Capitol Updates

 This week's Capitol Updates newsletter:


August 14, 2017

Those who are golfers, which I'm not, are familiar with a Mulligan. But you don't have to be a golfer to enjoy the benefits of a Mulligan. The term is now widely used to describe any "do-over," or second chance after initial failure. The Supreme Court has given the legislature a Mulligan to write an adequate and balanced state budget. The Court did so by assuming original jurisdiction of the measures that produced revenue for this year's budget, and by ruling as quickly as a decent respect for giving all sides a chance to make their legal arguments would allow. The fiscal year has barely begun, so if the legislature will act with the same dispatch as the Court, the damage will be limited.

I suspect the rulings on the other measures will come quite quickly, possibly this week, so legislators and the governor will know the size of the budget hole their initial failure has created. The deficit is at $215 million now, mostly affecting healthcare agencies, and could go higher depending on the Court's rulings. Without the cigarette fee revenue, the Oklahoma Healthcare Authority will lose $70 million, 7% of it appropriation; the Department of Mental Health and Substance Abuse Services will lose $76 million, 23% of its budget; and the Department of Human Services will lose $69 million, a 10% cut.

If the governor calls a special session, which is likely, legislators will have 3 options: Leave matters as they stand, which is untenable; amend the appropriations measures to spread the cuts to other agencies; or find a way to constitutionally raise the necessary revenue to fund the budget. So, while it may seem that only healthcare services, to which the cigarette revenue was earmarked are in jeopardy, actually all state services are at risk.

The Senate Republican and Democratic Caucuses met separately on Friday. The House Republicans and Democrats will meet separately next week. Since these are closed meetings I have no idea what the discussion was or will be. The House is where the process must begin-we now know courtesy of the Supreme Court. House leadership, however, will likely insist that the Senate agree to pass whatever the House passes before they will be willing to vote on it. This is an ultra-risk-averse way to legislate and was part of the problem last session. Strangely enough, the House ended up putting its members on record on all kinds of unpopular revenue measures that eventually went nowhere.

One thing that would be helpful now is if those who will ultimately be at the table to negotiate on behalf of their respective chambers and caucuses will agree up front not to use things said and positions taken during the negotiations for political posturing and ammunition to influence the outcome. If negotiations succeed, it won't matter much what was said. If they fail, there's plenty time to point the finger of blame. Blaming during negotiations just poisons the water and makes agreement almost impossible. That happened during the regular session.

Supreme Court find tobacco cessation fee unconstitutional

Shawn Ashley, eCapitol

The Supreme Court ruled Thursday lawmakers violated the Oklahoma Constitution when they approved a measure levying a $1.50 per pack cigarette fee during the final week of the legislative session.

Writing for the majority, Justice Patrick Wyrick, the court's newest member and perhaps the most vocal during Tuesday's oral arguments, said, "Whether SB0845 is subject to Article 5, Section 33's requirements depends on whether its 'principal object is the raising of revenue' and whether it 'lev(ies) taxes in the strict sense of the word.'"

SB0845, which implemented the tobacco cessation fee, passed the Senate on May 24, two days before the Legislature was required to adjourn sine die. It was passed May 26, the last day of the legislative session, by the House. Lawmakers appropriated $214 million of the $225 million it was forecast to generate in SB0860, the general appropriations bill. [Editor's Note: See related story, Fallin: '...we will have to come into special session to address this issue']

The Attorney General's Office argued that the $225 million generated by the tobacco cessation fee created by SB0845 was incidental to the bill's focus on reducing smoking and compensating the state for harms caused by smoking and that it did not levy a tax. "Neither argument is persuasive," Wyrick wrote.

All nine justices agreed the bill was unconstitutional. Seven of the justices concurred fully with Wyrick's opinion. Justices Joseph Watt and Tom Colbert concurred in part and dissented in part. The two justices said the bill should be stricken in its entirety, rather than allowing its non-revenue portions to be severed and stand.

Watt was absent from Tuesday's proceedings. Colbert was the only justice not to ask a question during the three hearings.

The bill was challenged by a group of cigarette manufacturers, wholesalers and retailers.

Wyrick, who served as the state's solicitor general before being appointed to the court, wrote in overview, "SB0845's text - and text alone - conclusively demonstrates that the primary operation and effect of the measure is to raise new revenue to support state government."

Wyrick walks section-by-section through the bill, something he asked Solicitor General Mithun Mansinghani to do during Tuesday's oral arguments, and illustrates how it falls short of creating a substantial new regulatory scheme for cigarettes. Wyrick notes that the "...directs that only a tiny fraction (about 0.5 percent) of the revenues are to be apportioned to a fund used for smoking cessation efforts, with the remainder being directed to a fund that will be used by various health-related state agencies to fund their general operations - with no requirement that any portion be used for smoking cessation efforts."

Addressing the issue of whether the bill's "principal object is the raising of revenue," Wyrick wrote the court looks to "'what the legislation actually accomplishes...and not 9to) what a legislature states it is accomplishing.

"Looking solely to the text of SB0845, its nine sections certainly demonstrate a purported purpose of reducing the incidence of smoking. But the text simultaneously demonstrates that the smoking reduction purpose is effectuated through the collection of revenue from wholesalers - and ultimately consumers - of cigarettes. The $1.50 per pack assessment is the only provision in SB0845 that the text directly links to its state purpose of reducing smoking, and the State Respondents concede that the assessment is the linchpin of SB0845's regulatory framework," Wyrick wrote. "Thus, even if the Legislature was concerned with reducing the incidence of smoking - and it undoubtedly was - the means by which it chose to effectuate that regulatory end was the collection of revenue from those who purchase cigarettes. Indeed, the measure accomplishes its regulatory goal precisely by 'impos(ing) a burden on taxpayers' such that they purchase fewer cigarettes because of the increased cost."

Wyrick wrote certain provisions of the bill do contain regulatory language, but "...those provisions impose no new obligations, merely amplify existing regulatory language or codify already-in-effect state policies.

"The only provision in SB0845 that can be fairly characterized as effectuating a meaningful change in the law is the revenue generating provision in Section 7. But while that provision may have a regulatory purpose, that purpose is achieved through revenue raising. And because the nexus between the smoking-reducing purpose and the actual use of the revenue is so attenuated, the raising of revenue for the general support of state government is the primary effect of SB0845, and thus its primary purpose, regardless of its concomitant smoking reduction purpose."

Wyrick noted the court previously had upheld regulatory schemes that generated incidental revenue. "...but a quarter-of-a-billion dollars per year is hardly 'incidental' when the imposition of a new financial burden on the people is the avowed aim of the measure (albeit in aim designed to reduce smoking)."

As whether the bill "levies taxes in the strict sense of the word," Wyrick wrote, "SB0845's assessment is indistinguishable in function from the already-existing tax levied on cigarettes, which is levied for the express purpose of 'provid(ing) revenue for the expense of the state government' and the bulk of which, coincidentally, was approved by public referendum following the 1992 amendment to Article 5, Section 33."

Harkening back to a question he asked during the oral arguments, Wyrick wrote, "By all appearances, what Section 7 describes and imposes is a quintessential 'sin tax...'"

Wyrick also wrote the assessment functions a payment exacted by the state to pay the cost of general government functions, which the court previously has recognized as a tax.

"Here, the 'tobacco cessation fee' is not paid in exchange for any specific government-conferred benefit - it is paid, in fact, to the Oklahoma Tax commission rather than to any state health agency that might be able to confer a smoking-related benefit," Wyrick explained.

The junior justice also wrote that the fee is not intended " cover the cost of administering a specific regulatory program. The $225 million is proportionate to the amount of revenue the Legislature needed to balance the budget rather than to the cost of administering the state's cigarette regulatory regime."

Wyrick concluded that section of the analysis by writing, "Lastly, were we told hold otherwise, the distinction between fees and taxes - and thus the protections against taxation provided by Article 5, Section 33 - would be meaningless...If this quintessential excise tax can be transformed into a fee merely by calling it a fee and adding some regulatory gloss to the measure enacting it, then the promise of Article 5, Section 33 --- a promise made to citizens in 19992 when they went to the polls and enacted the amended version - will be an exempt one. The 'tax relief' to be expected from the requirement that all 'future bills intended to raise revenue '... be approved by either a vote of the people or a three-fourths majority in both houses of the Legislature will have been illusory. And that, we think, would be an abject failure to carry out the 'manifest purpose of the framers and the people who adopted it.'"

Wyrick points out lawmakers essentially had to pass SB0845 or face another constitutional violation. "Indeed, without the $225 million, the Legislature violated the Constitution for a separate reason: failure to comply with the balanced budget mandate in Article 10, Sections 23 and 25. To deny that creating this revenue is order to balance the budget was not SB0845's raison d'etre is, as out Governor put it, to deny the stark 'reality of (the) state budget crisis' facing our Legislature this past term."

Thursday's decision severed those provisions of the bill that were not revenue raising and left them intact: Sections 1, 3, 4, 5 and 6. Those sections require signs prohibit smoking be conspicuous and in prominent locations. They also require the State Department of Health and the Tobacco Settlement Endowment Trust to work together to inform the public about the dangers of smoking in motor vehicles where children are present. The sections prohibit the use of any tobacco product on all state properties and in all state vehicles, whether owned, leased or contracted, except for Oklahoma Veterans Centers. The sections also require the Oklahoma State Department of Health and the Department of Mental Health and Substance Abuse Services to work together to develop new and innovative strategies to prevent tobacco use by minors.

The set an Aug. 17 deadline for any petition for rehearing to be filed. If no petition for rehearing is filed by that deadline, the court's opinion issued Thursday will become final.

Fallin: "...we will have to come into special session to address this issue"

Staff, eCapitol

Gov. Mary Fallin said she believes lawmakers will have to return to the Capitol to deal with the aftermath of the Supreme Court ruling unconstitutional a bill that would generate $215 million that was appropriated by the Legislature. Various groups called on Fallin to call a special session, including some education organizations that asked a teacher pay raise be added to the discussion.
"I am disappointed to hear the Supreme Court struck down the smoking cessation fee, but I certainly respect the justices' authority," Fallin said in a statement. "I will be discussing with legislative leaders from both parties the need to address the $215 million shortfall this will create for the Department of Human Services, the Department of Mental Health and Substance Abuse Services and the Oklahoma Health Care Authority, the three agencies that received the bulk of the money that was to be generated by the cessation fee.
"These agencies and the people they serve cannot sustain the kind of cuts that will occur if we do not find a solution. My belief is we will have to come into special session to address this issue."
In an opinion issued Thursday morning, the court ruled SB0845, which created a $1.50 per pack tobacco cessation fee, violated Article 5, Section 33 of the Oklahoma Constitution. The bill was set to take effect Aug. 25. The court determined the bill was a revenue-raising measure and as such could not have originated in the Senate, be passed in the last five days of the legislative session and become law without three-fourths approval in each chamber. One million dollars generated by the fee was to be allocated to the Alcoholic Beverages Law Enforcement Commission (ABLE) for its youth anti-smoking efforts. SB0860, the general appropriations bill, appropriated the remainder of the available funds to the:
* Oklahoma Health Care Authority (OHCA), $70 million or approximately 7.0 percent of its total fiscal year 2018 appropriation;
* Department of Mental Health and Substance Abuse Services (ODMHSAS), $75 million or roughly 23 percent of its total FY2018 appropriation; and
* Department of Human Services (DHS), $69 million or about 10 percent of its total FY2018 appropriation.
Jo Stainsby, director of the Oklahoma Health Care Authority's Office of Public Information, said, "The OHCA is waiting to see what the Legislature does before taking action on our budget."
ODMHSAS officials said it, too, was waiting to see what happened before taking any action.
DHS Executive Director Ed Lake said, "Obviously, our agency could not absorb a $69 million cut to our budget but we are not ready to declare the sky is falling just yet. We will be working closely with the Governor's office and members of the House and Senate on solutions to this loss of revenue."
DHS announced in July it was reducing its expenditures by $29.1 million for the current fiscal year after legislative appropriations failed to meet its needs for year.
Senate President Pro Tempore Mike Schulz, R-Altus, said he and his leadership team would work with Fallin's office and the House to determine what to do next.
"While I disagree, I appreciate the Oklahoma Supreme Court's quick ruling allowing the governor and the Legislature to immediately address the matter. There are several options available to us, and Senate leadership will continue to work with the governor's office and House on deciding the best move forward," Schulz said.
Senate Republicans are scheduled to meet in caucus Friday to discuss the ruling.
House Speaker Charles McCall, R-Atoka, said he, too, would work with Fallin and Schulz to develop a plan to address the court's decision.
"The court has made their ruling and now it is up to the Governor and legislative leaders to agree on the best course of action moving forward," McCall said in a statement. "It is important to remember that the reason our budget has been suffering is because Oklahoma families and businesses have been struggling. State revenues are a reflection of the people of our state. When our citizens have less money in their pockets to spend the state will realize less revenues. I am a firm believer that government must live within its means.
"The tobacco fee for health care was passed in an effort to avoid significant budget cuts. After House Democrats refused time and again to support increased revenue measures, the fee was our only opportunity to balance the budget without deeper cuts. The minority party decided to play games with the budget, and now that opportunity has passed," he added.
House Democrat Caucus Leader Scott Inman, D-Del City, and Senate Democrat Caucus Leader John Sparks, D-Norman, also proposed lawmakers return to the Capitol for a special session.
"Today, I am urging Gov. Fallin to call for a special session and for Republican leaders to come together with myself and Sen. Sparks and draft a truly bipartisan and constitutional budget plan that will help to restore, reinvest in, and rebuild Oklahoma," Inman, who also is seeking the Democrat nomination for governor, said.
"With our state agencies facing more budget cuts and with even more rulings waiting, the time is now to work out a budget agreement before a special session of the Legislature. By coming together now and putting a plan in place, we can save precious time and taxpayer dollars to fix the mess that their failed leadership has put us in because of their failed policies to cut taxes for the wealthy and well-connected," Inman added.
Inman said structural problems with the state budget must be addressed and he advocated increasing the gross production tax rate to 7.0 percent, eliminating what he called wasteful tax credits and balancing the budget constitutionally.
Sparks' said he was not surprised by the court's decision Tuesday. "We knew this tax was unconstitutional when it was passed by the Legislature back in May. We made the same arguments that the court has articulated in today's opinion when Republican leadership at the Capitol was playing partisan political games and pushing this desperate revenue measure through during the last hours of the 2017 regular session.
He added, "We need to approach a special session thoughtfully with real plans for revenue measures that can fill the $215 million budget hole which has been created at the Oklahoma Department of Mental Health and Substance Abuse Services, the Oklahoma Healthcare Authority and the Department of Human Services. We need to set clear priorities, take hard votes and make tough choices with all revenue options on the table for open, transparent discussion and debate. This is a time for cooperation and compromise. This is the time for a plan of action, accountability and real results. This is what our constituents demand of us and what they deserve from us with no exceptions and no excuses."
Rep. Earl Sears, R-Bartlesville, said Thursday the state is in uncharted waters and needs to get back on track with bi-partisan solutions that put bickering aside. That plan, he said, would likely include a special session after the court rules on the two remaining cases, though that decision is up to Fallin.
Sears, who is the chair of the House Appropriations and Budget Subcommittee on Finance and co-leader of the House Republican Caucus' budget policy working group, said the court's decision did not come as a surprise to him.
"I'm disappointed simply because we now have to step forward and address this issue because this will leave a $215 million hole," he said. "We can't walk away from it. We have to deal with it."
Sears said he would be opposed to a solution that did not adequately fund healthcare agencies in the state. The logical plan, according to Sears, would be to pass new revenue measures during a special session, though he said it was too early to speculate what those measures could include.
"If you did cuts across the board, that would have some ugly, unintended consequences," he said. "This is a moment that I would hope we would put the bickering to the side and come up with a solution and a plan that helps Oklahoma," he said.
Lt. Gov. Todd Lamb, who has announced his candidacy for the Republican nomination for governor, said, "I am not surprised by the court's ruling regarding the cigarette fee measure as I believe it contradicts the intent of SQ 640. With the ruling, the Legislature must now focus first and foremost on identifying existing state funds to allocate to the healthcare-related programs that were scheduled to receive appropriations from the cigarette fee measure. It is my belief this can be done without drastic cuts to agencies. State government can and must operate more efficiently, and this ruling provides an excellent opportunity to start that process."
In February, Lamb resigned his appointment as the state's small business advocate on Fallin's cabinet, citing disagreements with the governor's proposed tax policy. Fallin had proposed in her state of the state speech and executive budget generating more than $1.0 billion in new revenue by expanding the state sales tax to more than 100 services.
The Oklahoma Public Employees Association (OPEA) called on Fallin to call a special session, as well, saying the affected agencies would have to consider additional staff and service reductions.
"Today's Oklahoma Supreme Court tobacco tax ruling means state agencies, their employees and those they serve face an uncertain future due to reduction in funding for FY2018," OPEA Executive Director Sterling Zearley said.
"We have to raise revenues the right way now and not further damage core services provided by state agencies," he added. "We will not stand for more cuts to services because of this ruling."
Other groups and organizations also called on Fallin and the Legislature to convene a special session.
A group of 21 organizations that coalesced as the Save Our State Coalition, said, "Gov. Fallin shouldn't wait a single minute to call a special session and instruct the Legislature to find additional revenue, fix the broken budget, undo cuts to core services, and invest in education. The Save our State Coalition has issued a blueprint for a better budget that does just that, and we urge lawmakers to take it seriously.
"Countless Oklahomans whose lives depend on state services are waiting for our Legislature to do the right thing," the group said. "If the Legislature does not find new revenues to replace those rejected by the Court, the consequence will be unimaginable cuts to health care and other protections for our state's most vulnerable citizens - with the greatest harm on children, seniors, and people with severe disabilities."
Shawn Hime, executive director of the Oklahoma State School Boards Association, also urged Fallin to call a special session to "...give legislators the opportunity to create a bipartisan budget that prioritizes Oklahoma's children and public education. Starting the school year amid budget uncertainty is bad for children and bad for schools. Oklahoma desperately needs a budget with long-term revenue sources to ensure our schools have the resources needed to keep and hire the best educators and provide a high-quality education for every child. "
Stand for Children Oklahoma Executive Director Amber England said a special session call should include a discussion of teacher pay raises.
"Today's ruling gives Gov. Fallin an incredible opportunity to lead on the issue of teacher pay and investments in education," England said. "She should immediately call a special session and instruct the Legislature to find additional revenue to fix the broken budget and come up with a plan that pays for a much-needed teacher pay raise and investment in education to help restore the cuts to our schools.
"Lawmakers broke their promise to our teachers passing an unconstitutional budget and adjourning without passing a teacher pay raise or investing in education," England added.
The Cooperative Council for Oklahoma School Administration (CCOSA) also urged the inclusion of teacher pay in the special session discussion.
"With the Supreme Court's ruling today, it is urgent for our legislators to get serious about developing a sound budget for the state. CCOSA emphatically urges Gov. Mary Fallin to call for a special session as soon as possible. Every day that goes by without adequate, long-term funding for public education is a day that we short-change our children and our state's future," said CCOSA Executive Director Pam Deering.

Supreme Court hearings live-streamed for the first time

Cynthia Reynolds, eCapitol

Ten years ago a newly-elected Rep. Jason Murphey introduced a measure to encourage transparency of the Legislature and the Oklahoma Supreme Court by making live Internet broadcasts of their proceedings available to the public. As Murphey reaches the end of his tenure in the House, the Supreme Court, with the help of the Oklahoma Educational Television Authority (OETA), live-streamed all three hours of a series of hearings Tuesday for the first time in its history.
The rare hearing included nearly three hours of oral arguments in the constitutional challenges to four revenue-raising measures passed last session. [Editor's Note: See related story, Justices hear oral arguments in challenges to revenue-related measures]
"It's exciting to see, I've been watching; better late than never," said Murphey, R-Guthrie. "Hopefully this is the first in a long line of continual reforms and enhancement of the public purview."
The bill he proposed in 2007, House Bill 1039, would have made live Internet broadcasts of House and Senate proceedings available beginning with the Second Session of the 51st Legislature. The broadcasts would also include standing committee meetings and meetings of the General Conference Committee on Appropriations. Beginning Jan. 1, 2008, proceedings of the Oklahoma Supreme Court also would be broadcast, as well as public meetings of "all executive branch agencies, boards and commissions, and public trusts."
Murphey said it was hard to get people on board early on, until then-Speaker Lance Cargill said that he would support its passage.
"Unfortunately for that bill, he resigned as speaker," said Murphey. Speaker Chris Benge then indicated that the House would begin to broadcast its proceedings and the Senate followed suit. Murphey then chose not to pursue the bill any further.
"But in all that, the court became lost," he said. "The court is the hidden branch of Oklahoma government that most Oklahomans aren't well aware of...and it isn't for a lack of wanting to know."
Murphey said should this practice be sustained, it would be an incredible resource for the public and would have far-reaching implications. He also noted that he would consider drafting legislation next session that would require the live-stream to continue.
"If the court would go forward with these types of transparencies, legislation isn't necessary," he said.
Murphey has been particularly outspoken about transparency in government, which he said has seen a serious decline in the past few years. While technology has made it easier for transparency to become stronger, it has not occurred.
"I feel like I've lost some of that optimism," he said. "It's also a very strong reminder that transparency isn't...just going to happen but it has to be fought for."

Lawmakers would need more than a five-day special session to make up lost revenue

Shawn Ashley, eCapitol

Lawmakers would need more than a five-day special session if they plan to take up new revenue-raising measures in order to avoid the same situation that may make a special session necessary: Article 5, Section 33 of the Oklahoma Constitution.

Article 5, Section 33 provides revenue-raising measures:

* Must originate in the House;

* Must be passed before the last five days of the legislative session; and

* Must be approved by either a three-fourths supermajority of legislators or a majority of voters in a referendum.

Plaintiffs in three lawsuits challenging four bills claim the Legislature violated that constitutional provision when they passed the following measures:

* SB0845, which creates a $1.50 per pack tobacco cessation fee. The bill takes effect Aug. 25.

* HB2433, which removed the sales tax exemption for automobile purchases and imposed a 1.25 percent rate on vehicle purchases.

* HB1449 that established a fee for electric and hybrid motor vehicles.

* HB2348, which froze the individual income tax standard deduction at its current levels, $6,350 for single or married filing separately; $12,700 for married filing jointly or a qualifying widower with dependent child and; $9,350 for head of household.

The Supreme Court will hear arguments Tuesday in the cases. For the first time in history, the hearings will be live-streamed.

Revenue from SB0845's tobacco cessation fee was directed to four agencies: $1 million off-the-top to the Alcoholic Beverage Laws Enforcement Commission; $70 million to the Oklahoma Health Care Authority; $75 million to the Department of Mental Health and Substance Abuse Services; and $69 million to the Department of Human Services. Revenue from HB2433, which took effect July 1, follows the same apportionment schedule as sales tax collections with $103.2 million going to the General Revenue Fund (GRF).

HB2348 was forecast to generate $3.8 million for the GRF and HB1449 was forecast to increase GRF collections by $422,000.

Gov. Mary Fallin's spokesman would not disclose her office's plans if any of the bills are ruled unconstitutional.

"The governor and her staff have developed options, but it's premature to discuss them before the Oklahoma Supreme Court rules on the challenges," Michael McNutt, her spokesman said.

Fallin could call a special session, directing lawmakers to address the budget problem that would result from any or some of the measures, particularly SB0845 or HB2433, being declared unconstitutional.

The Constitution does not differentiate between revenue-raising measures passed in regular and special sessions. That means lawmakers would need to meet five additional days beyond the passage of the final revenue-raising bill in order to meet the constitutional requirement to make up lost revenue from any of the bills deemed unconstitutional.

If lawmakers are called back to the Capitol, it is expected they would file the necessary bills on the first day and first read them. The chambers also would consider any rules that would be applicable to the special session.

The only provisions of House Rules concerning special sessions address the succession of the speaker, parking and a prohibition on members going on the Capitol roof without the express permission of the chief sergeant at arms. Senate Rules stipulate they would apply to special sessions held during the 56th Legislature's term.

The Senate Rules also provide that bills and resolutions reported from committee or referred directly to the calendar be placed on general order immediately that amendments to the measures be filed no later than 4:30 p.m. the same day. The rules also require motions to reconsider be disposed of the same day notice is served. The Senate's rules also provide that the chamber's officers, standing committee membership and mileage allowances applicable to the regular session also will apply in the special session.

On the second day of a special session, bills would either be assigned to committee, where they could be heard later that day, or direct to the calendar. On the special session's third day, House bills would be voted on in the House and Senate bills in the Senate and the measures sent across the rotunda for first reading in the opposite chamber.

The fourth day would see the measures second read and either assigned direct to the calendar or to committee, where they could be heard later that day. On the special session's fifth day, House bills would be considered on the Senate floor and Senate bills would be considered on the House floor.

Once approved by both chambers, the bills would be sent to the governor. If no revenue measures are taken up and the Legislature adjourns sine die on the fifth day, Fallin would have 15 days to sign or veto the measures. If lawmakers take up revenue raising measures during the first five days of the special session, they would need to meet five more days in order to meet Article 5, Section 33's requirement that those measures not be passed during the final five days of the session.

Lawmakers would not have to do anything during those final five days except gavel in and gavel out until they adjourn sine die on the special session's tenth and final day.

When the court will rule after Tuesday's hearing is not known. In 2008, the court issued a temporarily ruling the same day it heard arguments in a case concerning a tax amnesty plan that had been approved by lawmakers and signed into law by then-Gov. Brad Henry. The case was heard on a Friday and an order deny the plaintiff's request to stop the program, which was set to begin the following Monday, was issued that afternoon.

A full decision was issued two weeks later.

Inman calls on Legislature to revisit GPT discussion in light of potential special session

Christie Southern, eCapitol

House Minority Leader Scott Inman said Tuesday he hopes to revisit discussions on raising the state's gross production tax should lawmakers be called into a special session later this year.
Standing outside the court room where the Oklahoma Supreme Court was preparing to take up oral arguments in the case against three revenue-related measures, Inman, D-Del City, chastised the Republican majority and Gov. Mary Fallin for what he called "a failure of leadership." [Editor's Note: See related story, Justices hear oral arguments in challenges to revenue-related measures]
"For months, in budget negotiations with the majority party, they clearly stated to us they knew full well the cigarette tax, the car tax and all of those others were revenue-raising measures. They needed them for the sole purpose of using their dollars to balance the state budget," he said. "In order for them to do so constitutionally, they needed to do so with a supermajority in the Legislature and they had to pass them anytime not in the last five days of session. They failed on both accounts and they know blatantly that this is unconstitutional and that we shouldn't be here today wasting the citizen's tax dollars on a case, we believe, is an open and shut case."
Addressing questions regarding accusations from Republicans that the House Democrats presented themselves as obstructionists all session long, he said "We stood strong and said the reason the state is in the mess that we are in with schools down to four-day school weeks and hospitals closing isn't because cigarettes are too cheap. It's because of their refusal to raise the gross production tax on their oil and gas donors."
Inman said he hopes to revisit talks on raising the gross production tax to 5 or 7 percent, as a way to find common ground around a constitutional cigarette tax or other revenue raising measures.
If one or more measures are thrown out and a special session isn't called, Inman said the end result will be "a miscarriage of justice" and "painful to watch" because of the cuts that will come to core services like the Department of Human Services and the Oklahoma Department of Education.
"I think the likelihood of a special session is high and if the Supreme Court does rule these measures unconstitutional and if the Republican majority does not come back to fix their errors, the catastrophic results will be on their head," he said.

House budget working group holds first meeting

Cynthia Reynolds, eCapitol

The House Republican Caucus' budget reform working group held its first meeting Tuesday led by co-leaders Reps. Kevin Wallace and Earl Sears with 11 other members in attendance. The brief meeting was an introduction about the purpose of the group and how information will be gathered and disseminated.
Wallace, R-Wellston, was recently named chair of the House Appropriations and Budget Committee after Speaker Charles McCall, R-Atoka, relieved Rep. Leslie Osborn of the position. Osborn, R-Mustang, is not a member of the 23-person working group.
Members of the group include: Reps. Ryan Martinez, R-Edmond; Marcus McEntire, R-Duncan; Kyle Hilbert, R-Depew; Tess Teague, R-Choctaw; Carol Bush, R-Tulsa; Josh West, R-Grove; Kevin West, R-Moore; Tammy West, R-Bethany; Roger Ford, R-Midwest City; Scott McEachin, R-Tulsa, Mike Osburn, R-Edmond; Carl Newton, R-Cherokee; Terry O'Donnell, R-Catoosa; Mark McBride, R-Moore; John Jordan, R-Yukon; Chuck Strohm, R-Jenks; Mike Sanders, R-Kingfisher; Bobby Cleveland, R-Slaughterville, John Montgomery, R-Lawton; Pat Ownbey, R-Ardmore; Josh Cockroft, R-Tecumseh.
Each of the members will be divided into nine sub-groups, including: revolving funds, tax credits, apportionment funds, total bond debt, sales tax, acquisition of measurable performances, federal funds, energy and gross production tax, and the timeline of budget development.
Wallace said each of the sub-groups will meet outside of the mandatory monthly meetings to gather and review information pertaining to the topic. That information will then be presented to the entire group by the sub-group's leader or what Wallace called "spokesperson."
"The bottom line is we're looking at, number one, inefficiencies," said Wallace. "As we dig in to each of these items, the goal at the end of this is to put together a document that you can look and know (in-depth information.)"
The information will then be given to appropriations and budget subcommittee chairs and then to the full House to decide which, if any, changes need to be made to the budgeting process or to specific agencies.
The second meeting will be held Sept. 5 at 1:30 p.m., though it was not stated whether or not the meeting would be open to the public.

Large Republican fields yield winners with plurality of votes; Dems choose two candidates

Shawn Ashley, eCapitol

Two candidates needed just over 30 percent of the votes cast in Tuesday's special Republican primaries to claim their party's nomination for November's special elections. Democrats also picked their candidates for those races.
Paul Rosino won the Senate District 45 Republican special primary by capturing 32.61 percent of the vote in the seven-candidate race. Special primaries are winner-take-all events with no runoff, so the top vote-getter advances to the general election. Rosino topped his nearest competitor by more than 11 percentage votes.
In the Democrat primary, Steven Vincent won 92.22 percent of the votes to defeat Noah Ynclan and advance to November's special general election.
The winner of November's contest will succeed former Sen. Kyle Loveless, R-Oklahoma City. Loveless resigned in April and pleaded guilty Thursday to three felony counts related to the embezzlement of campaign funds. He also agreed in July to a settlement with the Ethics Commission in which he will pay a series of fines and penalties, including $10,000 to the State Election Board to help defray the cost of the special election to fill the vacancy.
In House District 76, Ross Ford defeated four other Republicans to win his party's nomination. Ford received just 30.76 percent of the vote, besting his nearest competitor, Shelly Brumbaugh, by less than 1.0 percentage point.
Shelly Brumbaugh is the wife of the late Rep. David Brumbaugh, R-Broken Arrow, who passed away in April.
Chris Vanlandingham won the Democrat nomination with 54.18 percent of the vote.
The general election for both seats will be held Nov. 14, along with the general election for Senate District 37.
The Senate District 37 contest features a seven-way first-past-the-post Republican primary on Sept. 12. The candidate who receives the most votes in that contest will face a lone Democrat in the special general election to fill the seat being vacated by Sen. Dan Newberry, R-Tulsa.

Speaker Appoints Russ to Serve as Chair of Education Budget Committee

Speaker's Office

Oklahoma House Speaker Charles McCall has appointed state Rep. Todd Russ to chair the House Appropriations and Budget Subcommittee on Education.
Rep. Russ replaces former state Rep. Scott Martin, who resigned from the Legislature following the 2017 legislative session to pursue an opportunity in the private sector.
McCall said Russ has the experience and temperament to serve the state well in this new role.
"Rep. Russ is thoughtful, smart and determined, and I believe he will do a great job for our citizens and our schools on this committee," said Speaker McCall, R-Atoka. "Rep. Russ has long been a champion for our public schools, and he will help us develop policies that work for our students, teachers and taxpayers."
Russ, a banker from Cordell, has several family members who are educators, including his wife, Khristy, who has taught for more than 20 years.
"I have been involved in the public education system my entire life, from attending school to being married to a career educator," said Russ, R-Cordell. "I understand the needs of our students and teachers and I know how important our public schools are to our rural communities. We have to find a way to fund our school system and pay our teachers more while streamlining our costs and improving our education outcomes for our students. There are no easy answers, but I am looking forward to working with the Department of Education, Speaker McCall and Education Committee Chairman Michael Rogers (R-Broken Arrow) to develop real solutions during the upcoming session."
Russ currently serves on the House Appropriations and Budget Committee and is chair of the House Ethics and Elections Committee.

Winchester Joins Lt. Governors' Office

Office of Lt. Governor

Lieutenant Governor Todd Lamb has announced that Susan Winchester has joined his staff as chief-of-staff succeeding Keith Beall who resigned in June to join Oklahomans for Lamb as campaign manager.
Winchester, of Chickasha, will serve the remainder of Lamb's current and final term which expires in January 2019. She most recently was president of the Research Institute for Economic Development (RIED) from 2009-2017. She served in the Oklahoma House of Representatives from 1998-2008, and also was chair of the Oklahoma City National Memorial Foundation Board of Trustees from 2014-2016.
"I am excited Susan has chosen to join my staff at the state Capitol for the remainder of my term," Lamb said.
"Her knowledge of state government and Oklahoma's business and economic environment will be very helpful as I continue to recruit and advocate for businesses to consider Oklahoma. Her experience as a former legislator, as well as her professional experiences prior to and since, will greatly assist me and the lieutenant governors' office. I am thrilled to have her return to the Capitol on a daily basis."

July's gross revenue tops prior year, continues positive trend

Shawn Ashley, eCapitol

July's gross state revenue topped prior year collections by almost 9.0 percent, Treasurer Ken Miller reported Monday, providing additional evidence of an expanding Oklahoma economy.
Gross receipts collections for July totaled $926.9 million, up $73.1 million or 8.6 percent from July 2016. Collections during each month of calendar year 2017, except for March, have shown growth, Miller noted.
"The body of evidence supporting economic recovery is growing," Miller said. "Gross receipts show ongoing expansion, as do employment reports and broader measurements, such as the latest state Gross Domestic Product (GDP) release."
The federal Bureau of Economic Analysis reported in late July that Oklahoma's GDP rose for a second consecutive quarter, up by 1.9 percent during the first quarter of 2017, following four quarters of contraction - classically defined as a recession.
All major revenue streams expanded in July compared to the prior year Miller said.
Gross production tax collections are higher than the prior year for a tenth consecutive month. July receipts from the production of oil and natural gas generated $41.9 million, an increase of $11.4 million, or 37.4 percent.
Income, sales, and motor vehicle taxes show increases ranging from 6 percent to 12.5 percent during the month.
General Revenue Fund (GRF) collections, which make up a portion of gross receipts, will be reported by the Office of Management and Enterprise Services later in the month. GRF collections generally follow gross receipts numbers up or down.
Gross receipts for the past 12 months, at $11 billion, are less than the total from the previous period by only $2.8 million, or 0.03 percent. Growth in gross production collections is driving the shrinking margin. Individual income and sales tax receipts trail the prior 12 months by less than one percent each.
Legislation enacted last session that will result in increased revenue for the state is not yet reflected in gross receipts, according to Miller. The Oklahoma Tax Commission reports any additional revenue raised due to law changes will not begin to impact the reports until next month, he said.
Gross income tax collections, a combination of personal and corporate income taxes, generated $273.3 million, an increase of $15.6 million, or 6 percent, from the previous July. Personal income tax collections for the month are $258.6 million, up by $12.6 million, or 5.1 percent, from the prior year. Corporate collections are $14.7 million, an increase of $3 million, or 25.5 percent.
Sales tax collections, including remittances on behalf of cities and counties, total $386.5 million in July. That is $31.1 million, or 8.7 percent, more than July 2016.
Gross production taxes on oil and natural gas generated $41.9 million in July, an increase of $11.4 million, or 37.4 percent, from last July. Compared to June reports, gross production collections are up by $293,860, or 0.7 percent.
Motor vehicle taxes produced $68 million, up by $7.5 million, or 12.5 percent, from the same month of last year.
Other collections, consisting of about 60 different sources including use taxes, along with taxes on fuel, tobacco, horse race gambling and alcoholic beverages, produced $157.2 million during the month. That is $7.5 million, or 5 percent, more than last July.
Gross revenue totals $11 billion from the past 12 months. That is $2.8 million, or 0.03 percent, less than collections from the previous 12 months.
Gross income taxes generated $3.9 billion for the August 2016-July 2017 period, reflecting a decrease of $150.3 million, or 3.7 percent, from the August 2015-July 2016 period.
Personal income tax collections total $3.5 billion, down by $30 million, or 0.8 percent, from the prior 12 months. Corporate collections are $403.7 million for the period, a decrease of $120.3 million, or 23 percent, over the previous period.
Sales taxes for the period generated $4.2 billion, a decrease of $14.5 million, or 0.3 percent, from the prior year.
Oil and gas gross production tax collections brought in $454.1 million during the past 12 months, up by $98.1 million, or 27.5 percent, from the previous 12-month period.
Motor vehicle collections total $761.1 million for the period. This is a drop of $11 million, or 1.5 percent, from the trailing period.
Other sources generated $1.6 billion, up by $53 million, or 3.4 percent, from the previous 12 months.

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