Bipartisan fiscal conservatives kill historic proposal to hike state taxes

State revenues show double digit jump

Stalwart fiscal conservatives in the Oklahoma House stood firm and voted down a proposal for the highest tax increases in Oklahoma history.

Republicans and Democrats in a bipartisan effort defeated House Bill 1054X during the sixth week of the special session. Gov. Mary Fallin, who has been pressuring lawmakers for huge tax increases all year, threatened to extend the session through Christmas if House members didn’t vote for huge tax hike.

Spending bills must originate in the House of Representatives. New tax increases require a 75-percent approval vote but the vote November 8 fell five votes short.

Tulsa area legislators Eric Proctor, D-Tulsa; Dale Derby, R-Owasso; Tom Gann, R-Inola; Dr. Mike Ritze, R-Broken Arrow; Sean Roberts, R-Tulsa; Terry O’Donnell, R-Catoosa; Michael Rogers, R-Broken Arrow and Chuck Strohm, R-Tulsa, voted against the historic tax increase.

Tulsa area legislators who voted for the failed tax bill were Karen Gaddis, D-Tulsa; Regina Goodwin, D-Tulsa; Meloyde Blanchett, D-Tulsa; Carol Bush, R-Tulsa; Katie Henke, R-Tulsa; Kevin McDugle, R-Wagoner; Glen Mulready, R-Tulsa; Jadine Nolan, R-Sand Springs, and Weldon Watson, R-Tulsa.

“There is plenty of money available in other funds, and we should not create a permanent tax increase for a temporary problem,” Roberts said. “Oklahomans have recently seen agencies mismanage millions of dollars with corruption at the highest levels. It is unwise for the Oklahoma Legislature to enable these agency heads to continue to commit fraud, and passing a massive tax increase package would do just that.

“When Oklahomans voted down a one-cent sales tax for teacher pay last year, they sent a clear message they do not want higher taxes. With my no vote yesterday, I followed through on protecting taxpayer dollars. Let’s fight for a better, more fiscally responsible Oklahoma.”

“I’m extremely disappointed by the House of Representatives failing to pass House Bill 1054X, which would have addressed a $215 million shortfall in our current fiscal year budget and provided a teacher pay raise,” Fallin said in a statement. “It is discouraging that some members have chosen politics over taking care of people by refusing to vote for this budget package and have shown they are not willing to move our state forward. As a result of their no votes, our state will not have enough funds for agencies to deliver services that work for people, especially with our state facing a $400 million shortfall next session.”

While Fallin and Republican leaders in both the House and Senate were twisting arms for permanent multi-million-dollar tax increases, Oklahoma State Treasurer Ken Miller said state revenue grew by 10 percent in October – a sign that the state’s revenue is not in as bad a shape as Fallin and state agency heads say.

Revenues are up by more than 10 percent from the same month of the prior year, the first time double-digit growth has been seen in four and a half years. It also marks the ninth time since the start of the calendar year that monthly revenue to the Treasury are more than the prior year, Miller said.

At $980.2 million, October collections are up by 10.6 percent, or $94.1 million, compared to receipts from October 2016. Should that trend continue, revenue would show a billion-dollar increase over 12 months.

“Such strong revenue growth is encouraging, with all four major revenue sources in positive territory,” Miller said.

Total gross receipts from the past 12 months also paint a positive picture with all major revenue streams except gross income tax showing increases over the prior 12 months.

Part of the growth is due to new taxes passed in the regular session of the Legislature earlier this year. Almost $18 million of the increase is due new taxes. The largest amount, $11.7 million, is tied to a 1.25 percent state sales tax on motor vehicles. A $5 fee on motor vehicle registration increased collections by $1.9 million for the month.

Elimination and suspension of gross production rebate payments added $3 million during October. Ending a discount for businesses that remit sales tax added $1.2 million, and a new fee assessed on professional sports tickets contributed $71,622.

Since August, law changes from last session have yielded more than $58.3 million in new gross revenue.

Income tax collections increased $13 million (4.2 percent). Sales tax rose by $40.5 million – up 11.8 percent. Gross production taxes rose $17 million (up 48.4 percent). Car tag rose $5.9 million (10.9 percent).

For the last 12 months, state revenues are $11,200,000,000.00 – up $377,800,000.00 – which is three times the projected shortfall that occurred when the Oklahoma Supreme Court overturned the previous cigarette tax hike because it was unconstitutional.

For the year, sales tax is $4.4 billion – up $135 million (3.2 percent). Oil and gas production was $501 million – up by $157 million (45.6 percent) and car tags were $762 million – up by $15.7 million (2.1 percent).

House Speaker Charles McCall said passing enormous tax increases will be hard in the House, especially since some grassroots groups – including the Tulsa 912 Project – have been vocal in opposition to the effort to grow state government.

“As we have said throughout the session, the 75 percent super majority requirement of State Question 640 is a high hurdle,” McCall said. “We heard from our constituents more on this bill than any other in a long time, and it was clear that the House listened and voted the way their constituents encouraged them to vote. The bill passed with a large majority, which makes it eligible to be voted on by the people of Oklahoma at the ballot.”

McCall said the House has passed several bills to help this year’s budget but the Senate has failed to take action on them.

“It is time to move on to what can pass and help this year’s budget,” McCall said. “Last week, the House — in four bipartisan votes that all received more than 90 percent support — sent several appropriations measures to the Senate that would use existing cash to ensure vital health services and programs will continue without interruption into April 2018. We also approved a bill that would increase the gross production tax to 7 percent on more than 6,600 existing wells and generate $48 million for this year’s budget. I encourage the Senate to act quickly to pass those measures for the citizens of Oklahoma.”

During most of the special session, Democrats had opposed raising any taxes without a significant increase the gross production tax on oil and natural gas. Proctor has said these taxes were a burden for low-income people and that he would have a hard time voting for any of them.

“Since the beginning of this extraordinary session, Republican House leadership has told Oklahomans that they have the 75 percent of their caucus needed to raise revenue, and it was the Democrats who needed to come on board with their support,” said Rep. Emily Virgin, who represents the House Democrat Caucus. “Today, after more than 80 percent of our caucus held their nose and voted yes for this far from ideal revenue bill, we found out this simply isn’t true. The House Republican Caucus delivered 48 votes or less than 67 percent of their caucus.”

And while budget concerns take center stage, Oklahoma’s State Pension Systems achieved substantial gains during the past fiscal year, according to State Rep. Randy McDaniel. “The noteworthy results are the product of collaboration and hard work,” said McDaniel, R-Edmond. “The improvement is valuable to those counting on the durability of the pension systems for their retirement security and to the long-term financial strength of the state.”

The Oklahoma Teacher’s Retirement System (OTRS) is the state’s largest pension system. It showed strong investment returns and fiscal progress. OTRS now has a funded ratio of 70.4 percent, the highest level recorded for this system that began in the early 1940s. This is up from 47.9 percent in 2010.  In addition, OTRS’ unfunded liabilities dropped more than a billion dollars this past fiscal year from $7.6 billion to $6.5 billion.

“The 70.4 percent funded ratio for OTRS is historic,” said Tom Spencer, executive director for OTRS. “The credit for this achievement can be shared by current and past legislators and governors for providing OTRS with adequate funding and for meaningful pension reform.”

For Fiscal Year 2017, the unfunded liabilities have been reduced to $8.4 billion, the lowest level since 2003. Moreover, the funded ratio has increased to 78.6 percent, slightly below the standard financial stability benchmark of 80 percent.

The turnaround in Oklahoma’s pension systems has not gone unnoticed. According to the Mercatus Center at George Mason University, Oklahoma ranked 7th in the nation for overall fiscal health in 2017. The center uses five separate fiscal solvency categories in its nonpartisan evaluation.

“The improved financial condition of Oklahoma’s public pension systems is encouraging,” said State Treasurer Ken Miller. “The strengthened financial health of the systems is significant to the overall bond rating of Oklahoma, but we must continue to push for long-term stability in all key areas important to the fiscal management of our state.”