Under ratings pressure, Fallin pushes Oklahoma budget fix

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DALLAS – Oklahoma Gov. Mary Fallin urged lawmakers to end a six-week-long special session by closing a $215 million budget gap.

Citing potential harm to the state’s ratings, Fallin urged the state House to support House Bill 1035 that won passage in the Senate by a vote of 37-5 on Monday.

“This bill addresses our $215 million budget hole; provides recurring revenue to help bring more stability to our budget going forward for next year when we know that we will still have a budget hole,” Fallin said. “It also keeps a promise to the teachers of Oklahoma by providing a $3,000 pay raise, and a $1,000 pay raise for our state employees.”

The House, which failed to pass an earlier version of the bill last week, may vote on the measure Wednesday.

The Senate version of the bill tax hikes on tobacco, motor fuel, low-point beer and the production of oil and gas and is expected to bring in $132 million of the next eight months and $426.5 million next year.

The bill is estimated to bring in $132 million over the next eight months. For the next full budget year, it could raise $426.5 million, said Senate Appropriations Committee Chair Kim David.

The Senate's funding package would still leave a $57 million funding gap that Senate leaders said would be filled with a combination of budget cuts and raids on agency savings accounts.

Senate passage of the bill came after Moody’s Investors Service cited the impasse over the funding bill as a negative credit factor. Moody’s already has a negative outlook on Oklahoma’s Aa2 general obligation rating.

“The budget gap at 4.0% of estimated general fund spending is not huge, but it is meaningful,” Moody’s analyst Joshua Grundleger noted. “The nearly six-week-long impasse underscores the economic and institutional weaknesses that have led to a persistent structural budget imbalance since 2015.”

Fallin urged lawmakers to take the Moody’s comment seriously.

“It is worth repeating what Moody’s Investors Service stated in its report: the state of Oklahoma has reduced appropriations by 5.3%, or $387 million, in the past three years,” Fallin said. “The Legislature’s inability to pass a permanent solution to our budget challenge has resulted in Moody’s, one of the nation’s top rating agencies, giving Oklahoma a ‘credit negative’ outlook, which will hurt investment by businesses that are considering to expand in or move to our state.”

Separately, Fallin on Monday signed House Bill 1081X, which appropriates $23.3 million to the Oklahoma Department of Mental Health and Substance Abuse Services. The measure, which passed easily in both houses, takes the money from the state’s Constitutional Reserve Fund, commonly called the Rainy Day Fund.

The Mental Health Department lost $75 million for this fiscal year when the Oklahoma Supreme Court ruled a proposed cigarette smoking cessation fee was unconstitutional. The fee was estimated to bring in $215 million for the fiscal year that ends June 30.

Fallin called the current special session in the wake of the court’s ruling that passage of the revenue-generating measure in the last week of the regular session violated the constitution’s ban on such actions in the last week of a regular session.

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Budgets State taxes Mary Fallin Oklahoma