I think it came as a surprise to most people that the amount of money available for appropriation this year actually went down when the State Equalization Board met last Tuesday.  Now, rather than $171 million less to spend for FY-15, the legislature will have $188.5 million less.  I had been told by a senior legislator that certification was expected to go up about $50 million.  

                  At this point it seems doubtful that most state agencies can escape budget cuts.  What's likely to happen is that agencies will be cut to generate funding to deal with unavoidable expenses such as Medicaid, Corrections and DHS child welfare.  It's hard to see how programs, provider rates and state employees will escape unscathed.  We've seen budget cuts before, but in the past they were caused by economic downturns.  These cuts are caused by recent tax cuts and earmarking of revenue that formerly went into the general revenue fund for appropriation.     

                  Honestly, I don't see a lot of handwringing at the capitol.  Most of today's leaders ran on a platform of cutting government, and being forced to make cuts makes that easier.  I do think "right sizing" government has reached the point where people are going to start noticing.  A fire is already brewing under education.  When grandma's prescriptions get cut and provider contracts get cancelled, people react.  It won't be a surprise if Corrections has some sort of crisis.  Changing the way public employees get paid and retire will get a reaction.

                  There are ways this shortfall could be dealt with, even in a conservative manner.  Millions of dollars are going to transportation outside the appropriation process.  The legislature could borrow some of that and repay it in future years.  There are millions in the rainy day fund.  If the governor and legislature agreed on emergency funding the budget could be shored up.  Dealing with unfair and unnecessary tax credits on horizontal and deep well drilling could produce some needed revenue.  The legislature and governor believe they are doing what a majority of the people want.  Unless they hear otherwise they'll continue on the same course.        

Gap grows wider: Board projects bigger-than-expected revenue decrease

By M. Scott Carter

The Journal Record

OKLAHOMA CITY - Remember that bad news about the $170 million hole in the state budget?

It got worse by $18 million.

Already facing a tight budget year, state lawmakers now have a $188 million gap for the 2015 fiscal year. The change came after the state Board of Equalization voted 6-1 Tuesday to certify new budget numbers. In December, the board certified revenue estimates that were about $170 million shy of last year's amount.

On Tuesday, the seven-member board, which includes Gov. Mary Fallin and most statewide elected officials, certified $6.94 billion in revenues available for discretionary appropriations for fiscal year 2015. That figure is $188 million, or 2.6 percent, less than the amount appropriated last year.

That gap comes despite Oklahoma's low unemployment rate and increases in family incomes, gross production tax collections and income tax revenue. Sales tax projections held steady at $254.4 million.

State Finance Secretary Preston Doerflinger pointed to fluctuations in corporate income tax as part of the reason for the decrease, saying that collections fell $45.7 million or 10.9 percent.

"All other areas continue to be up, but we're still dealing with that corporate income tax figure," he said.

Doerflinger described the problem as a classic only-in-government paradox.

"We have more money than ever, but less money than last year," he said. "The question continues to be asked, 'How does this happen?'"

Doerflinger said the state's economy remains strong and the national economy continues to improve. He said every major tax category - except corporate income tax - showed growth between the Equalization Board's December and February meetings.

"These things are causing state tax collections to grow in nearly every major category, but corporate income," Doerflinger said. "Gross tax collections hit an all-time high in January."

State Treasurer Ken Miller said the problem could be caused by the economic model used to project revenue.

"There are some things that lag, maybe there was some softness in corporate income back several months ago that then project forward in an overweighted position, and I think that's what happening in this projection," he said.

Corporate income, Miller said, is a very volatile number.

"I think there are very real concerns on using corporate income and a projected steep drop in income to drive a lower certification," he said. "I think we're lowering a certification based on what I think is a drop in corporate income tax that's not warranted."

Even with the lower revenue projections, Fallin said Tuesday she continued to support a quarter-percent decrease in the state income tax rate.

"We still also believe that keeping our tax rate at a competitive rate - lower - is always important to create the type of business environment that is attractive to jobs," Fallin said. "As we just saw, we've created a lot of new jobs, and we think that's because we've been gradually responsibly lowering the income tax rate as it's possible."

Fallin said she was concerned, however, about the way revenue projections were developed. During Tuesday's meeting, the governor asked Doerflinger and Miller to chair a committee that would recommend a better way to do revenue estimates.

"We have concerns that maybe our revenue estimates might not be as accurate as they need to be," she said. "They are projections, but we think it would be better if we had more than one person who was an economist looking at revenue projections."

Senate President Pro Tempore Brian Bingman, R-Sapulpa, said the state government has been preparing for smaller budgets.

"We are obviously disappointed to see it move further in the wrong direction," Bingman said in a media statement. "But agencies have known about the downturn for several months and have been planning accordingly. We will need to tighten our belt even more and take the time to scrutinize every tax dollar spent to ensure core government services like education, health care and transportation are maintained."

Lawmakers have until May 30 to pass a budget.

House speaker talks Capitol repair, tax cuts

By Tim Talley

Associated Press

OKLAHOMA CITY - The state Capitol architect briefed House Republicans on some of the major repairs needed for the nearly 100-year-old building, but newly elected House Speaker Jeff Hickman said Monday no consensus has been reached on how to finance the overhaul.

Hickman, who was elected speaker last week, met behind closed doors with the 72-member Republican caucus to discuss various proposals to cut the state's income tax and plans to repair the Capitol.

"The overwhelming consensus is that something has to be done," said Hickman, R-Fairview. "It's just a question of what and how much that costs.

"There are obviously some structural issues, not the least of which is the plumbing issue that's going to have to be addressed."

Capitol architect Duane Mass outlined repairs needed for the Capitol that totaled $163 million.

The most obvious sign of problems with the 400,000-square-foot building are yellow barricades erected in 2011 on the south side of the Capitol to prevent pedestrians from approaching the south side of the building, where large chunks of limestone have been falling from the building's facade. The building also has been plagued by outdated electrical and plumbing systems.

Hickman's predecessor, former Speaker T.W. Shannon, opposed financing the repairs with a bond issue, an idea that has the support of Senate President Pro Tem Brian Bingman and Gov. Mary Fallin.

A Senate committee last week overwhelmingly approved a plan for a $160 million bond issue to fund Capitol repairs, and House Democratic Leader Scott Inman said members of his caucus are ready to support the proposal.

Hickman also said no agreement was reached on any plan to cut the state's income tax.

The Legislature last year passed a bill to cut the income tax and divert $120 million in revenue for repairs to the Capitol, but the Oklahoma Supreme Court determined that measure violated a constitutional ban on bills containing more than one subject.

Norman senator tapped to lead Senate Democrats

OKLAHOMA CITY (AP) - Norman state Sen. John Sparks has been selected to lead the Senate Democrats after the 2014 elections.

The 12 Senate Democrats selected Sparks last week as the caucus' leader-elect. He will succeed Sen. Sean Burrage of Claremore, who is not seeking re-election.

Among Sparks' first order of business is to try and keep his caucus from getting any smaller. Burrage is among four Senate Democrats who have said they won't seek re-election in the fall, and it will be a challenge for Democrats to keep control of all those seats.

Sparks said that despite being outnumbered 36-12, Democrats provide contrast to the Republican majority and shine light on the dark spaces.

Oklahoma Capitol could receive $160M face-lift

By Sean Murphy

Associated Press

OKLAHOMA CITY - Oklahoma's nearly 100-year-old Capitol could receive a $160 million face-lift under a measure given final approved Thursday by the state Senate, but the financing method is expected to face resistance in the more conservative House.

The bill, approved on a 36-11 vote, authorizes a state bond issue to pay for the repairs. State Sen. Greg Treat, R-Oklahoma City, who answered questions about the bill on the Senate floor, told his colleagues: "We can't afford to wait any longer and let this building continue to crumble."

Several Democrats questioned why Senate leaders didn't consider tapping the state's Rainy Day Fund, which currently has a balance of $535 million, but Treat said using bonds was "a fiscally responsible way to do it."

Much of the opposition came from conservative Republicans, some of whom preferred sending the proposal to a statewide vote. But Gov. Mary Fallin, a longtime proponent of repairing the Capitol, praised Senate leaders for acting quickly to pass the plan.

"It's our responsibility to maintain and preserve our seat of government," Fallin said in a statement. "A bond issue is the best, most realistic option for restoring the People's House."

The most obvious sign of problems with the 400,000-square-foot building are yellow barricades erected in 2011, to prevent pedestrians from approaching the south side of the building where large chunks of limestone have been falling from the building's facade. Capitol architect Duane Mass said pieces larger than a softball have fallen from the building.

Mass said rusting metal clips that hold the giant limestone panels in place, along with a faulty repair job in the 1970s, are responsible for the rock and mortar falling from the front of the building, which was constructed over three years from 1914 and 1917.

The inside of the building features polished marble floors, valuable artwork and a stunning dome added in 2002. But behind the walls are major problems, including a plumbing system with rotting pipes that has never been completely restored and a hodgepodge of electrical systems.

The next stop for the measure, Senate Bill 2044, is the Republican-controlled House, where there has been increasing resistance to the idea of a bond issue.

Newly elected House Speaker Jeff Hickman told a group of newspaper publishers at the Capitol on Thursday that he was embarrassed they had to walk under scaffolding on their way into the building.

"It is an embarrassment that you all come here to your state Capitol and you can't walk in the front door because there are barricades across the front, and you need to be real careful that a piece of the building doesn't fall on you when you're walking in," Hickman said.

Hickman said that while there is a consensus among his GOP colleagues that major repairs are needed, there is no agreement on how those repairs should be funded. The Legislature approved, and the governor signed, a plan last year to divert $120 million from the state's general revenue fund to pay for the repairs - but that bill was ruled unconstitutional by the Oklahoma Supreme Court.

With legislators facing an estimated $188 million shortfall this year, the prospect of paying cash for the repairs is unlikely. Among the other ideas being discussed are tapping the Rainy Day Fund, issuing bonds, or sending a bond proposal to a vote of the people.

"We're looking at all those options, and I'm trying to determine from our House members, in the short time that I've been in the speaker's office, what they want to do and what they feel like the best option would be to repair this building," Hickman said.

Out-of-state trips precede Okla. Senate vote

By Sean Murphy

Associated Press

OKLAHOMA CITY - Several Oklahoma legislators accepted expenses-paid trips to Miami and Las Vegas from a group that wants to change the way the U.S. elects a president, but because the travel was sponsored by a nonprofit group, rather than traditional lobbyists, there's no requirement for the lawmakers to disclose the trips to the public.

FairVote, which wants states to allocate electoral votes to the candidate who receives the most votes nationally, extended invitations to legislators to attend seminars to learn more about the national popular vote proposal. Another one is set for next month in St. Croix in the U.S. Virgin Islands.

One House member and two state senators, including one who sponsored a bill to change Oklahoma's law, told The Associated Press they were among the Oklahoma legislators who attended the seminars. All three said the trips didn't influence their position on the bill, which passed the Senate last week on a 28-18 vote and was sent to the House.

"To me it's a good way to actually sit down and discuss issues uninterrupted away from the Capitol building," said state Sen. Rob Johnson, R-Yukon, the Senate author of the bill. "I understand some people's concerns, but they're not junkets. We're there to work. We sat there the entire time and discussed the issue."

Also attending were state Rep. Tom Newell, R-Seminole, and state Sen. John Sparks, D-Norman. Sparks and Johnson both support the bill, while Newell said he opposes it.

Because the trips were not funded by lobbyists or the companies that employ them, there is no requirement that the lawmakers disclose the travel and lodging, said Lee Slater, executive director of the Oklahoma Ethics Commission.

A legislator who did not make a trip said the travel and lodging should be disclosed.

"It's a mighty inappropriate loophole that needs to be closed," said state Rep. Jason Murphey, R-Guthrie, a longtime critic of the influence that lobbyists and the companies they represent have at the Capitol. "It's the lack of transparency that concerns me, the fact that very few in the public knew these trips were even going on."

Johnson said he attended a fall seminar in Las Vegas, while Newell and Sparks went to a separate event in Miami. Another seminar is scheduled for March in St. Croix, but FairVote's Executive Director Rob Richie said that trip may be canceled.

"We put out invites, but it's not clear if it will happen," Richie said.

FairVote is a Maryland-based 501(c)(3) that supports several election reforms, including using the national popular vote to determine the president.

Under the bill, Oklahoma would join nine other states and the District of Columbia that have passed legislation to award electoral votes to the presidential candidate who receives the most popular votes in all 50 states and the District of Columbia. The intent, its backers say, would ensure that every vote counts, not just those in traditional "swing states" that influence the outcome of presidential elections.

The state Republican Party opposes the bill. Dave Weston, the state party chairman, noted George W. Bush would have lost to Al Gore in the 2000 presidential election if the national popular vote had been in effect.

"The same would apply to the 2008 and 2012 elections; despite Oklahoma's overwhelming support for the Republican nominee, our electoral votes would also have been awarded to Barack Obama," Weston said. "Our country's founders gave smaller states an intentional advantage with the electoral college. The numbers don't work in our favor when we give that up."

State Rep. Don Armes, the House author of Senate Bill 906, declined to say Wednesday whether he attended any of the trips sponsored by FairVote.

"I'm not ready to talk about all of that," said Armes, R-Faxon.

State case against health care law enters new stage

By Randy Krehbiel 

Oklahoman Online

MUSKOGEE - Oklahoma's attack on the Affordable Care Act entered a new stage this week with the filing of a motion for summary judgment in the 3-year-old case.

State Attorney General Scott Pruitt and Solicitor General Patrick Wyrick filed the motion late Tuesday in the U.S. District Court for the Eastern District in Oklahoma in Muskogee. The federal government is expected to file a response in the form of a cross-motion for summary judgment by March 18.

A second round of responses will then be filed over the next two months.

U.S. District Court Judge Ronald White is expected to base his ruling on those arguments. White's decision is likely to be appealed.

Pruitt originally sued in January 2011, just after taking office, challenging the act on constitutional grounds. A U.S. Supreme Court ruling in June 2012 caused Pruitt to file an amended petition in which he argued the act makes no provision for enforcement of noncompliance penalties in states such as Oklahoma that have not implemented health insurance exchanges.

"The administration miscalculated how many states would support this law and set up their own health care exchanges," Pruitt said.

Pruitt maintains rules promulgated by the Internal Revenue Service to deal with such situations are outside the scope of the law.

"The IRS is unlawfully changing the Affordable Care Act without going through Congress," Pruitt said. "The agency is ignoring the language of the ACA in order to 'fix' the law. That's not what our constitution allows."

Pruitt and others maintain that the act will be unable to function if the enforcement provisions challenged by Oklahoma are ruled out.

The Oklahoma lawsuit has attracted the attention of opponents who see in it perhaps their best hope of nullifying the health care law.

Lawmaker has constitutional convention bills

By Tim Talley

Associated Press

OKLAHOMA CITY - An Oklahoma legislator who has been calling for changes to the 50,000-word state constitution doesn't want to stop there.

State Rep. Gary Banz wants to see the U.S. Constitution changed, too, to prohibit Congress from appropriating money in excess of federal revenue estimates in any fiscal year, except during a national emergency.

"We're going to have a fiscal tsunami that's going to destroy the nation if we don't do something," Banz said. The U.S. Treasury Department said recently the nation's deficit from October to January was $184 billion and last year was $680.2 billion.

Banz, R-Midwest City, has introduced bills at the Oklahoma Legislature that would call for two constitutional conventions - one state and one federal.

Oklahoma hasn't held a referendum on its constitution since 1970, even though the document itself says it should do so every 20 years. There hasn't been a federal constitutional convention since the Constitution took effect in 1789. Two-thirds of the states, a total of 34, must approve a petition for a convention for one to be called.

Under the state petition, delegates would meet next year to consider whether to change the state constitution or start again from scratch. A ratification vote would occur in 2016.

Banz' two earlier attempts cleared the House but died in the Senate.

This is the first year Banz has suggested a federal constitutional convention. Twenty states have passed similar petitions.

"It's easy for people to get them confused," Banz said.

The Oklahoma Constitution requires voters to consider a constitutional convention every 20 years, but the last time they were asked was March 17, 1970, when the idea was soundly rejected. Voters also rejected conventions in 1926 and 1950 - and in 1994 rejected an effort to drop the requirement for referenda every 20 years.

In addition to archaic language such as declaring the flashpoint of kerosene is 115 degrees Fahrenheit, the document also requires that candidates for governor and lieutenant governor cannot run on a single ticket, "which is a reflection of this populist mentality that wrote that Constitution," Banz said.

"They wanted to divide that power every which way they could."

But Banz wouldn't say if that part of the constitution needed to be changed.

Legislation petitioning Congress to convene a constitutional convention to consider a balanced budget amendment is part of a growing movement among conservative lawmakers opposed to deficit spending on the federal level.

The measure calls on Congress to convene a constitutional convention that would be limited to proposing a balanced budget amendment. Oklahoma delegates would be authorized to debate and vote on only a balanced budget amendment even if the convention was not limited to that issue.

The possibility that the convention's focus could be wider than just a balanced budget amendment alarms some conservatives concerned it could lead to the loss of existing constitutional rights.

"History tells us, as well as good legal minds, that you cannot limit this to one issue," said Charlie Meadows, president of the Oklahoma Conservative Political Action Committee, which supports conservative legislative candidates.

"The concern of a runaway convention is very strong," Meadows said. "We could lose our Second Amendment rights (to keep and bear arms). We could lose our freedom of speech, our freedom of religion. We could lose a lot of our constitutional rights if we ever convened one of these things."

But Meadows said he shares Banz's concern about deficit spending by Congress.

"Our entire economy is dependent on deficit spending right now," he said.

But instead of considering altering the U.S. Constitution, Meadows said state officials should voice their opposition by returning "deficit dollars" Congress appropriates to the states for federal programs they administer. Meadows said 40 percent of all federally appropriated money is "deficit dollars."

"I believe it's a state solution," Meadows said. "If there is ever to be restoration of responsible government, it must come from the states."

House passes physical therapy referral bill

By Tim Talley

Associated Press

OKLAHOMA CITY - The Oklahoma House of Representatives passed legislation Wednesday that allows physical therapists to treat ailments without a prior referral from a doctor or other medical professional.

The House voted 68-21 for the legislation and sent it to the state Senate, where similar legislation is being considered.

House Bill 1020 removes restrictions in current state law that require a doctor or other medical professional, such as a dentist or podiatrist, to refer a patient before a physical therapist can diagnosis and treat an ailment.

State Rep. Arthur Hulbert, R-Fort Gibson, the bill's author and himself a physical therapist, said allowing physical therapists to treat human ailments without referrals would lead to fewer unnecessary physician visits and help lower health care costs. Hulbert said 48 other states already have some form of direct access to physical therapists without physician referrals.

Opponents said physical therapists need physician oversight because they do not have the same level of education and training to reliably diagnose a patient's disorder.

"You might have a pain in your arm and have a heart attack and think it's just a pulled muscle," said state Rep. Pam Peterson, R-Tulsa, whose husband is a physician.

Physical therapists are an important part of the medical team that includes a variety of allied health professionals, she said.

"But they are not the captain of the ship," Peterson said. "They're not trained to discover cancer."

State Rep. Mike Rite, R-Broken Arrow, also a doctor, described the bill as "an expansion of scope" for physical therapy professionals that should require them to receive the same level of education and training as doctors.

But another physician, state Rep. Doug Cox, R-Grove, said he supported the bill and believed physical therapists "have a wonderful knowledge and get wonderful results."

Cox disagreed that the measure would expand the scope of physical therapy practice because the legislation does not allow them to do anything more than they already do. Physical therapists are primarily concerned with impairments and improving mobility and movement through diagnosis and physical intervention.

Hulbert acknowledged that the training physical therapists receive is different than that of medical doctors.

"Physical therapists are not trying to be MDs," he said. But Oklahoma ranks second in the nation in the level of restrictions on physical therapy practice and ranks among the worst in the nation in health outcomes for its citizens.

He said opponents of the bill had implied that removing the physician referral restriction would threaten patient safety.

"It is safe? Yes," Hulbert said.

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