- Associated Press - Sunday, February 7, 2016

OKLAHOMA CITY (AP) - One year ago, depressed energy prices contributed to a $611 million hole in the state budget that forced Oklahoma lawmakers to tap Oklahoma’s Rainy Day reserve fund as well as dozens of non-recurring revenue sources to prevent draconian cuts to public services like schools, roads and public safety.

With energy prices even lower, lawmakers face a projected shortfall of at least $900 million in the budget for the upcoming year and are again looking for ways to piece together a balanced budget that will avoid double-digit budget cuts and adequately pay for vital public services.

Lawmakers say things will be different this time, though they’ve already shot down one bill that would prevent companies from taking advantage of tax incentive programs at the same time.

Leaders of the House and Senate are studying proposals outlined by Gov. Mary Fallin in her State of the State address on Monday to enhance the state’s recurring revenue and end the reliance on one-time funding sources to fill the budget hole, which officials said could grow even larger if energy prices continue to decline.

The average price for a barrel of crude oil was just under $30 a barrel on Jan. 31, down from $36.57 the previous month and $47.11 the previous year.

The chairman of the powerful House Appropriations and Budget Committee, Rep. Earl Sears, R-Bartlesville, said the governor’s ideas are “being seriously considered in the House.”

“…But there’s a lot of things that we’re going to have to iron out and work out in between in all those proposals,” Sears said.

Senate President Pro tem Brian Bingman, R-Sapulpa, said elimination of some state tax credits is among the structural changes in the state’s budgeting process the Senate will consider.

“One of our challenges is using one-time (revenue) to fill the hole. We’re trying to avoid that if it all possible,” Bingman said.

The Republican governor’s proposals include more than doubling the state tax on cigarettes and expanding the sales tax to a variety of services that are currently exempt. They also include repealing or reducing various tax exemptions and deductions.

“It’s definitely started the conversation,” said Preston Doerflinger, Fallin’s secretary of finance and chief budget negotiator. Doerflinger said the governor wanted to give lawmakers budgeting options as they tackle the state’s newest budget crisis.

“I think there will probably be other ideas,” he said. “We can’t rely more on one-time funds than we can on recurring revenues. This is the year to do the hard work.”

But with a budget hole that could reach $1 billion, Sears said lawmakers may have to again look to the Rainy Day fund and one-time revenue sources, in addition to revenue enhancements and budget cuts, to balance the state budget for the fiscal year that begins July 1.

“There are many of us who are still willing to tap into those sources,” Sears said. “However, there is no question we would love to get away from that. By the same token, we are not taking them off the table.”

Doerflinger has vowed to resign if next year’s budget relies on the state pension system and one-time funding sources to fill the budget hole.

“I am OK with a mix of one-time sources,” Doerflinger said. “I’m not discouraged at all.”

Opposition to some of the governor’s ideas surfaced during the first week of the 2016 Oklahoma Legislature. On Tuesday, the Senate Finance Committee killed a bill to prohibit companies from taking advantage of two separate tax incentive programs at the same time.

Other proposals, including a $200 million sales tax modernization program that would expand state sales taxes to certain services, including items delivered electronically, are under discussion in the House, Sears said.

“We’ve already begun conversations in regards to what would that look like and how would we implement it,” he said. Specific services that would be subject to taxation have not been determined, he said.

But Sears said other ideas have “a high hill to climb,” including Fallin’s $181 million proposal to increase the cigarette tax from $1.03 to $2.53 per pack.

House Democrats are vowing to fight the proposals following a series of Republican-backed reductions in the income tax, including a cut from 5.25 percent to 5 percent that went into effect on Jan. 1.

“Part of the solution is to stop digging our way deeper and deeper into the hole with income tax cuts that are fiscally irresponsible,” said House Democratic Leader Scott Inman of Oklahoma City.

“Until they come to the table and admit that the income tax cuts that helped put us in this mess should be back on the table as an overall tax policy reform, then you’ll see our efforts pushing back against any effort to raise taxes on middle-class families,” Inman said.

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