Gov. Mary Fallin's proposal to cut the highest bracket of Oklahoma's personal income tax rate, a much more modest plan than her idea last year that fell flat with lawmakers, is part of a nearly $7 billion budget that her chief budget adviser calls gimmick-free.
“There are no tricks or gimmicks in this budget,” said Preston Doerflinger, the governor's finance secretary.
The governor for the second year in a row urged lawmakers Monday to cut the top bracket of the state's personal income tax, which would be a $40 million hit on state revenues for the upcoming fiscal year as well as calling for increases in spending for mental health and child welfare services.
A pay raise for the state's approximately 34,000 employees is not included in her budget. She, like Republican legislative leaders, opposes a cost-of-living increase. Instead, she is proposing $200,000 to develop a study to look at the pay of state employees with the goal to move toward a performance-based compensation system. The study also will look at what private businesses are paying workers who perform similar tasks as state employees.
State employees haven't had an across-the-board increase since October 2006. Doerflinger said some agencies have provided pay increases for their employees since then.
“If we just give 3 percent … across the board on top of raises that other agencies may have already experienced, I'm not sure how that is fair,” Doerflinger said.
House Democrats criticized the Republican governor's budget, saying it doesn't add up.
“She was long on ideas, short on details,” said House Minority Leader Scott Inman, D-Del City.
“She named a litany of programs that she believes are important for the state of Oklahoma, and in many of those she'll find common ground with House Democrats,” said Inman, whose party is outnumbered 72-29 by House Republicans.
“However, at the same time the governor offered a tax cut plan that would reduce state revenues by over $120 million,” Inman said. “When you've got only $170 million of growth revenue, and hundreds of millions of dollars worth of needs that she outlined today, we simply don't see how the math adds up.”
Lawmakers should have about $170 million more to appropriate this year compared with a year ago, based on tax revenue estimates. Their main duty during the session, which began Monday and runs through late May, is crafting a budget.
Doerflinger, who also serves as director of the agency that prepared her budget document, said lawmakers could have another $36 million or so when the final amount is determined later this month. The estimate of available funds for the 2014 fiscal year, which starts July 1, was issued in December.
Fallin asked lawmakers to lower the top income tax bracket, which kicks in after the first $8,700 of income made by every Oklahoman, from 5.25 percent to 5.0 percent. Proposals seeking bigger cuts made by and lawmakers failed to advance last year.
Fallin's plan last year called for reducing the top 5.25 percent rate to 3.5 percent, and reducing the number of income tax brackets from seven to three, with individuals earning less than $15,000 not required to pay personal income taxes. Further cuts in the income tax rate would be cut by an additional quarter point in any year in which the state saw 5 percent revenue growth.
‘Move the needle'
Personal income taxes bring in about one-third of the state's legislatively appropriated budget. For this fiscal year, personal income taxes are estimated to bring in $2.1 billion of the $6.8 billion budget.