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Okla. long on needs, short on cash in 2014 session

Published on NewsOK Modified: February 1, 2014 at 12:13 pm •  Published: February 1, 2014
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OKLAHOMA CITY (AP) — Oklahoma legislators who want to increase funding for schools, public safety and other state programs will find themselves short on money to do so as the 2014 session opens on Monday.

Budget projections show the Legislature already will have about $170 million less to spend on state programs in the next fiscal year, and that doesn't include plans to further cut the state's income tax and continue tax breaks for certain types of oil and gas drilling. Meanwhile, the list of state funding needs is long: child welfare, overcrowded prisons, underpaid teachers and state workers, and a crumbling state Capitol.

Gov. Mary Fallin will outline her proposal for a balanced budget on Monday that will include an income tax cut, although details haven't been released.

"I'm working toward a balance of how we reasonably lower our income tax, but yet also provide for our important services like education, corrections, public safety and those other needs," Fallin told reporters last week at a legislative forum hosted by The Associated Press. "You will see me propose some spending cuts in our budget, but that will all be discussed Monday."

The Oklahoma Legislature will convene at noon on Monday, and Fallin will deliver her State of the State speech to lawmakers at about 12:45 p.m.

Fallin prepared her executive budget based on a projection that lawmakers will have about $6.96 billion to spend on the fiscal year that begins July 1, a decrease of $170 million. A state panel will certify a second estimate later this month that will determine exactly how much will be available to spend, and Fallin remains hopeful that amount will be higher.

"I hope that improves and I think it will," Fallin said.

Fallin, Senate President Pro Tem Brian Bingman, and House Speaker T.W. Shannon all have endorsed cutting the state's income tax rate. A bill passed last year to slash the rate from 5.25 percent to 5 percent, beginning in 2015, was ruled unconstitutional because it contained more than one subject. But it could be more difficult to pass this year with revenues declining. A .25 reduction in the income tax costs the state about $120 million when fully implemented.

Bingman, R-Sapulpa, suggested any reduction in the income tax must be offset somewhere else in the budget.

"Any time we've had a tax cut in the past, we've used growth revenue. We don't have that growth this year," Bingman said. "The revenue picture has got to change before we can enact the tax cut."

Democrats, who make up less than one-third of the House and just one-quarter of the Senate, maintain any plan to cut the income tax is fiscally irresponsible, especially during a revenue downturn.

"When you consider we're funding public education at $200 million less than we were in 2008, that our teachers haven't had a pay raise since 2006, and we have people working at the Department of Corrections who are underpaid, I think it's very irresponsible to talk about tax cuts at this time," said Senate Democratic Leader Sean Burrage, D-Claremore.

Another tax item the Legislature is expected to address this year is an incentive for horizontally drilled oil and gas wells that reduces the production tax from 7 percent to 1 percent for the first 48 months of production. The incentive, originally put in place in the late 1990s when horizontal drilling was experimental and extremely costly, now applies to most new wells that are drilled because horizontal wells are now the norm. The incentive, which is set to expire in 2015, is costing the state hundreds of millions of dollars in lost revenue each year.

Fallin and Bingman have signaled they're open to discussing changes in the rate, but Shannon has said he wants to keep the rate at 1 percent and make it permanent.

"We owe it to the families in this state to put them first by giving them the tax cut we promised, and find a way to further reduce the tax burden," Shannon said in a statement. "We also must not raise taxes on the energy industry by increasing the rate from 1 percent to anything higher than that."

Shannon and leaders in the increasingly conservative House also have opposed any effort to issue state-backed bonds to pay for items like repairs to the Capitol, the completion of the unfinished American Indian Cultural Center and Museum in Oklahoma City, or the construction of a new museum in Tulsa dedicated to popular culture.

Fallin and Bingman have repeatedly endorsed the idea of a bond issue to pay for some of the state's infrastructure needs, especially for repairs to the Capitol. Fallin said with low interest rates and an estimated 85 percent of the state's bond debt expected to be paid off in the next four years, the time is ideal for a bond issue.

"With so much of the bond indebtedness going off the books in the next four years, we can afford to do a bond issue," Fallin said. "In fact, we can't afford not to.

"I know there is support with members of the House and Senate. There may be some in leadership that may not support that issue, but we will have the usual lively debate at the Capitol this session."

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Sean Murphy can be reached at www.twitter.com/apseanmurphy


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