Budget includes money for teacher raises, justice reform
Gov. Mary Fallin unveiled her proposed fiscal year 2019 budget Monday, calling for about $700 million in revenue hikes and a similar amount of increased spending — including $289.5 million to pay for $5,000 teacher pay raises.
The governor’s executive budget closely mirrors the plan developed by Step Up Oklahoma, a statewide coalition of Oklahoma business and civic leaders who came together late last year to develop a package of proposals to resolve the state’s budget crisis and improve accountability.
Like the Step Up Oklahoma plan, the governor’s plan calls for increasing certain taxes to help resolve the state’s budget problems and pay for $5,000 teacher pay raises.
It also calls for spending increases to meet agency budget needs and fund certain reforms.
The Legislative Services Bureau would receive an additional $2 million to pay for “agency performance and accountability efforts” under the plan.
The plan also calls for giving state agencies an additional $31.2 million to pay for Oklahoma “justice reform initiatives.”
That extra money would be divided among
three agencies. The Department of Mental Health and Substance Abuse Services would receive $25 million, the Pardon and Parole Board would get $1.2 million and the Department of Corrections would get an extra $5 million. Another $5.5 million would go to the Department of Corrections to pay for a lease increase at the Sayer facility.
Large portions of the revenue increases would go to four state agencies as one-time appropriations to resolve problems that have surfaced or fulfill state obligations.
The Health Care Authority would receive $141.8 million to compensate for a loss of federal funding for the teaching hospitals. The state Board of Education would receive $92.7 million to pay for ad valorem reimbursements, the Long-Range Capital Planning Commission would get $37.7 million for infrastructure and $13.9 million would go to pay Capitol bond debt service.
On the revenue side, the governor’s budget, like the Step Up plan, calls for:
• Increasing the tax on cigarettes by $1.50 a pack, which is expected to raise $231.7 million a year.
• Increasing the tax on gasoline and diesel by 6 cents a gallon, which is projected to raise $163.4 million.
• Making several changes in the state’s individual income tax laws, including disallowing the regular personal exemption, reducing standard deduction amounts and capping itemized deductions at $22,500, although there would be no cap on charitable contributions. The proposal contains protections for low wage earners and Fallin said that “55 percent of filers would see a reduction or no change in tax liability, even though the changes are projected to raise $129.2 million overall.”
• Increasing the initial gross production tax on oil and natural gas wells from 2 percent to 4 percent for the first 36 months. After that, the wells would be taxed at 7 percent. The change would generate an estimated $126.7 million.
• Instituting a $1 per megawatt hour tax on the generation of wind energy, which is projected to produce $19.2 million in revenue.
• Repealing the transferability and cash refundability of tax credits that benefit coal, wind and railroad corporations, which is projected to generate $13.9 million.
• Taxing little cigars like cigarettes and adding an additional 10 percent tax on chewing tobacco, which is expected to generate $12.2 million.
• Changing gaming laws to allowing Indian casinos to use balls and dice in craps and roulette games. Fallin said neither the Oklahoma Tax Commission nor the Office of Management and Enterprise Services was willing the estimate how much revenue that change would generate, but Step Up Oklahoma officials have cited estimates of $22 million.
The governor’s 2019 fiscal year budget plan differs markedly from the budget plan the governor submitted to the Legislature last year, when Fallin proposed filling a gaping budget hole — projected at the time to be $868 million — by expanding the state sales tax to include numerous services.
Last year’s plan fell flat with the state Legislature, which instead resorted to one-time revenue sources to fill much of the budget hole. But lawmakers once again found themselves in a significant budget crisis after the Supreme Court ruled a cigarette fee was unconstitutional, triggering a $215 million shortfall.
It remains to be seen how lawmakers ultimately will respond to the governor’s new revenue and spending plan, which was developed through negotiations that involved Step Up Oklahoma officials, legislative leaders and representatives of the governor’s office.
House Speaker Charles McCall has said he has been working to gain support for the plan and intends to bring it up for an early vote. However, House Democrats called a news conference after the governor’s speech and said they want changes in the proposed income tax revisions called for in the plan before they would be willing to support it. The plan is expected to need a substantial number of Democratic votes to pass.
The governor strongly endorsed the plan during her State of the State speech Monday, saying, “Now it is time for us to step up, be courageous, do our jobs and pass this plan.”
“This plan represents yet another approach to stabilize state revenue and reform government to increase efficiency and cut abuse, all while funding core services and providing a long overdue teacher pay raise,” she stated in her budget’s executive summary.