Budget & Tax

Senate approves funding bill as Democrats hint tax increases needed

May 6, 2020

Ray Carter

The Oklahoma Senate approved Tuesday the “general appropriation” bill to fund state government for the next year but did so over the objections of Democrats who hinted tax increases should be pursued instead of modest spending reductions.

Senate Bill 1922 appropriates $7.7 billion for state agencies in the next year, a decline of 3 percent compared to the current year state budget. Lawmakers faced a budget shortfall of $1.3 billion due to falling oil prices and the impact of the COVID-19 shutdown. However, they filled much of that shortfall by using state savings and redirecting state funding previously apportioned to other needs, such as state pensions. As a result, SB 1922 reduces state appropriations by only $237.8 million, not $1.3 billion.

“This absolutely prioritizes public education, absolutely prioritizes health care, and protects other core services,” said Senate President Pro Tempore Greg Treat, R-Oklahoma City.

Democrats objected to the spending cuts and made several references to 2018 when lawmakers approved roughly $600 million in tax increases, including tax increases on fuel, tobacco, and energy production.

“Clearly we have a structural budget deficit,” said Sen. Julia Kirt, D-Oklahoma City. “We’ve made improvements through previous years, the Legislature’s hard decisions to improve revenues, but we still are out of balance and moving from crisis to crisis as oil and gas prices go up and down. This year we’re spending those savings. Most of those savings were accidental through surpluses from estimates in previous years, and we’re spending those accidental savings with short-term needs.”

She said state government needs “sustainable strategies.”

Sen. J.J. Dossett, D-Owasso, said Oklahoma did not fund K-12 education properly for a decade prior to 2018.

“We found a way a year ago, two years ago,” Dossett said. “I think we should find a way to continue that trend. This budget does not do that.”

Although lawmakers increased K-12 school appropriations by 20 percent over the 2018 and 2019 legislative sessions, funneling $638 million more into the system, Dossett said that moved the needle only “about halfway there.”

“These are tough times, but I don’t think there’s a time you can retreat in education funding,” Dossett said. “That’s an investment that is the future of your state.”

Senate Appropriations Chairman Roger Thompson, R-Okemah, suggested those endorsing additional gross production tax (GPT) increases or similar measures are ignoring economic reality, tacitly referencing the fact that oil futures recently fell into negative territory.

“We want people working and we want people back to work and we need to be able to fund education, and yet I hear ideas that (say), ‘Why don’t we raise GPT?’” Thompson said. “Well, nothing of nothing is nothing. We’re not going to be able to do that. Why don’t we raise the income tax? Businesses are struggling to stay alive, and if we’re really talking about helping something with the economy, neither of those help with the economy.”

Under SB 1922, Oklahoma’s K-12 public-school appropriation is technically reduced 2.5 percent, or $78 million. But the state has received nearly $161 million in federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding that will go to public schools and can be used for virtually any expense. Legislative leaders have pointed out that federal funding will more than offset the reduced appropriation for public schools.

Thompson noted many education activists refer to the 2009 budget as the “high-water mark” for school funding and said SB 1922 is “still in the ballpark” of that 2009 spending level.

Dossett objected some school districts will “potentially not receive a dime of the CARES Act relief.”

Thompson said that is true since the federal money will be distributed based on the number of “Title I” students covered by a federal program for children from low-income families. As a result, wealthy school districts with few poor students will receive far less federal CARES Act funding than other districts.

But Thompson noted that is similar to the formula used every year to distribute state school appropriations, which gives more funding to poor schools than rich schools with substantial property tax bases.

“We have the same thing if we are talking about the funding formula,” Thompson said. “There are some who see the inequity in that. I personally think it’s equitable.”

While Dossett said 2018-2019 funding increases “changed the course” of Oklahoma’s school system, subsequent results showed little correlation between spending and outcomes. Statewide student performance declined on state tests, the ACT college-entrance exam, and the National Assessment of Educational Progress (NAEP) even as funding increased. And schools’ reliance on emergency-certified teachers has continued to climb, despite huge teacher pay raises.

Senate Bill 1922 passed on a 36-11 vote. Two Republicans joined Democrats in opposition. The bill now proceeds to the Oklahoma House of Representatives.