Legislative leaders agree to $6 billion tax cuts
Capitol Spotlight for weeklies for week of June 18, 2006
By Jim Campbell
OPA Capitol News Bureau
Having agreed to a framework for tax cuts totaling $6 billion over the next decade, what can the Oklahoma Legislature do for an encore?
For the second year in a row legislators are hailing "the largest tax cut in state history." But last year's $150 million reduction looks puny beside the eventual $600 million annual tax relief in the budget deal between the Republican House, the Democratic Senate and the Democratic governor.
"We achieved historic tax relief for working Oklahomans that is more than four times the size of last year's record tax cut package," said House Speaker Todd Hiett, R-Kellyville, in announcing the deal that broke a standoff threatening to shut down state government on July 1, just 15 days hence.
Compromising on issues that had divided the sides for weeks, Republicans got a four-year phased-in income tax cut from 6.25 percent to 5.25 percent and elimination of the estate tax over three years. Hiett and Sen. Scott Pruitt, R-Broken Arrow, both lieutenant governor candidates, had proposed 4.9 percent while Senate Democrats held out for a hike in the standard deduction. 
The agreement provides an increase in the income tax deduction to the federal standard level over four years.
"Taking advantage of this unique opportunity to historically change the tax structure of our state will mean that 45,000 households in Oklahoma will never again have to pay state income tax," said Senate President Pro Tempore Mike Morgan, D-Stillwater.
Legislative leaders and Gov. Brad Henry agreed to return June 21 for three days of special session to enact the deal. Subcommittees began immediately to work out details for various state agencies that were due to lose funding July 1. Henry said he would not expand the call to include other measures sought by various lawmakers.
Morgan and Henry cautioned about further tax cuts that could collide with a collapsing economy.
"I think we have to be very, very careful," said Henry. "But I don't think everyone would have signed off on this agreement if they did not think we would be able to carry it out. But we have to be very careful in the future."
"We can't get tax cut crazy," said Morgan. "When we come back next year we have to keep that in mind."
"I cannot sugar-coat the fact that I believe that state leaders in the future will face budget challenges when energy prices eventually moderate and Oklahoma is no longer riding the wave of the latest oil boom," he said.
Hiett's position all along has been that tax reductions will produce more jobs, investment and state revenue.
Senate demands for a $3,000 raise for teachers are included, as well as a 5 percent pay raise for state employees. The two sides split the difference on the state worker raise, starting it Oct. 1 instead of the July 1 date sought by Democrats and the Jan. 1, 2007, start favored by the GOP.
Other highlights of the $7 billion budget plan include funding for 100 new case workers to protect children from abuse and neglect, $130 million more for higher education to defray tuition increases, $80 million to be divided between the University of Oklahoma and Oklahoma State University for an OU diabetes center and the Tulsa OSU osteopathic college, $270 million for roads and bridges beginning in fiscal 2008, $102 million for Medicaid reimbursement for doctors and hospitals treating indigent patients and $150 million for Henry's Economic Development Generating Excellence endowment.
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One can only imagine, considering remarks in separate news conferences, the atmosphere of private negotiations between Hiett and Morgan.
"It was a very difficult process," said Hiett.
"It's certainly been difficult," said Morgan.
Morgan said he did not want to meet the press with Hiett because "I knew all he wanted to talk about is tax cuts."
Hiett said the only thing holding up a budget deal "was their refusal to sit down and discuss the issues."
Henry, who will have had the unusual experience for Democratic governors of signing record tax cuts, said he did not know whether the steep reductions would affect a Taxpayers Bill of Rights vote should that initiative reach the ballot. TABOR would limit state spending increases to a formula of inflation and population growth.
The $3,000 teacher pay raise, he said, would "make significant progress" in the percentage of education funds going into the classroom. Bob Sullivan of Tulsa, a GOP gubernatorial hopeful, is pushing an initiative to require 65 percent classroom funding.
"Sixty-five percent is not a magic number," said Henry, adding that he would like to see it at 90 percent although transportation and various support services have to be considered.