DALLAS – In her final State of the State address, Oklahoma Gov. Mary Fallin urged lawmakers to create structural balance for the state budget after two failed attempts in special sessions.

“We are in a unique period as this legislative session begins with a concurrent special session,” Fallin said Monday. “We also are at a special point in Oklahoma’s journey because the prospect of a brighter path forward is so very near.”

Term limits will bring the tenure of Oklahoma's first woman governor to an end after the November election.

"There still will be a need for additional revenue," Oklahoma Gov. Mary Fallin said after revenue estimates for fiscal year 2018.
“Let's focus on the future and make sure we recognize and embrace the opportunity we have in front of us," said Oklahoma Gov. Mary Fallin.

Fallin, a Republican, is proposing $7.28 billion in state spending for the fiscal year that begins July 1.

In her budget summary, Fallin noted that the spending plan, adjusted for inflation, is $1 billion less than the budget approved in 2008 as financial markets were collapsing.

“This plan represents yet another approach to stabilize state revenue and reform government to increase efficiency and cut abuse, all while funding core services and providing a long overdue teacher pay raise,” Fallin’s executive summary says.

Results of the current session could determine whether Moody’s Investors Service removes the negative outlook on Oklahoma's Aa2 rating or downgrades the credit.

“The legislature’s inability to pass a comprehensive and permanent solution is credit negative,” analysts said in a report last November.

Fallin’s plea for structural balance comes four years after she signed into law a cut in the state’s 5.25% income tax rate to 4.85% over several years. In fiscal year 2015, the tax cut reduced revenue by $47.4 million. The following year, the impact was estimated at $71.1 million.

The tax cuts came as the price of oil began its nearly 60% drop in mid-2014, bringing years of revenue shortfalls to the state. At the time, David Blatt, executive director of the Oklahoma Policy Institute, said the tax cuts would take scarce tax dollars from public schools and other important services.

"They voted for automatic tax cuts for future years even though the Tax Commission can't say how much it will cost and we have no projections of what our budget needs will be," Blatt said.

Last year, lawmakers closed a $900 million budget gap. But a state Supreme Court ruling last August declared a tobacco fee approved in the last week of the regular session unconstitutional. That ruling reopened a $230 million shortfall. Fallin and lawmakers have worked in special sessions since the court ruling to make the new revenues clear constitutional muster.

Fallin’s speech Monday marks the third year in a row that she has sought tax increases, four years after she fought for the income tax cut.

It was also the third year in a row that Fallin sought pay raises for teachers in a state that is losing educators to higher-pay neighboring states, particularly Texas.

Fallin’s plan includes a $5,000 pay raise for teachers. Fallin said teachers will see the increase not just as a way to help pay bills, but as a validation of their vocation.

“What kind of future do we want to have?” Fallin asked. “Do we find it acceptable to have four-day school weeks? Is it acceptable for Texas to steal our teachers and leave our classrooms short of teachers?”

With four years of experience dealing with budget shortfalls after the energy collapse, Fallin urged lawmakers to deal with the immediate issues.

"Tradition tempts me to take this opportunity to reflect on the past seven years on what has been my blessing to serve as governor of the state we all love,” Fallin said. “But today is not for yielding to tradition. Today is not to look over our shoulder, but to press on ahead for a better future," Fallin said.

"And that, my friends, is the last you will hear from me today about the previous seven years,” she added. “Let's focus on the future and make sure we recognize and embrace the opportunity we have in front of us."

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