DALLAS – Oklahoma Gov. Mary Fallin called lawmakers to their second special session the week before Christmas in hopes of raising revenue to patch a $111 million budget gap in the current fiscal year and set the state on a more sustainable course for the future.

The second extraordinary session of the 56th Legislature will convene Monday, Dec. 18.

“We know we still have a budget hole for this fiscal year of about $111 million," said Oklahoma Gov. Mary Fallin.
Oklahoma Gov. Mary Fallin. Oklahoma

“Budget plan estimates are being developed on various revenue proposals,” Fallin said. “Instead of waiting for final details, I wanted to give legislators enough notice as possible about when they should return to the Capitol.”

In the first special session that ended Nov. 17, Fallin’s proposed tax increases fell five votes short of the 75% super-majority needed in the House. The bill, which garnered bipartisan support, would have closed a shortfall that was then estimated at $215 million. Instead of raising revenues, lawmakers approved spending cuts, most of which Fallin vetoed.

The revenue shortfall developed after the state Supreme Court ruled a cigarette fee passed in the last week of the regular session unconstitutional. The state constitution requires a super-majority vote for any revenue-generating measure in the last week of a regular session.

The second special session comes as the state is seeing an economic upswing, with gross revenues rising by more than 12% in November, according to Treasurer Ken Miller. Fallin said a preliminary estimate of available funds will be presented to the state Board of Equalization Dec. 20.

“I am hopeful the estimate will show revenue growth for the 2019 fiscal year,” Fallin said. “But even if it does, there will be a need for additional revenue to address the combination of one-time funds currently in the budget, the current fiscal year shortfall from the loss of cigarette fee revenue, spending obligations for 2019, and money to give our teachers and state employees a much-needed pay raise. These items taken together will approach close to $800 million.”

Oklahoma’s Aa2 rating from Moody’s Investors Service has a negative outlook as analysts await resolution of the budget issue. Fallin has echoed analysts’ interpretation of one-time budget solutions as a negative credit factor.

“In recent years, we have patched over our problems by using one-time money that, in effect, borrows from Peter to pay Paul,” Fallin said. “We know we still have a budget hole for this fiscal year of about $111 million from the loss of cigarette fee revenue that will result in cuts that the Health Care Authority will need to make starting Jan. 1 and the Department of Human Services by Feb. 1 if we don’t identify more funding.”

Fallin said she will be working with lawmakers on a budget plan in advance of the session.

While Fallin last month vetoed most of the revised budget bill approved by legislators in the special session, she maintained parts of the bill that temporarily preserved funding for key health and human services until lawmakers return in another special session to approve long-term funding solutions.

She vetoed all but five of the 170 sections contained in the budget measure, saying it did not provide a long-term solution to the recurring budget deficits experienced by the state the past three years. The current 2018 fiscal year budget includes $509 million of one-time funds and future obligations of at least $180 million not included in the 2018 fiscal year budget, which combined results in a starting deficit of almost $700 million for the 2019 fiscal year.

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