The impact of last year’s U.S. Supreme Court ruling that eastern Oklahoma remains mostly tribal land continues to spread beyond the criminal courts.
The court’s July 2020 ruling in
The court, in a 5-4 decision,
“We are living a nightmare out here,” Ryan Leonard, the Oklahoma governor’s special counsel for Native American affairs, told
The Washington Post. “It’s complete, dysfunctional chaos in the state of Oklahoma.”
Oklahoma expects to lose more than $200 million per year in income and sales tax revenue as a result of the McGirt ruling, named for Jimcy McGirt, a Seminole criminal defendant convicted in state court for a crime on Muscogee land.
If the ruling applies to all five tribes, the state would receive $72.7 million less in income taxes and $132.2 million less in sales and use taxes each year, according to
"The OTC anticipates an immediate impact on tax collections as a result of McGirt, with the bulk of the initial potential impact occurring during FY21," the report said.
The Tax Commission anticipated a $60 million annual loss of income tax and sales and use taxes collected in the 3 million-acre Muscogee Nation alone. But the July 9, 2020 ruling is expected to apply to the Five Civilized Tribes and cover most of eastern Oklahoma.
The Tax Commission also anticipates $218 million in income tax refunds to tribal citizens. Taxpayers can request refunds going back three years.
Amid the chaos in the criminal system, Oklahoma is suing the federal government for “overreach” in stripping the state’s regulatory authority over coal mining on tribal lands. The issue could have a potentially large impact on the oil and gas industry that provides a large share of state revenue.
“One of my most important responsibilities is protecting the state’s economic activities,” Attorney General Mike Hunter told a meeting of the Oklahoma Energy Producers Alliance. “There’s no more important stream of commerce in this state than the exploration and production of hydrocarbons.”
Hunter last week filed a lawsuit against the Department of Interior, Interior Secretary Deb Halaand, and other Biden administration officials for “unlawfully attempting to strip Oklahoma of its jurisdiction to regulate surface coal mining and reclamation operations.”
The lawsuit was announced by Gov. Kevin Stitt.
“The Department of the Interior and other defendants in this case are dead wrong about their decision,” Stitt said in a prepared statement. “They are attempting to unlawfully federalize mines that have been regulated by Oklahoma for almost 40 years by ignoring the clear limitations in the McGirt decision.
“Despite multiple attempts at dialogue, the Biden Interior Department has refused to adequately explain their legal position,” Stitt said. “The state of Oklahoma has no choice but to pursue legal action.”
According to the lawsuit, numerous steps are required before the Office of Surface Mining Reclamation and Enforcement can take over a state program. None were followed, the suit claims.
“This action ignores the law and the reality that Oklahoma has managed these operations for decades,” said Oklahoma Solicitor General Mithun Mansinghani. “The administration’s action jeopardizes the safe operation of coal mining and mine reclamation, state funding, and the jobs of state employees that have been performing this work for many years.”
The lawsuit argues the Department of the Interior is relying on a novel and erroneous expansion of the U.S. Supreme Court’s decision in McGirt, which was explicitly limited to the application of federal criminal law under the Major Crimes Act.
The Oklahoma Tax Commission has said that the McGirt decision has not yet been applied to taxation.
“As you are probably aware, the McGirt Court limited its holding to criminal matters under the Major Crimes Act only,” General Counsel Elizabeth Field wrote in a letter to a member of the Oklahoma Society of Certified Public Accountants.
Conflicts over policy or law between tribes and state governments are generally resolved through compacts. In states like Arizona, those who live on the tribal reservations are almost entirely members of the tribe. In Oklahoma, 90% of the population living in the five reservations are non-Indians, according to state officials. Tulsa, the state's second-largest city, lies within the reservation.
Stephen Greetham, senior counsel for the Chickasaw Nation, said that compacts have always been the key for solving intergovernmental challenges.
"The Chickasaw Nation is proud of what we have done under our agreements with Oklahoma and have long expressed an interest in exploring additional compacts," he said. "McGirt hasn’t changed our position on this, and we would continue to look forward to working with the state’s executive department and, importantly, the Oklahoma Legislature in developing effective agreements to respectfully resolve any differences we may have following this historic court ruling."
A year after the ruling, ratings analysts have not cited the implications in reports on the state.
Moody’s Investors Service rates Oklahoma Aa2. S&P Global Ratings rates Oklahoma’s general obligation debt AA. Fitch Ratings assigns Oklahoma its AA issuer default rating. Outlooks are stable as revenue growth returns to the state.
"In our view, the path to a full fiscal recovery for Oklahoma will likely be contingent on the pace of economic recovery of leading industries, particularly the state's energy sector,” S&P analyst Thomas Zemetis wrote in a May 7 report. “Oklahoma's energy sector comprises just 1.9% of the overall employment base, but a substantial 12.5% of the state real gross state product in 2020, and it remains a key driver of Oklahoma's historical economic expansion and near-term economic recovery.”
