DALLAS – Oklahoma teachers and state employees demanding better pay are pressing lame-duck Gov. Mary Fallin and tax-averse Republican state lawmakers to resolve a crisis that has taken center stage in statewide election campaigns.

The threat of an April 2 teacher walkout comes in an election year after the GOP-controlled state government cut taxes, followed by a series of revenue shortfalls leading to deep cuts to education and state agencies.

Gary Jones, the Oklahoma State Auditor & Inspector, is a Republican candidate for governor in 2018.
Gary Jones, a Republican candidate for governor, is calling for higher taxes on motor fuel and oil and gas production to help with the state's budget problems. Jones campaign

Lawmakers are struggling to find solutions in the upcoming fiscal year less than a month after finally producing a balanced budget for the current fiscal year, a process that required two special sessions.

Strike talk in Oklahoma was inspired by the nine-day walkout in West Virginia that closed every school in the state and ended after state lawmakers enacted a 5% pay raise.

The Oklahoma Education Association, which represents Oklahoma teachers, has called for an $812 million package for fiscal year 2019 that includes pay raises for teachers. OEA submitted the plan to avert a statewide teacher walkout that would lead to school closures.

“If the legislature cannot properly fund education and core state services by the legal deadline of April 1, we are prepared to close schools and stay at the Capitol until it gets done,” OEA President Alicia Priest said in a prepared statement.

The pleas for pay raises and restored funding coincide with an economic upswing that has steadily lifted monthly revenues from taxes on sales, income, oil and gas production and other sources.

February gross receipts to the Treasury grew by 15.5% from the same month of the prior year and reflect an increasing growth rate in collections over the past year, State Treasurer Ken Miller reported. For 13 of the past 14 months, monthly gross receipts have increased over the prior year.

“The trend line shows increasing growth in Oklahoma gross collections,” Miller said. “Together with other economic indicators, it appears the state’s economy is gaining momentum.”

Republicans have yielded some ground on the need for new revenues as schools, prisons and state transportation have suffered funding losses. The Oklahoma Tax Commission attributes $31.7 million received in February to new revenue resulting from legislation enacted during 2017. The additional revenue comes primarily from changes in sales tax exemptions and gross production tax incentives, according to Miller.

The new revenue accounts for 3.6% of February gross receipts. Out of $6.8 billion in gross collections since August, $172.6 million, or 2.5%, has resulted from law changes from last year, Miller said.

Despite those changes, Republican legislative leaders have tried to hold a firm line against any new taxes, a position echoed by every Republican candidate to succeed Fallin except one, State Auditor & Inspector Gary Jones.

To restore structural budget balance, Jones’ economic plan calls for higher taxes on motor fuel and oil and gas production, along with a budget stabilization fund.

“Raiding revolving funds and using accounting tricks to appear to balance the budget has caused problems for our state, including the lowering of our credit rating and agencies postponing projects that have been planned for years,” Jones said in a campaign statement. “A stabilization fund would provide resources in downturns without raiding dedicated funds.”

Rep. Leslie Osborn, R-Mustang, last year lost the chairmanship of the House Appropriations and Budget committee after she entertained discussion of new revenue-generating measures to solve the state’s chronic revenue shortfalls.

“It is a sad day when we cannot have an honest conversation about the major financial and budget issues we face as a state,” Osborn said after she was removed by House Speaker Charles McCall. “Be assured, I will continue to stand up for finding achievable solutions to the myriad of problems in Oklahoma that keep us mired in mediocracy.”

Over the past decade, income tax cuts reduced the 2016 state revenue collections by more than $1 billion, according to the Institute on Taxation and Economic Policy in Washington. Republican leaders' decisions to continue cutting taxes in the wake of the 2014 oil collapse were seen as worsening the problem.

Moody’s Investors Service has a negative outlook on the state’s Aa2 rating. Amid a series of patchwork budgets, revenue shortfalls that have exceeded $1 billion and a decline in oil revenues, Moody’s has maintained the negative outlook since December 2015.

At $167 million, the revenue shortfall for the 2019 fiscal year beginning July 1 is the smallest in several years.

Last year, lawmakers had to combine cuts and new revenue to close an $878 million budget gap. The available revenues meant 13% less to fund state agencies compared to the previous year. Fiscal year 2018 was the third with a budget shortfall and the second with a declared revenue failure that forced immediate spending reductions.

S&P Global Ratings retained a stable outlook on Oklahoma’s AA general obligation rating as lawmakers met in special session last November trying to close a $215 million revenue gap. That gap was not closed until Feb. 27, four months before the end of the current fiscal year.

“The size of this budget gap compared with Oklahoma's $6.8 billion budget is a manageable 3%,” S&P analysts wrote. “That said, in our view, deliberations to address this $215 million budget gap highlight that after multiple years of agency funding reductions, further cuts have become increasingly difficult. The special session also demonstrates its challenge to achieve sufficient votes to raise revenues.”

Oklahoma’s constitution requires a three-fourths supermajority vote of the legislature to increase taxes. During the first special session, a majority of lawmakers supported new revenue, but the vote fell short of the required supermajority.

More than two dozen state agencies have seen budget cuts of more than 30% since 2009. Public school funding has dropped since 2015 as schools added 10,000 students statewide. The state also has 1,500 fewer teachers than in 2010, and about 20% of districts have reduced the school week to four days as a cost-saving measure.

OEA’s proposal calls for a $10,000 teacher pay increase, including a $6,000 raise for the FY19 budget. The plan also includes a $5,000 pay increase for full‐time support staff $200 million to restore public school funding, which OEA said has been cut more than any other state in the nation since 2008.

Beyond education, the plan calls for $213 million for state employee pay raises, which is $71 million each year for the next three years. Health care funding would increase by $255.9 million over two years.

“Being last in the country in teacher pay and at the bottom of per pupil funding cannot be our vision for Oklahoma,” Priest said. “Our teacher shortage has reached catastrophic levels because it’s so easy for teachers to move to Texas or Arkansas, or even to another profession, and make much more money.”

On March 10, the Oklahoma Public Employees Association board of directors voted unanimously to ask the staff to develop a plan to join teachers in the April 2 walkout.

“We do not enter in to this action lightly,” the OPEA said in announcing the move. “We do not want participate in a work stoppage but past tactics have not worked to compel lawmakers to improve state employee and teacher pay. They have taken no action to restore years of budget cuts.”

In the face of the threat, House Speaker Charles McCall announced a $700 million plan last week that he said would give most teachers as much as a $20,000 raise within six years. However, the plan identified no means of funding, prompting a rebuke from the OEA.

“The deal announced today by Speaker Charles McCall and his leadership team is not a plan at all," Priest said. "It's nothing more than a political stunt that falls woefully short of the revenue needed to save our schools and keep teachers in Oklahoma classrooms."

Among the state agencies suffering most from spending cuts is the Oklahoma Department of Corrections, which has reported 30% shortage of guards for its crowded prisons. Before final passage of the 2018 budget bill in February, the DOC imposed a hiring freeze for fear it would not have enough money to staff the prisons.

DOC is asking lawmakers for $10 million in the FY 2019 budget so that all DOC employees can receive a 5% salary increase, as well as benefit packages.

DOC Director Joe Allbaugh said the department is turning over correctional officers at a rate of 39% and probation officers at 23% each year.

“We do not have the employees that we need to operate a safe environment for our staff and to protect the public,” Allbaugh said. “The budget request reflects the reality in the Oklahoma criminal justice system.”

To reduce the incarceration rate, Fallin is backing six bills that would alter sentencing policies. The bills were introduced last year but failed to pass. Joined by legislators, district attorneys and business leaders on March 5, Fallin announced plans for a coordinating council to oversee future criminal justice reform efforts.

“The agreement reached is a huge first step forward, moving our state much closer to our goal of reducing the incarceration crisis while keeping our communities safe.” Fallin said. “We need to stop warehousing moms and dads, sons and daughters in prison for long sentences compared to other states.”

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