The Enid News and Eagle, Enid, OK

December 19, 2013

Shortfall throwing a blanket on Fallin’s income tax cut plans

By Sean Murphy, Associated Press
Associated Press

OKLAHOMA CITY — After two consecutive years of pushing for an income tax cut for Oklahoma families, Gov. Mary Fallin seemed less enthusiastic about the idea Thursday, when she learned the Legislature will have about $170 million less to spend on state programs next year.

Just days after the Oklahoma Supreme Court tossed out a bill she championed to cut the top personal income tax rate and spend $120 million on Capitol repairs, Fallin said it was too early to tell whether she would push for a tax cut again next year.

“We’re going to continue to talk to the Legislature about what is possible this legislative year, as far as it relates to tax cuts,” Fallin said.

Fallin said she still supports the idea of lowering taxes to create a better business climate, “but we have a lot of other needs in Oklahoma.”

Fallin made the comments after the Board of Equalization certified the Legislature will have about $6.96 billion to spend on the budget for the fiscal year that begins July 1. That’s about $170 million, or 2.4 percent, less than lawmakers appropriated on the current fiscal year, even after the board agreed to put about $103 million back into next year’s budget as a result of Tuesday’s decision by the Supreme Court.

A bill to slash Oklahoma’s top personal income tax rate from 5.25 percent to 5 percent, beginning in 2015, and to divert $120 million over two years to pay for Capitol improvements, was ruled unconstitutional by the high court on Tuesday because it contained more than one subject.

Fallin already is calling on the Legislature to consider paying for the Capitol improvements with a bond issue, an idea that has been rejected by the increasingly conservative House and Speaker T.W. Shannon, R-Lawton, who has pushed for a “pay-as-you-go” approach to infrastructure improvements.

A spokesman for Shannon did not immediately respond Thursday to a request for comment, but a post on the speaker’s Facebook page said the governor, House and Senate all agreed last session to cut taxes and not assume debt for the Capitol repairs.

“The Supreme Court has undone that agreement, but I’m still committed to providing tax relief to Oklahoma families, and I’m still opposed to adding more debt that will burden future generations,” Shannon’s post read.

Fallin suggested the revenue situation should force policymakers to take another look at the idea.

“I think it’s something our legislators need to think about,” Fallin said. “We have very low bond indebtedness in the state of Oklahoma ... and (bond) prices have been very, very good. And by 2018, 85 percent of the state’s debt with bond issues drops off the books.”

The $6.96 billion in certified revenue will be used by Fallin to build her executive budget, which she will present to the Legislature at the start of the legislative session in February, and often is used as a starting point for negotiations with legislative leaders. The board will certify a second estimate for the Legislature in February, and Fallin said she’s hopeful the revenue picture might improve by then.

“We’re hoping that once we get our second round of numbers in February, and get our December sales tax collections in from the Christmas season, there might be some better news for the state,” Fallin said.

Accomplishing a cut in the income tax has been an elusive political goal for Fallin. Her aggressive plan to slash the tax rate fell apart in 2012 after the Legislature first balked at eliminating numerous tax deductions and exemptions to help offset the cost of the plan, then wouldn’t endorse it after learning some Oklahoma taxpayers would actually see their tax liability increase.

Fallin seemed to have accomplished her goal earlier this year when she and legislative leaders agreed to one-quarter of 1 percent cut in 2015, followed by a second cut in 2016 if certain revenue conditions were met, but that proposal was thwarted by Tuesday’s court ruling.

Both politics and the state’s dwindling revenue collections could conspire against Fallin in 2014.

“We have to see two things: what’s fiscally possible and what’s politically possible,” said Fallin spokesman Alex Weintz.