'This is literally it': State lawmakers build new budget plan after Senate pushes to add gross production tax hike to proposal

Translated, it read: “Let’s get on with it already.”

In a remarkable if not unprecedented move, the Senate approved by voice vote a resolution calling on the House, which must originate revenue bills, to put an increase in the gross production tax into the package that failed the House on Wednesday and to pass the whole thing immediately.

By Thursday evening, the House and Senate had teed up a “Plan A” that is exactly what the Senate asked for and a “Plan B” that cobbles together budget cuts, reserve cash and new revenue.

Plan B, which consists of five separate bills, was approved by House and Senate committees Thursday afternoon. Those committees will consider Plan A on Friday. The Senate could vote on the Plan B bills Friday, but final votes on Plan A won’t come until Saturday.

“This is literally it,” said House Majority Leader Jon Echols, R-Oklahoma City. “There’s nothing else. Plan B is not a bluff.”

The components of Plan B require only a simple majority for passage but would require at least $60 million in additional spending cuts. The plan’s most controversial feature would eliminate the state sales tax exemption on motor fuels for the first $1.66 per gallon. At current prices, the result would be an additional 6 to 7 cents per gallon.

Plan A would require supermajorities in both the House and the Senate, but would raise enough revenue — somewhere around $450 million — to completely account for the $215 million shortage that necessitated the current special session as well as pay for teacher and public employee raises and restoration of the earned income tax credit.

Asked if House leadership has the votes for Plan A, Echols said, “I don’t know — but I’m going to vote for it.”

Wednesday’s resolution requests that the temporary gross production tax on new horizontal oil and gas wells move from 2 percent to 4 percent and be made part of a package that also hikes the cigarette tax by $1.50 and the gas tax by 6 cents and raises the tax on low-point beer.

House Democrats have refused to provide the votes needed for the supermajority required to pass a revenue bill unless the measure includes a substantial increase in the discounted gross production tax.

House Republicans have tried to entice the minority caucus with such Democratic vote bait as a $3,000 teacher pay raise, a $1,000 state employee raise and restoration of the state earned income tax credit, to no avail. Speaker Charles McCall offered to bring a gross production tax bill to the floor later, but the Democrats held firm.

A gross production tax increase had to be part of the big package.

Wednesday’s resolution does not specify the length of the 4 percent discounted rate, but Senate President Pro Tem Mike Schulz, R-Altus, said it would be 36 months, same as for the current 2 percent rate. The tax rate goes to the long-standing base of 7 percent after that.

Assistant Minority Leader Eric Proctor, D-Tulsa, said his caucus has maintained that it would accept 4 percent only if the discount period is shortened to 12 months. The Democrats originally wanted to eliminate the discount altogether, then said they would accept 5 percent for 5 years, 4½ percent for 18 months or 4 percent for 12 months.

Echols said 4 percent for 12 months was not a realistic counter offer, though, because it actually works out to a bigger tax hike than 5 percent for 36 months.

The amount generated in the first year under the latest proposal is relatively small — probably less than $20 million — but Democrats say it would bring in hundreds of millions a year once fully implemented.

“I don’t think we’d be having this fight if it was only $20 million a year,” Proctor said.

Senate Minority Leader John Sparks, D-Norman, a co-sponsor of Thursday’s resolution, would not comment on the length of time for the 4 percent rate.

He said the resolution sends a meaningful message to the House that the Senate was open to considering a hike in the gross production tax.

Last session, Schulz would not agree to a gross production tax increase.

Senate Majority Floor Leader Greg Treat, R-Oklahoma City, said his caucus is not comfortable going with a higher rate increase.

“Four percent is the only thing we can deliver the votes on,” Treat said.

Treat said he hopes the House takes it up, along with the revenues they tried to pass Wednesday, to fill the budget hole and to stop the bleeding.

If the additional tax hike is added, the Senate will have the supermajority needed to pass it, Treat said.

Industry groups came out against the Senate’s action.

“We are disappointed the Senate has joined House Minority Leader (Scott) Inman and his caucus in calling for increased taxes on Oklahoma’s defining industry because increasing the state’s gross production tax for new wells harms Oklahoma businesses and harms working Oklahomans,” said Tim Wigley, Oklahoma Independent Petroleum Association president.

A rival industry group, the Oklahoma Energy Producers Alliance, argued for doing away with the horizontal well discount altogether and promised an initiative petition drive to do just that.

“We want to end all special tax breaks, fund core services and let the marketplace decide winners and losers in business,” said OEPA President Mike Cantrell.

randy.krehbiel@tulsaworld.com

Twitter: @rkrehbiel

Barbara Hoberock

405-528-2465

Twitter: @bhoberock