Board of Equalization projects $6 billion in tax revenue for legislative appropriation, conservative voices say TSET money could help close $863 million gap
Published: December 22nd, 2016
OKLAHOMA CITY – The state Board of Equalization (BOE) met at the State Capitol Wednesday (December 21). The body approved a project of $6 billion in state government revenue available for legislative appropriation in the fiscal year that begins July 1.
A combination of lower-than-projected tax revenues and recurring expenses (covered with “one-time” money in the current fiscal year) yields a projected $868 million gap for next year.
Final certification of projected revenues will not take place until the customary OBE meeting early in the upcoming legislative session, which begins February 1.
While new rounds of spending cuts seem inevitable in wake of the revenue finding, Governor Mary Fallin, who serves as chairman of the OBE, will renew calls for close examination of existing tax exemptions, business incentives, education administrative inefficiencies and other steps to boost revenues or free-up scarce tax resources.
A recently-created panel that reviews state business incentives has recommended against changes in existing economic incentives programs save for one: the generous wind-power subsidy scheduled to sunset in 2021, but which could be ended earlier.
The wind industry and its allies, powerful at the Capitol, are expected to wage an all-out fight to retain hefty subsidies worth around $100 million in the past year (http://www.www.capitolbeatok.com/reports/big-wind-s-big-loss-as-vermont-goes-so-goes-oklahoma).
Fallin pointed out the state exempts about 150 activities from the sales tax, and said changes could be a source of higher revenue.
The governor mentioned the incoming president-elect’s intention to “block grant” some resources to the states, and said that might boost state revenues in the future. She did not name a time frame for how quickly such changes might occur, but noted that President-elect Donald Trump has laid out “an ambitious agenda” favoring federalism.
Some conservatives opposed to broad tax hikes in general – particularly in the midst of a continuing recession – renewed their advocacy for use of revenues presently beyond the reach of the Legislature and governor.
Besides the chief executive, other members of the OBE include Lt. Gov. Todd Lamb, Auditor & Inspector Gary Jones, Schools Superintendent Joy Hofmeister, Treasurer Ken Miller, Attorney General Scott Pruitt and Agriculture Secretary Jim Reese.
Reese is a Fallin appointee, while all the other voting members of the OBE are statewide elected officers. Pruitt did not attend the meeting.
CapitolBeatOK asked Treasurer Miller about the hefty balance in possession of the Tobacco Settlement Trust (TSET), and whether that could help with portions of the state budget this year and in the future. Miller responded that TSET is under the control of an independent board and “spins off about $50 million a year.” Created through a state ballot proposition and intended as a means to provide health care assistance to lower-income Oklahomans, TSET is not subject to legislative control and, he argued, that is probably wise.
This reporter asked if some portion of the TSET earnings might be used to cover the cost of some recurring portions of the state budget in health care areas. Miller replied that would be up to the TSET board.
In dialogue with reporters, Miller said that some existing business incentives and tax breaks were “not well thought out,” and that reform ideas “still on the table” at the Capitol would be “politically difficult to do.”
Jonathan Small, president of the Oklahoma Council of Public Affairs (OCPA) has frequently criticized TSET’s use of its compartively abundant resources, contending the money could be put to better use than television and print advertisements that blanket the state.
Asked to comment on TSET and this year’s revenue situation, Small told CapitolBeatOK, “”If we truly care about the most vulnerable, we will refocus the hundreds of millions of dollars and annual payouts to TSET on helping pay for state run health care programs that provide medical care for the most vulnerable.”
Last December, an analysis from the 1889 Institute contended, “Thus far, the TSET’s board has apparently elected to spend the money on only a couple of the areas the constitution allows, namely on tobacco cessation and cancer research. Additional allowed uses include public education, after-school programs, and child health, among others.” (http://www.www.capitolbeatok.com/reports/1889-institute-analyzes-tset-spending-patterns)
While the broad revenue and budget picture dominated after-meeting questions from reporters, the session dealt with other steps members of the OBE must take every few months or, in some cases, annually. In every case, the board voted unanimously in favor of the legally-required proposals.
In addition to formal certification of the total dollars available for legislative appropriation, the BOE approved the Office of Management and Enterprise Services (OMES) finding, based on state Tax Commission data, that state revenue will not, presently, allow implementaiton of a drop in the top marginal income tax rate from the current 5 percent levy to 4.85 percent.
After discussion and input from Higher Education Chancellor Glen Johnson (who spoke at Gov. Fallin’s request), the OBE approved a $74.3 million line item for OHLAP (Oklahoma Higher Learing Assistance Program) funding. Johnson said the state has more students, who are taking more total credit hours than ever. While there is presently a $6 million carryover to support OHLAP, better known as “Oklahoma’s Promise,” Johnson said that will be zeroed out by year’s end.