Capitol Updates

 This week's Capitol Updates newsletter:


August 13, 2018

To put it bluntly there is nearly nothing visible going on inside the Capitol unless you want to count the efforts of the construction workers that are repairing and remodeling the building. The place is pretty much torn up. In most areas it's very much a construction zone. As fall approaches and activity picks up toward next session working around the mess won't be easy.

The one thing happening is the weekly meeting of the medical marijuana working group. I've attended at least part of each of these meetings, and I'll say the members of the working group are working. They generally show up having read new material that's been distributed to them and prepared to ask questions. The issue is complicated and fraught with political risk. The public has spoken, yet many long and strongly held opinions - right and wrong - still exist. The legislators I've heard talk about it I think have got it right. Simply do your best to discern what the people have commanded and do it.

With the runoff election about 2 weeks away, most legislative action for now is taking place between legislators, candidates and their constituents. I've had the opportunity to get acquainted with quite a few candidates during the election, and the ones I've met are high quality. The issues I hear from them are education, the budget, criminal justice reform and mental health, pretty much in that order. They say this is what they are hearing from the people.

They seem to be well informed, but ready to learn. Through the years, I've seen new members come in angry, ready to burn the building down so to speak, and some who just want to get there to join the party. This year's candidates-the one's I've met-fall in neither category. They are looking for change, but the right kind of change. If my calculous is right, and if the legislative leadership and the new governor have a similar outlook, we could see some real progress in the next couple of years. Nothing good seems to come easily or quickly, but I'm encouraged by what I've seen so far during the campaigns.

OHCA reflects on past fiscal year uncertainty

Tyler Talley, eCapitol

The governing board of the Oklahoma Health Care Authority (OHCA) reflected Thursday on the agency's financial recovery over the course of the previous fiscal year, which was at one time plagued with uncertainty.

OHCA received multiple additional appropriations from the Legislature for fiscal year 2018 as the agency faced a substantial $70 million budget hole if not granted additional state dollars. The hole resulted from the Oklahoma Supreme Court finding SB0845, which implemented a tobacco cessation fee in place of a tobacco tax, unconstitutional.

To account for a loss in dollars, the agency was prepared to make a number of provider rate cuts.

These changes included a 9 percent across the board provider rate cut and a 4 percent cut to nursing facilities. The agency's board of directors ultimately voted to rescind these cuts entirely after receiving two, separate additional appropriations from the Legislature during the first and second special sessions in November and December, respectively.

OHCA also received $110.0 million in its FY2018 state appropriations in May specifically for payments for the state's two medical schools.

OHCA first received notice in December from CMS that it planned to discontinue its waiver with the health schools of the University of Oklahoma and Oklahoma State University due to the state spending Medicaid dollars on training doctors without apparent approval for over a decade, potentially costing those schools more than $115 million next fiscal year.

To amend the gap, the Legislature and Gov. Mary Fallin approved HB1022XX which appropriated additional funds to the two medical schools. A portion of that bill was then repealed in SB1600 and included in the overall FY2018 appropriations bill.

Now, with those additional funds incorporated into its budget, the agency stands in the green as outlined by Chief Financial Officer Aaron Morris in his financial report covering financial transactions for May and June 2018, the last two months of the fiscal year.

The June report show a state dollar variance show a positive $29.8 million and the agency ended the fiscal year under budget in Medicaid program spending by $10.3 million in state dollars and under budget in administrative services by $4.9 million in state dollars.

The agency also ended FY2018 over budget in tobacco tax collections and fees by $0.7 million in state dollars as well as drug rebate by $15.3 million in state dollars.

"In December we were looking at deficits, not carryovers," Chair Tony Armstrong reflected, crediting the hard work of OHCA staff continuing their work "even when it looked like the boat was sinking."

He continued, "You have to understand, we did come through some really rough seas."

Armstrong, thanking agency leadership and staff, summarized OHCA successfully reached the end of a fiscal year it did not foresee six months ago.

Chief Executive Officer Becky Pasternick-Ikard noted the increased pressure on staff by way of increased workloads, due in part to the multiple hiring freezes.

"It's really wonderful for us to see this," she said. "I don't if there's anybody in this room that would say it's been easy this past year. I think it's been incredibly demanding but I don't think, as an agency, we could be prouder of how we stood strong through this."

Fallin puts Vision Fund proposal on general election ballot

Shawn Ashley, eCapitol

Gov. Mary Fallin issued a proclamation Thursday putting the last legislative referendum approved during the 2018 regular session on November's general election ballot, a proposal to create the Oklahoma Vision Fund to help fund state government operations, even though she vetoed companion statutory language.

State Question 800 is the result of SJR0035. The resolution, by Sen. John Sparks, D-Norman, and Rep. Charles McCall, R-Atoka, proposes a vote of the people for their approval or rejection the creation of the Oklahoma Vision Fund to support the operation of state government. It requires the fund consist of annual deposits of at least 5 percent of the total collections of the gross production tax. It requires the funds be budgeted and expended in the same manner as the General Revenue Fund. It prohibits the funds from being used for service payments due on bonds or other financing instruments. It limits withdrawals from the fund to no more than 4 percent annually.

Proponents of the measure said it would better prepare for the cyclical nature of Oklahoma's energy economy and would help keep core services funded in downturns.

Fallin, however, vetoed a statutory companion to the proposed state question, HB1401. The bill, by Rep. John Montgomery, R-Lawton and Sparks, creates the Oklahoma Vision Act. The bill establishes the Oklahoma Vision Fund and requires, beginning July 1, 2020, that 5 percent of total revenue from the gross production tax on oil and gas be deposited into the fund, as well as any amounts appropriated by the Legislature; any other deposits and apportionments from other sources as may be provided for by law; and investment and income returns from fund principal. It requires the percentage from the gross production tax on oil and natural gas increase by 0.2 annually thereafter. It requires the balance of the Oklahoma Vision Fund be invested by the State Treasurer. It requires 4 percent of the average annual amount of the principal of the Oklahoma Vision Fund for the immediately preceding five complete fiscal years as determined by the State Treasurer be apportioned to the General Revenue Fund not later than Sept. 30 each year. It permits not more than 5 percent of the money in the fund to be used for debt service payments due on bonds or other financing instruments issued by the State of Oklahoma, counties, municipalities, authorities, commissions, political subdivisions or any other governmental entities within the State of Oklahoma. It permits 1 percent of the fund's investment earnings to be used by the Office of the State Treasurer to manage the Oklahoma Vision Fund. It requires the State Auditor and Inspector to conduct an annual audit of the Oklahoma Vision Fund and its subaccounts, all expenditures derived from the Oklahoma Vision Fund, to report any findings to the Governor and the Legislature, and to make any documents pertaining to the audit publicly accessible.

Fallin wrote in her veto message she believed HB1401 to be well intentioned but "It raises some significant concerns." In particularly, Fallin indicated she was concerned about the annual increase in the amount of gross production tax revenue that would be allocated to the Oklahoma Vision Fund and away from other funds, such as the Energy Stabilization Fund. Fallin also expressed concern that a portion of the money in the fund could be used for debt service for counties, municipalities, authorities, commissions, political subdivisions or any other governmental entities within the State of Oklahoma.

"The state should not be paying for obligations that are not its own," she wrote.

Gross receipts collections reach unprecedented levels, Miller reports

Shawn Ashley, eCapitol

State gross receipts in July were $1.0 billion and total $12.3 billion for the 12-month period, unprecedented high levels, State Treasurer Ken Miller reported Monday.
Miller said the July and 12-month numbers, which provide a general reflection of state economic activity, show growth of more than 10 percent each.
"Economic expansion is clearly driving the growth we see in gross receipts to the Treasury," Miller said. "Continued improvement in state employment, notably in the oil fields, and positive numbers in other economic indicators are continued signs of ongoing growth."
Increases are seen in each major revenue stream for both July and the past 12 months; employment is up by more than 32,000, including 5,200 new jobs in the oil patch, during the past year; and leading indicator indices show anticipated business expansion.
In July, income tax collections are up by 10 percent compared to July of last year, sales tax is up by almost 9 percent, and gross production is up by 64 percent, Miller reported.
Increases and decreases in gross receipts generally indicate which direction General Revenue Fund collections, which are a subset of gross receipts, will move when the Office of Management and Enterprise Services reports them later in the month.
For the 12-month period, income tax is up by 8.8 percent, sales tax by 11 percent, and gross production by 60 percent, the treasurer said.
Revenue from tax increases that took effect on July 1, including hikes in cigarette, fuel and gross production taxes, will not begin flowing to the tax commission until next month and had no impact on July's report, Miller noted. Other new revenue that resulted from legislative changes made in 2017, including sales tax on vehicles and gross production incentive rate changes, has generated approximately $340 million during the past 12 months, according to the Tax Commission.
Total growth in gross receipts is more than $1.2 billion during the same time period, which means the new revenue accounts for slightly more than one-fourth of the increase.
July gross collections total $1 billion, up $100.6 million, or 10.8 percent, from July 2017.
Gross income tax collections, a combination of individual and corporate income taxes, generated $300.7 million, an increase of $27.4 million, or 10 percent, from the previous July. Individual income tax collections for the month are $283.8 million, up by $25.2 million, or 9.7 percent, from the prior year. Corporate collections are $16.9 million, an increase of $2.2 million, or 15 percent.
Sales tax collections, including remittances on behalf of cities and counties, total $420.5 million in July. That is $34.1 million, or 8.8 percent, more than July 2017.
Gross production taxes on oil and natural gas generated $68.8 million in July, an increase of $26.9 million, or 64 percent, from last July. Compared to June reports, gross production collections are up by $704,356, or 1 percent.
Motor vehicle taxes produced $73 million, up by $5 million, or 7.4 percent, from the same month of 2017.
Other collections, consisting of about 60 different sources including use taxes, along with taxes on fuel, tobacco, and alcoholic beverages, produced $164.5 million during the month. That is $7.2 million, or 4.6 percent, more than last July.
Gross revenue totals $12.3 billion from the past 12 months. That is $1.2 billion, or 11.3 percent, more than collections from the previous 12 months.
Gross income taxes generated $4.3 billion for the period, reflecting an increase of $346.6 million, or 8.8 percent, from the prior 12 months.
Individual income tax collections total $3.8 billion, up by $277.3 million, or 7.8 percent, from the prior 12 months. Corporate collections are $473 million for the period, an increase of $69.3 million, or 17.2 percent, over the previous period.
Sales taxes for the 12 months generated $4.7 billion, an increase of $469.4million, or 11 percent, from the prior period.
Oil and gas gross production tax collections brought in $726.8 million during the 12 months, up by $272.7 million, or 60 percent, from the previous period.
Motor vehicle collections total $773.7 million for the period. This is an increase of $12.5 million, or 1.6 percent, from the trailing period.
Other sources generated $1.8 billion, up by $145.3 million, or 8.9 percent, from the previous year.

Have a good week. Give me a call at 918.671.6860 if I can be of help in any way.