- Associated Press - Saturday, May 17, 2014

OKLAHOMA CITY (AP) - Oklahoma’s Republican leaders reached an agreement on how to divvy up the $7 billion state budget, but plenty of work remains as the Legislature races toward a planned early adjournment on Friday.

The House and Senate still must pass the budget bill through both chambers, and there are several other big-ticket items they plan to cram into the final hectic week of session, including a $120 million bond issue to repair the Capitol, an overhaul of the pension system for state workers, and adjusting a tax incentive for oil and gas drilling.

Although lawmakers have until May 30 to finish their work, House and Senate leaders said last week after striking a budget agreement that they intend to adjourn before Memorial Day.

Gov. Mary Fallin, meanwhile, is still pushing legislators to let school districts have a one-time property tax increase to fund school shelters and pass a bill to enhance a prescription drug monitoring program. Both of those measures have stalled in the Legislature.

“I would see we’re approaching the end of the session with measured optimism,” said Fallin spokesman Alex Weintz. “It’s great that we got this budget agreement, and our hope is that these other things will fall in place now that we’ve got that in place.”

A new proposal to repair the state Capitol, with a $120 million bond issue over 10 years, was part of the budget agreement, but still must be approved by the full House and Senate.

The House also is expected to consider early next week a plan to convert newly hired state workers from a traditional defined benefit pension plan to a 401k-style defined contribution retirement plan.

The Legislature this year also has yet to reach an agreement on a generous tax incentive currently in place for horizontally drilled wells that reduces the tax from its regular rate of 7 percent to 1 percent. Put in place in the late 1990s when horizontal drilling was costly and experimental, the incentive is now costing the state hundreds of millions of dollars each year since most new wells are drilled this way.

Because the tax incentive is scheduled to expire in 2015, the rate will return to 7 percent unless the Legislature takes action. Oil and gas industry officials have proposed moving to a 2 percent rate for all wells, but no legislative consensus has been reached.

Chad Warmington, president of the Oklahoma Oil & Gas Association, said he’s optimistic a deal can still be reached before lawmakers adjourn.

“It is in everyone’s best interest to nail this down this year,” Warmington said. “If we do not reach an agreement by the end of session, companies who are making their budget plans for next year will be forced to plan for the worst-case scenario, a full 7 percent tax. Those numbers could very well force companies to look in other states for a better return on their investment.”

One issue that appears to be dead for the session is a plan to tap $40 million from the state’s Unclaimed Property Fund to match another $40 million in pledges to complete the American Indian Cultural Center and Museum in Oklahoma City. The Senate passed the proposal, but many House Republicans bitterly opposed the plan, and House Speaker Jeff Hickman said he wouldn’t bring it to the floor for a vote unless 51 of the House’s 72 Republicans supported it.

The museum sits unfinished along the banks of the Oklahoma River near the intersection of Interstates 35 and 40, and Lee Allen Smith, who helped secure the private pledges, said he expects many of the donors to back out.

“I don’t believe the donors are going to stay without having a plan to show their pledge would be matched,” Smith said. “And I wouldn’t blame them if they didn’t. This is a slap in the face to a lot of these folks.”


Follow Sean Murphy at www.twitter.com/apseanmurphy

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