Analysis: OK Republicans to squabble over agency cuts, lower taxes, energy incentives

OKLAHOMA CITY – After growing state government by about $800 million over her first three years in office, Oklahoma Gov. Mary Fallin laid out a restrained executive budget in this week’s State of the State.
The tighter Fallin plan comes just in time for her reelection campaign — in a year where government revenues available for appropriation are down slightly. While Democrats – including state Rep. Joe Dorman of Rush Springs, the likely party nominee in November — in November — were predictably critical of Fallin’s priorities, her main challenge will come from within Republican ranks in both the House and Senate.
While proposing a $50 million boost for K-12 education spending and new spending for a handful of other state government functions, her new proposal is arguably the most conservative Fallin budget outline yet. Among other things, the chief executive proposed 5 percent reductions for most state agencies, a small reduction in overall spending, and a one-quarter percent income tax reduction.
In Oklahoma as in many states, governors propose, but the Legislature disposes. And, the leaders of both the Senate and the House clearly have their own ideas about state spending – including bonded indebtedness — taxation, and treatment of the energy industry.
A leadership change in the lower chamber may contribute to upcoming drama.
Monday, members of the House of Representatives are scheduled to name a successor to Speaker of the House T.W. Shannon, R-Lawton, who is retaining his seat but relinquishing the leadership job to run for the U.S. Senate seat Tom Coburn is leaving this winter.
The current number two in the House, Mike Jackson, R-Jackson, is an income tax cut advocate and not a fan of bond issues, much like Shannon.
Competing with Jackson for the top job is Rep. Jeff Hickman, R-Dacoma. Hickman narrowly lost the Speaker’s race to Shannon in 2013 and is a shade – but only a shade – more moderate than Jackson.
As for the Senate, although many of the upper chamber’s objectives can be characterized as conservative, advocacy of a tax cut was notably absent from the formal listing of Republican priorities, issued Thursday morning.
The stage for substantive discussion was set in Gov. Mary Fallin’s State of the State address, in which she called for a shift toward market forces in public employee compensation.
Upon examination that shift translates into higher pay for some employees (notably state Troopers and human service workers), perhaps fewer employees in several agencies and a shift away from defined benefit pensions to defined contribution retirement plans (modeled on 401 K plans in the private sector) for new state employees.
Fallin strongly encouraged the Legislature to approve new state debt – a bond proposal – to finance at least the front end of exterior and interior state Capitol repairs. The House has recently been the main roadblock to passage of any new bonding measures. Oklahoma state debt is relatively low and outgoing Speaker Shannon, among others, wants to keep it that way.
To the cheers of conservatives in the joint session that heard her State of the State address, Fallin pushed a modest income tax reduction, arguing that it is time to give “a tax cut to taxpayers.”
Last year, the Legislature approved, and Fallin signed, a one-quarter percent reduction in the unpopular levy, but that measure was struck down for violating the state’s “single subject” rule.
The Senate leadership’s silence this week on a lower income tax speaks loudly — a none-too-subtle hint the idea could be in for rough sledding.
Unspoken in the governor’s state of the state message, and in her executive budget, was anticipated tough sledding for her proposal to negotiate with the state’s energy industry a rise in the state’s horizontal drilling incentive.
Several oil industry leaders, including George Kaiser and John Brock, both of Tula support allowing the levy, reduced during the industry’s slump in the late 2000s, to rise moderately this year.
Preston Doerflinger, Fallin’s Secretary of Finance, said there have been active negotiations with industry representatives and members of the Legislature over the issue.
The House seems inclined against a boost, while the Senate leadership appears sympathetic.
Thus is the stage set for a session where the big arguments will be over modest income tax reduction, single-digit cuts in spending at some agencies, small pay hikes for some government employees, pension reforms that could prove significant, and an increase in state bonding authority.
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