Oklahoma state’s proposed $ 8.3 billion budget includes tax cuts and increased funding for education
May 14 – State lawmakers and Governor Kevin Stitt have agreed to a state budget of $ 8.3 billion for the coming fiscal year that will increase funding for education, cut savings for ‘about $ 800 million and will reduce corporate and personal income taxes.
At a press conference Thursday, legislative leaders stood alongside Stitt to announce the budget proposal for the fiscal year that begins July 1.
Unexpected increase in state revenues means that instead of having to cut budgets like the Oklahoma legislature did last year, heads of state can make targeted investments and increase budgets of state agencies by 7% on average.
The proposed budget represents an increase of about half a billion dollars from the budget of 7.8 billion dollars for the current year, which included 4% cuts in most state agencies.
Thursday’s announcement was in stark contrast to the state budget legislative leaders announced last year without Stitt’s presence. At the time, the governor complained about being left out of budget negotiations and vetoed several important budget bills – the Oklahoma legislature’s veto was quickly overturned.
This year, Stitt got nothing but praise for the budget proposal.
“Today we have been on the People’s Agenda,” Stitt said. “I am proud of the Legislative Assembly’s collaborative efforts to deliver a budget that cuts taxes for Oklahomans and businesses, makes the largest education investment in state history, and deposits approximately $ 800 million. dollars in our state savings accounts, replenishing our $ 1 billion in savings. ”
The budget proposal includes cuts to Oklahoma’s personal income and corporate tax rates.
The state’s top personal income tax rate will drop from 5% to 4.75%, and the state’s 6% corporate tax rate will be reduced to 4%.
The corporate tax cut does not go as far as the proposal by House Speaker Charles McCall, R-Atoka, which sought to eliminate the state’s corporate tax altogether.
Unlike McCall’s plan which could be overturned with a simple majority vote in the legislature, overturning the tax cuts included in the budget would require three-quarters of the votes in both houses of the legislature.
Lawmakers don’t want to go back to where they were a few years ago when they had to raise taxes to fund teacher pay increases, McCall said. He was also optimistic that with sufficient savings and increased tax revenues, lawmakers will not have to increase revenues in the years to come.
“I am optimistic that we will soon be investing in the right things in the state of Oklahoma and in the future that we will grow our economy and see more taxpayer dollars in the state of Oklahoma. “said McCall.
The budget would also restore the refundable aspect of the working income tax credit, often referred to as the working family tax credit, which state lawmakers eliminated in 2016 to fill a budget deficit.
The corporate income tax cut will cost $ 48 million next year and $ 110 million a year thereafter. The reduction in the personal income tax rate will cost $ 63 million next year and $ 170 million in subsequent years.
The corporate tax cut will allow Oklahoma to have the eighth lowest corporate tax rate in the country, said House Appropriations Speaker Kevin Wallace R-Wellston.
Heads of state have touted a “historic” investment in education in the draft budget.
Common education will see a $ 178 million increase in funding, triggering a provision in state law that caps class sizes for kindergarten and first graders. In total, the budget would devote $ 3.2 billion to common education.
“After such a difficult year following the pandemic, the budget agreement announced today is tremendous news for students, teachers and indeed all Oklahomians who benefit from a strong education system,” he said. Superintendent of Public Schools Joy Hofmeister said in a statement. “An additional $ 137 million for the school funding formula and $ 60 million for textbooks will go a long way in ensuring that our children are on the right track academically.
The budget would also increase the cap on the Oklahoma Equal Opportunities Scholarship Fund, a tax credit for donating to schools, to $ 50 million, which would be split evenly between public schools and private.
Currently, the cap is $ 3.5 million for private schools and $ 1.5 million for public schools.
After State Question 802 is passed, the budget will fund Oklahoma’s 10% share of Medicaid expansion costs.
Lawmakers are constitutionally required to fund the expansion that will cost $ 164 million next year.
Initially, the Oklahoma Health Care Authority will fund the expansion using additional federal revenues raised internally. The legislature announced a phased approach to increase hospital fees from 2.5% to 4% to cover long-term expansion costs.
The budget in no way precludes Stitt and the Health Care Authority from moving forward with plans to outsource care for most Medicaid recipients to the four insurance giants through Managed Care. some thirds.
Some lawmakers have suggested that one way to stop Stitt from implementing third-party managed care was to not fund the contracts out of the state budget.
Senate Pro Tem Greg Treat, R-Oklahoma City, said managed care legislative discussions are ongoing, but these policy decisions are separate from budget negotiations.
The budget proposes to write off $ 800 million in savings to replenish accounts that were depleted during the pandemic.
A priority for Stitt and legislative leaders, the cash injection will once again push the state’s savings accounts to over $ 1 billion.
As of February, state savings accounts held around $ 230 million.
House Democrats presented their own budget proposal this week, but most of their priorities were not included in the final budget deal.
Due to Republican supermajorities in both houses of the Legislature, Democrats have little say in budget discussions. Several Democrats attended Thursday’s press conference to find out what was in the budget.
However, restoring the refundable aspect of the earned income tax credit has been a top priority for Democrats for years. Although, earlier this week, House Democrats made tax cuts for wealthy Oklahomans and businesses.
“We are proud to say that we are investing in the Oklahomans, while ensuring that they can keep more of their hard-earned money,” said Emily Virgin, House Minority Leader, D- Norman. “One of the most important ways to do this is to restore and increase the Working Income Tax Credit.”
House Democrats said their $ 9 billion budget proposal focused on helping working families in Oklahoma. The plan, which included small tax increases on Oklahomans who earned more than $ 100,000 a year, proposed to get rid of taxes on groceries, offer a risk premium to first responders, and increase the minimum wage.
The proposed budget also includes:
– $ 35 million in new funding for economic development
– Creation of a new film tax incentive with a cap of $ 30 million
– $ 42 million for broadband expansion, offered as a tax incentive for Internet service providers
– Creation of a children’s mental health unit at OU Health, at a cost of $ 9.9 million over three years