The other shoe has fallen as far as next year's state budget is concerned.  The State Board of Equalization met last week and certified $171.5 million less will be available for appropriation next year than was available this year.  All things being equal that would call for a 2.4 percent cut throughout state government.  Except for a decision by the state Supreme Court declaring a tax cut and appropriation bill unconstitutional, the decrease would be $273 million or 3.8 percent.   

            I was encouraged by Governor Fallin's initial reaction taking a wait and see approach to re-enacting the tax cut and saying it's time to consider bond financing to repair the capitol.  But since then, both the House and Senate leaders have indicated they support re-enacting the tax cut.  And I don't look for the House to change its opposition to bond financing for the capitol any time soon. 

            The Equalization Board will meet again in February to make a final determination on how much will be available for the Legislature to appropriate.  If the numbers come in stronger for December and January, it could create a slightly better picture, but not by much. Agencies and programs that were planning to request an increase in services may be fighting to maintain current levels.   

            Everyone knows the economy has been rocky.  But the shrinking of available funding for state government services, including education, mental health and public safety, is not totally a product of the economy.  About a billion dollars has been removed by tax cuts.  In addition more than another half billion has been removed from the general revenue fund and earmarked for specific purposes.  Today's leaders feel they were elected to shrink government and lower taxes, and that's what they're doing.  They will continue the same policies unless they hear a different message from constituents.  

State court tosses income tax cut

Law violated constitution, justices ruled

By Randy Ellis

The Oklahoman

The Oklahoma Supreme Court on Tuesday unanimously tossed out a new state law that established incremental state income tax cuts tied to economic growth.

The legislation, which included provisions creating a fund for Capitol repairs, violates a constitutional prohibition against including more than one subject in a single bill, the court said.

"The bill concerns income tax rate reduction as well as the creation of a fund for repairs to the state Capitol building," Justice James Winchester wrote. "We ... hold the statute unconstitutional as it violates the single subject rule mandated by ... the Oklahoma Constitution."

The bill had been one of the top priority pieces of legislation for Gov. Mary Fallin and Republican legislative leaders. Tuesday, they expressed disappointment at its rejection.

"I am extremely disappointed in the Supreme Court's decision to unravel a plan that would have provided tax relief to Oklahoma families as well as a way of restoring our crumbling Capitol building," Fallin said. "I will work closely with the Legislature to develop a strategy to move forward."

'Blow to ... families'

House Speaker T.W. Shannon, R-Lawton, called the ruling "a huge blow to Oklahoma families who have been expecting tax relief."

"I'm deeply disappointed the Supreme Court has once again ruled against the interests of those families," Shannon said. "The good news is, help is on the way. I am prepared to act quickly with legislative leaders and the governor to restore what the Supreme Court has undone."

The rejected measure, HB 2032, called for reducing Oklahoma's top income tax rate from 5.25 percent to 5 percent on Jan. 1, 2015.

It also set up a mechanism that would have cut the top income tax rate to 4.85 percent in 2016 if total revenue growth in fiscal year 2016, which begins July 1, 2015, equaled or exceeded the fiscal impact of the 0.15 percentage point cut.

The bill also would have created a fund for Capitol building repairs, calling for $60 million to be used for Capitol repairs in fiscal year 2014, which began last July 1, and an additional $60 million to be set aside for repairs in fiscal year 2015.

Backers of the tax cut indicated about 62 percent of the state's 1.6 million tax filers would have received a tax cut if the court had upheld the law. None would have seen an increase.

The average return would have had an $82 tax break at the 5 percent maximum tax rate and a $143 tax break at the 4.85 percent level, but amounts would have varied considerably depending on income, Oklahoma Tax Commission officials have said.

Oklahoma taxpayers with federal adjusted gross incomes of up to $25,999 would have gotten back $8 or less, with some receiving nothing, at the 5 percent maximum tax rate, officials said.

Taxpayers would have needed adjusted gross incomes of $80,000 to $99,999 to get back an average of $108. Those with adjusted gross incomes of $200,000 to $499,999 could have expected savings averaging $371 and those earning $1 million or more would have gotten back an average $1,377.

The tax cut bill was successfully challenged by Jerry Fent, an Oklahoma City attorney who has a long history of challenging legislation that he believes to be unconstitutional.

Justices ruled that HB 2032 violates the constitutional single subject rule that is designed to prevent log rolling - the practice of piggybacking an unpopular law with a popular measure so lawmakers can't approve one without the other.

"Taxation policy and the appropriation of state funds for Capitol improvements are not germane ... to a readily apparent common theme and purpose," Winchester wrote. "A voter could certainly be for one measure and not the other, but forced to approve the entire bill in order to pass the desired legislation. The single subject rule prohibits this unpalatable choice."

Not everyone was disappointed by Tuesday's court decision.

State Rep Mike Ritze, R-Broken Arrow, said he was "very pleased that the Oklahoma Supreme Court ruled in favor of the state Constitution today, despite the fact that the bill included a tax cut that would have helped all Oklahomans."

"At the end of the day, it is far more important that Legislators abide by their oath to defend the Constitution as the state Supreme Court has done with this ruling," said Ritze, who removed his name as a co-author of the bill when the language was added concerning Capitol repairs.

State Rep. Mike Reynolds, R-Oklahoma City, called the ruling "a victory for transparency."

"I've been disappointed in House leadership constantly attacking the Supreme Court's decisions on the single-subject rule," he said. "It would have been very easy to pass the tax-cut bill without the leadership's pet project of Capitol improvements."

"Today all Oklahomans have lost a tax cut - not due to a ruling of the Oklahoma Supreme Court, but due to the refusal of the Legislature to abide by the Constitution," Reynolds said.

Okla. schools to lose $40 million in tax exemption

TULSA - Oklahoma public schools stand to lose about $40 million this year because of new tax exemptions that have primarily benefited telecommunications companies, utilities and railroads, according to Oklahoma Tax Commission estimates.

Passed by Oklahoma voters in 2012, State Question 766 extended the intangible property tax exemption that locally assessed companies enjoyed previously to centrally assessed corporations.

The Tulsa World reports that of the 254 centrally assessed corporations that could have qualified, 97 submitted exemption claims and 69 of those had their claims recognized.

Paula Ross, communications director for the tax commission, said revenue from those centrally assessed properties account for a significant portion of property tax revenue that benefits public schools and local governments, with 67.1 percent flowing to schools.

The newspaper sought the names of the corporations after the Tulsa school board was recently told at a public meeting that AT&T had been the biggest beneficiary of the change in state law. But Ross said confidentiality rules prevented the commission from providing a company-by-company breakdown.

She said the telecommunications sector accounted for $34.4 million - or 57 percent of the $60.2 million estimated to be lost in property tax revenue.

Trish Williams, the Tulsa school district's chief financial officer, told the board the decrease in net assessed valuation could be attributed only to the first-year impact of corporations like AT&T being allowed to exempt themselves from paying millions in property taxes.

For Tulsa schools, the loss is estimated at $1.4 million from the general fund and $200,000 from the building fund.

"The impact is expected to grow in the coming years as more companies claim exemption status and as our economy becomes more service- and technology-centered," Williams said.

Estimates of the impact State Question 766 will have on 2014 property tax collections have varied from $12 million to $60 million and, in worst-case scenarios, about $100 million.

Workers' comp law upheld

By Randy Ellis  

The Oklahoman

The Oklahoma Supreme Court on Monday upheld the constitutionality of Oklahoma's new workers' compensation law, sparking jubilation among many Oklahoma government and business leaders.

"The Supreme Court acted properly today in upholding the constitutionality of Oklahoma's workers' compensation reforms," Gov. Mary Fallin said. "I am excited the state can move forward with improvements that will help to encourage job growth and investment in Oklahoma while delivering on a more efficient, effective and fairer workers' compensation process."

Fred Morgan, president of The State Chamber of Oklahoma, called Monday's ruling "a big victory."

"Today's decision is obviously very good news for the business community," Morgan said. "We hope the new law can be implemented promptly."

The Supreme Court ruled that the new law does not violate a constitutional prohibition against covering multiple subjects in a single bill.

However, three justices did express concerns about opt-out provisions in the law. They indicated those opt-out provisions may not pass constitutional muster if future constitutional challenges are made once administrative rules have been developed and implemented.

Despite those cautions, backers of the new law clearly were thrilled by Monday's ruling.

"These reforms create a new and modern system that protects workers and is fair to Oklahoma businesses," said House Speaker T.W. Shannon, R-Lawton. "The archaic and confrontational system this state has relied on in the past did little for workers, hurt business and only benefited the handful that profited from such a dysfunctional system. This ruling ensures Oklahoma is moving in the right direction."

The new law phases out the state's judicial workers' compensation system and replaces it with an administrative system which will go into effect in February of 2014.

The new law also authorizes employers to opt out of the state system as long as they provide equivalent benefits to injured workers.

Opponents challenged the law on multiple grounds, but the Supreme Court's majority opinion focused on the allegation that the new law could violate a constitutional prohibition against covering multiple subjects in a single bill - a practice commonly referred to as logrolling.

The court rejected that claim.

"As all sections of the new law are interrelated and refer to a single subject, workers' compensation or the manner in which employees may ensure protection against work-related injuries, we disagree with the constitutional challenge to the Administrative Act on grounds of logrolling," justices wrote in the majority opinion.

In a separate concurring opinion, Justice Douglas L. Combs agreed the law didn't violate the single-subject rule but said provisions established for employers who opt out of the administrative system "do not provide adequate due process protections" for injured employees.

"Right out of the gate, claimants whose employers have opted out receive a lower level of due process protection than claimants whose employers chose not to, and that decision is not made by the claimant, but by the employer," he wrote.

Vice-Chief Justice John F. Reif expressed similar concerns in an opinion that dissented from a portion of the court's majority opinion.

"A fundamental element of due process is a fair and impartial trial," he wrote. "Under the opt out system, the employer and any 'appeals' committee chosen by the employer cannot satisfy the impartiality requirement of due process, because the employer has a direct pecuniary interest in the decision of a claim."

Several elected state officials and lawmakers issued news releases Monday praising the court's decision upholding the constitutionality of the new law.

"The decision by the court is a victory for the reform of workers' compensation in Oklahoma and those who desired to see our antiquated system changed," Attorney General Scott Pruitt said. "I am thankful that our office was able to play a significant part in upholding the changes made by the Legislature by successfully defending the constitutionality of the law."

Oklahoma Insurance Commissioner John D. Doak said the ruling is "great news" for economic development and jobs in the state of Oklahoma.

"Oklahoma currently has one of the highest average costs of workers' compensation benefits in the nation, which has had an enormous impact on our state economy," he said. "The new law has already shown significant workers' compensation insurance rate decreases across the state and will continue to bring positive change to our state by ensuring Oklahoma is one of the best places to do business."

Senate President Pro Tempore Brian Bingman, R-Sapulpa, said he was confident from the beginning that the law wasconstitutional.

"With this ruling, the creation of the new state Workers' Compensation Commission can continue without delay to ensure a seamless transition for businesses and employees alike," he said.

Okla. finance officials project revenue decline

By Sean Murphy

Associated Press

OKLAHOMA CITY - Early projections show that the Oklahoma Legislature will have less money to spend on state programs in the upcoming fiscal year, prompting the state's finance secretary on Wednesday to warn agency leaders to prepare for flat or reduced budgets.

Secretary of Finance Preston Doerflinger said early estimates show that the Legislature will have about $6.9 billion to appropriate for the fiscal year that begins July 1. That's about $273 million, or 3.8 percent, less than lawmakers spent on the current fiscal year.

The revenue estimates are expected to be certified on Thursday by the Oklahoma Board of Equalization and will be used by Gov. Mary Fallin to prepare her executive budget, which is often a starting point for budget negotiations with the Legislature.

"Barring a big revenue increase, it looks like the next state budget will be slightly smaller than last year or flat," Doerflinger said.

However, as a result of Tuesday's decision by the Oklahoma Supreme Court to toss out a bill to cut the state's top personal income tax rate and divert $120 million in tax collections for Capitol repairs, Fallin plans to make a motion to add about $103 million back into next year's budget. If approved by the board, that would reduce the budget hole to about $170 million, or about 2.4 percent less, than what was appropriated last year, Doerflinger said.

The board will meet again in February to make a final determination on how much will be available for the Legislature to appropriate, but Doerflinger said a major change in the revenue picture is unlikely.

Although Oklahoma's economy is continuing to improve and overall gross collections to the state treasury are up, Doerflinger said collections to the general revenue fund, the state's main operating account, are dwindling as a result of legislation over recent years to divert money directly to pay for things like transportation, education, pensions, and various tax credits and incentives.

In 2007, Doerflinger said more than 55 percent of overall revenue collections went to the general fund. This year, that figure is down to about 45 percent.

"Policymakers now control less than half the revenue collected by government because the general revenue fund is losing ground each year," he said. "Even though most of the redirected funds are going to necessary, noble purposes, the trend should still cause pause."

State Rep. Tom Newell, R-Seminole, said: "We knew all along that even with a flat budget that we were going to have to make some tough decisions. Now, this just makes those decisions even tougher."

Education officials, who have been pushing for more funding as a result of increased enrollment, say public school students are likely to suffer from flat or reduced budgets.

"It's our students who will be sitting in overcrowded classrooms," Oklahoma Education Association President Linda Hampton said in a statement. "It's our students who will be retained in third grade this year if they cannot pass the reading test, who won't receive the needed remediation. It's our students who won't have access to technology and will be forced to use outdated textbooks.

"You can't expect everything and pay for nothing," she said.

Animal rights groups seeks banner at Capitol

OKLAHOMA CITY (AP) - Officials with the animal rights group People for the Ethical Treatment of Animals said they want to hang a banner at the Oklahoma Capitol encouraging people not to eat meat.

PETA Executive Vice President Tracy Reiman said in a letter Tuesday to the Oklahoma Capitol Preservation Commission that the banner would promote compassion and understanding for all.

The animal rights group is the latest to express its desire to have a display at the state Capitol, where the Legislature approved a Ten Commandments monument in 2009. A New York-based group of Satanists also expressed an interest in erecting a monument, as did a Hindu leader from Nevada.

Reiman said in a press release the proposed PETA banner would encourage people to "Go Vegan" and feature numerous religious symbols.

Dorman forms panel to consider gubernatorial bid against Fallin

Mary Fallin is a popular Republican governor with a campaign chest of about $1 million almost a year out from the 2014 general election, a situation few potential challengers would be willing to take on-one of them being Democrat Joe Dorman, a state representative from Rush Springs.

"Being out there, visiting with the citizens of Oklahoma, I don't think she's as popular as she thinks," Dorman said Tuesday morning after filing documents with the Ethics Commission to form a gubernatorial exploratory committee.

The term-limited legislator quipped that currently he has $307 to roll over for a race against Fallin.

"We're going to work hard to raise the funds that we'll need to run a successful and competent race," he added.

A former House staffer, Dorman first ran for the House in 2002.

"Working the last 90 days on the storm shelter petition, going around the state of Oklahoma, many citizens approached me about how disappointed they are things are running in state government right now," he said. "I've done a lot of soul searching the last few weeks, visited with my family and decided I wanted to form the exploratory committee to look at this and see if it's the right way to go."

Dorman has been the key legislative supporter of the Take Shelter Oklahoma initiative petition drive, which fell about 40,000 signatures short Monday of obtaining the 150,000-plus voter signatures they needed to put a $500 million school storm shelter bond issue proposal on the ballot.

We asked the lawmaker whether he still plans to push a legislative measure on the same issue.

"I absolutely am filing a bill to form the issue for the bond issue for the storm shelters," he said. "That's going to be my number one goal in this legislative session."

The organization wants the Oklahoma Supreme Court to grant it more time for the effort.

Dorman said if that does not occur, he will push forward with his legislation.

"It's going to be the same language of what we see in the proposed state question," he said.

Dorman said that education is going to be a top issue.

"Working the last 90 days with the storm shelter issue, visiting with teachers especially, about the conditions we're seeing in schools, what we've seen Gov. Fallin and Superintendent Janet Barresi do to education-I think that has to be one of our most critical issues we'll look at," he said.

Dorman is cognizant of the fact that he would have an uphill battle going head-to-head against Fallin, a former U.S. representative who was also the state's first woman lieutenant governor.

"Any time you run a race against an incumbent, you're the underdog," Dorman said. "But I was the underdog in my first legislative race, also. I'm used to being in that position. The size of the electorate is just expanded a little bit. But I'm going to run the best race I possibly can. I'm going to put together a good team and we're going to give it our best shot."

He said he expects most of his campaign contributions to be $25 or $50, from Oklahomans who are "looking for real leadership."

The pro-life state representative said he is confident going forward with the exploratory committee.

"I'm looking forward to listening to Oklahomans over the next period of time, before session especially, while I have time to get out and visit with individuals before our work begins here at the Capitol," he said.  "I feel good about the odds."

Dorman said the economy and economic development are also key issues.

"We have seen a stagnant economy in recent months," he said. "We've seen the numbers coming in on projections that do not look good for the budget. We've got to work to enhance business opportunities for individuals. We've got to put Oklahomans to work."

Libertarian R.J. Harris has also said he plans to seek the Democratic nomination for governor.

DEQ selects new director

By Sarah Terry-Cobo

The Journal Record

OKLAHOMA CITY - The Oklahoma Department of Environmental Quality's board of directors named a new head of the agency on Wednesday.

Scott Thompson assumed the role of director effective immediately. He replaced Steve Thompson, no relation, who retired in October.

Scott Thompson has been director of the DEQ's land protection division since 2000. He managed environmental investigation, cleanup, permitting and enforcement programs and engineering and design projects. In addition, he also managed the agency's Superfund program, a federal program aimed at cleaning up hazardous waste sites. He has more than 23 years of experience managing state environmental programs, according to the agency.

Thompson has a bachelor's degree in biology and a master's degree in environmental science.

Tar Creek cleanup manager plans changes at DEQ

By Sarah Terry-Cobo

The Journal Record

OKLAHOMA CITY - Scott Thompson is ready to shake things up at the state Department of Environmental Quality. On Thursday, his first full day as director of the agency, he outlined several changes he has in mind.

Thompson was named director Wednesday after serving as the land protection division's director for 13 years. In that position, he oversaw the cleanup of the Tar Creek site. He plans to streamline permit processes, make the agency more accessible for new businesses, and ensure that each employee has the sense of representing the DEQ.

He said he doesn't see an inherent conflict between the energy industry and the environment.

"Most people are for clean air and clean water," he said. "We do need jobs and to be able to afford to get around in our cars, heat and cool our homes, and run our computers. We need to work together."

He has managed the agency's most complicated and polluted cleanup projects, from overseeing brownfield sites to the Tar Creek Superfund site. He has spent his career working for the state and is looking to other states for examples of how to run government agencies more efficiently.

Roots in OKC

Thompson's first job after college was with the state Health Department's environmental services division. He joined the agency in 1984 after he graduated from Central State University with a degree in biology. But his interest in science and the outdoors stems from his upbringing.

He grew up on the outskirts of northwest Oklahoma City. He played in the woods, dug up crawdads in the gurgling creeks and fished in farm ponds. As a young field investigator, he traveled across the state taking stock of the remnants of industry and identifying hazardous sites. Some of those sites were later classified as brownfields when the federal Environmental Protection Agency developed an official designation and certification process.

"Sometimes you do something that doesn't pay off right away," he said. "Then the opportunity shows up and boom, you have useful information."

Investing fees

In the 1980s, the state changed its rules on landfills. They had to collect fees based on how much garbage was disposed. But most operators had no idea how much they were accepting each year, because scales weren't used, said Michael Patton, executive director of the Metropolitan Environmental Trust.

Thompson played an important role in making sure tipping fees were low to help landfill operators manage the change. He also made sure those fees were used to purchase scales at landfills as a community investment, Patton said.

"I've always respected Scott," Patton said. "He is incredibly professional. Even when I disagreed with him, it was never held against me punitively, and he always made sure my voice was heard."

The most polluted site in America

The Tar Creek Superfund Site in northeast Oklahoma has been classified as the most polluted place in the United States by the EPA. The abandoned mining district, about 50 square miles, includes contaminated streams and millions of tons of material, including leaded chat piles. Much of the area is within the Quapaw Tribe's boundaries.

Thompson said working to clean up Tar Creek, while still a work in progress, has been the most complicated and challenging endeavor of his career.

"Just the sheer size, and the effort, and the volume of material," he said. "There has been lots of controversy and some success. I'm not sure I'll see the end of that (controversy). I feel pretty good with where we're working with the tribes and citizens."

Bob Nairn, professor in the School of Civil Engineering and Environmental Science at the University of Oklahoma, has spent the last 13 years focused on building wetlands to remediate the toxic waters downstream from the acidic mine drainage. He said Thompson excels at managing complex and controversial pollution cleanup projects.

"On a personal level, he is very approachable, very personable," Nairn said. "Sometimes that isn't always the case when you're dealing with controversial environmental issues, but he is the guy to handle those sorts of situations."

Tim Kent, environmental director of the Quapaw Tribe, said Thompson always supported how the tribe wanted to direct the cleanup. Sometimes that meant being at odds with the EPA. But showing a unified front helped both sides, Kent said.

"The tribe really appreciates Scott's cooperation more than anything," he said. "I think it is fair to say the tribes in Oklahoma don't always don't get along with the state. But that hasn't been true with Scott and the DEQ."

And as federal dollars dwindle, Thompson manages the funds efficiently to do more with fewer resources, Kent said. He supported Thompson's selection.

"You will see a lot of things get done more efficiently, and that will satisfy people on both sides of the aisle: He will use taxpayer money well and still get things done," Kent said.

The agreement with the Quapaw Tribe to clean up parts of Tar Creek is the first partnership of its kind in the nation. If the Quapaw Tribe succeeds, it could provide a model for more local involvement in pollution remediation projects, Thompson said. Oftentimes, the community is more satisfied with the work when it is managed on a local level, he said.

For the future

Thompson is serious about shaking up the agency. One of the first things he wants to do is to make the agency easier for businesses to interact with. He envisions pulling people from each division who do great customer service and having them guide new businesses through the permit process.

Thompson also wants to emulate Colorado's hazardous waste registry. The Centennial State has a program for businesses that create small amounts of hazardous waste. They take online courses that outline rules and regulations. Rather than punishing a small business for not following a rule it may not understand, Thompson would like to inform those business owners on how to comply.

He isn't seeking an increased appropriation for the next fiscal year, but he said the DEQ couldn't withstand a budget cut.

Thompson said he wants the agency to continue cleaning up properties so they can be used for business development.

"I really like working with people to clean things up instead of fighting, or even document things to show it doesn't need to be cleaned up," he said. "When we bring parties together and mediate, that's better for everyone."

Okla. imposes moratorium on Capitol monuments

By Sean Murphy

Associated Press

OKLAHOMA CITY - After hearing from satanists, Hindus and an animal rights group, the panel that oversees the grounds at the Oklahoma Capitol says it's not taking any more requests for new displays at the Statehouse.

The Oklahoma Capitol Preservation Commission voted Thursday to approve the ban until a court dispute over the current Ten Commandments monument is settled. It was that monument that the New York-based Satanic Temple said opened the door for it to seek its own display at the Statehouse in Oklahoma City.

That was followed by similar requests from a Hindu leader in Nevada, the People for the Ethical Treatment of Animals, and the satirical Church of the Flying Spaghetti Monster.

"At this time, I believe action by the (commission) on any of these requests would be premature given that the lawsuit has yet to be decided," said Commission Chairman Trait Thompson.

The Republican-controlled Legislature in 2009 authorized the placement of the privately funded Ten Commandments monument at the state Capitol, and former Gov. Brad Henry, a Democrat, signed the bill into law. It was placed on the north steps of the building last year, and the Oklahoma chapter of the American Civil Liberties Union has sued to have it removed.

Brady Henderson, legal director for ACLU Oklahoma, said that if state officials allow one type of religious expression, they must allow others as well.

"The best solution is to say: 'Let's just get out of the religious monument business," Henderson said. "This isn't an issue that can be solved with more and more religions or points of view represented."

The Satanic Temple said earlier this month that it would file a formal request with the commission. A spokesman for the group said it's nearly finished with the application and that the moratorium should not be applied retroactively.

"At the state Capitol a monument to the Ten Commandments still stands," spokesman Lucien Greaves said in an email to The Associated Press. "If ... the monument to the Ten Commandments remains, then our case for placing a Satanic monument still holds merit."

A fundraising website dedicated to erecting the satanic monument showed the group had raised nearly $8,000 toward its $20,000 goal as of Thursday afternoon.

Thompson said Thursday's vote won't affect a state senator's plans to erect a privately funded Bill of Rights monument.

"I can't tell the Legislature what to do," Thompson said. "That's completely up to them."

Board to make first FY 2015 revenue certification on Thursday; tight budget picture expected

State officials have been warning agencies for months not to expect major budget increases for the upcoming fiscal year. They will find out just how constricted FY 2015 funding numbers may be on Thursday, when the State Equalization Board makes its first estimate of revenue available for appropriation during the 2014 legislative session.

The board's certification is used by the governor to develop her executive budget for the coming fiscal year, which is submitted to the legislature for review.

In October, state Finance Secretary Preston Doerflinger told agency heads to tighten their belts and anticipate flat budgets in FY 15, as revenue collections for the first quarter of FY 14 fell about 4 percent below the same period the prior year.

Doerflinger said issues such as the $60 million in income tax funds that will be deposited into a new Capitol repair fund were also factors in the drop.

Just last week, Doerflinger said that July-November collections of $2.1 billion were 1.4 percent below the same period in FY 2013 and 6.5 percent below the estimate.

That means agencies should be realistic and "prepare to make do with what they already have," the state finance official said.

Gov. Mary Fallin has issued her own caution, warning that that the state will have to shoulder some $60 million in mandatory health care expenditures next fiscal year as the state's portion of Medicaid spending rises.

Fallin won't commit to pushing tax cut next year

By Sean Murphy

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 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 that 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. Shannon did not immediately respond Thursday to a request for comment.

"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 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.

Have a good week.  Give me a call at 918.671.6860 if I can be of help in any way.