits have faced opposition.
One bill to prohibit companies from taking advantage of two separate tax incentive programs at the same time was killed by a Senate committee, while others that would suspend dozens of other tax subsidies for businesses failed to get past Thursday’s legislative deadline.
“You’ll hear more about those,” Bingman promised, hinting that attempts may be made to bring them up again. “We’re going to talk about putting some caps on some of the credits.”
Legislative leaders have said budget cuts to state agencies are likely on top of spending cuts due to revenue failures during the current budget year. Budget reductions of 3 percent were ordered in January. Another budget cut was ordered earlier this month.
“I think realistically there’s going to be some cuts,” Bingman said. But lawmakers have already voiced disapproval to more budget reductions.
“You can’t cut your way to prosperity, and you can’t borrow your way out of debt,” House Democratic Leader Scott Inman said.
As the legislative session draws to a close, lawmakers may be confronted with several unpopular budget proposals for the upcoming year, including onerous budget cuts of up to 6 percent.
“We may have to throw something like that out,” Bingman said. “Then maybe they might be a little more serious about looking at some of the reforms to the tax code, credits and things like that.”
“You may see several budgets being put out on the floor,” he said. “We’ve got a long way to go.”
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