Does Anyone Like This Budget?

Capitol Considerations 

by Senator Micheal Bergstrom

Does Anyone Like This Budget?

We have a budget.

On Wednesday, at about 1:30 in the morning, the Oklahoma State Senate’s Joint Committee on Appropriations and Budget (JCAB) passed a $6.9 billion budget for fiscal year 2018. Then late Wednesday night we passed it again and sent it to the House.

I don’t think anyone is thrilled with it. Why? Well, let’s consider how it is funded.

There’s a $1.50 cessation fee on each pack of cigarettes, which is not a tax.  There’s also an increase to four percent on the gross production tax (GPT) of wells currently paying only one percent.  The bill also contains a 1.25 percent sales tax on vehicle sales, plus a variety of new fees, bonds, and revolving fund cash sweeps.  We also removed a number of tax refunds and rebates.

With the refusal of the Democrats in the House to cooperate and seriously negotiate, we were forced to get creative with funding. It seems that Minority Leader Inman, in his quest for political power, was not interested in helping solve long-term funding issues, so we ended up with an excise tax and a sales tax on new cars and trucks.

What’s in the bill?

One of my top priorities this session was to see that common education was held harmless in this budget. The budget avoids cuts or increases funding for the Department of Education and 16 other agencies. We are going to pass an $18 million trailer bill to make sure common education has no cuts. In fact, this budget provides approximately $21.6 million more for schools than the original FY’17 budget.

The Departments of Public Safety, Health Care Authority, Human Services, Rehabilitative Services and the Office of the Chief Medical Examiner all saw significant increases. Most of the remaining agencies saw a cut of less than five percent.

What’s not in this package of bills?

New wells will continue to pay only two percent GPT for 36 months before the rate rises to seven percent.  A travesty, since after 36 months much of the well’s production will have been depleted and since quite a few in the industry have told me in private conversations that a reduction to 18 months coupled with an increase in the GPT to four or even five percent will NOT have a negative impact on drilling. Also, there is no change in the income tax rate, nor is there a cap on deductions. I argued that reducing the rate further was foolish at this time and though I initially considered the cap on deductions I decided it was bad policy.

There is also no fuel tax increase.

There is no teacher pay raise. While that was a priority for us, fully funding education and crucial services had to take precedence. I’m hopeful we can get this done next year.

So we have a budget.

Nobody is thrilled with it. Still, it does protect our core services, we have eliminated some waste, and we have overcome a massive budget deficit.

It’s not perfect, but it is progress.

I welcome your questions and concerns, so please feel free to contact my office at the State Capitol if you would like to discuss a particular issue or problem.  Our office can be reached by phone at 405-521-5561 or by email at bergstrom@oksenate.gov.   If you visit the Capitol, we are located in Room 527A.

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A few weeks ago I said we were making progress on the Oklahoma state budget. We were, but a candidate for governor keeps derailing the process. Perhaps he's more interested in political posturing than in legislating.

Capitol Considerations: 

A Weekly Column by Sen. Micheal Bergstrom

Who Should You Blame For This Mess?

Oklahoma’s legislature has been struggling with a mess, a fiscal mess, and it has been getting messier as the days and weeks have rolled by.

A month ago, I was optimistic about our chances of getting a quality budget done before the end of session. Today I’m thinking we may end up in a special session. From what we are being told, we will likely remain in session through the weekend and right on through next week, with no days off, which is fine.

So let me tell you about what’s been going on. Those who read my column should have noted that I don’t spill a lot of ink describing the actions or inactions of the Democrats, or, for that matter, of the House of Representatives. Today I think I must.

The House, which is required by the state constitution to start all revenue raising measures, has sent multiple tax increase bills to the Senate. Since I was just elected in November, I can honestly say I wasn't involved in creating the budget hole we find ourselves in, and I have an aversion to raising taxes, but we have a $900 million hole, and we can't cut that much in a $7 billion budget and still maintain essential services. So I have held my nose and voted for some of those taxes.

Every time, after we send those bills back to the House, they have balked and bailed out.

Now part of that is because the Democrats in the House, led by someone who is running for governor and who seems more interested in playing partisan politics than in legislating, have been blocking any effort to solve this.

Another part is that the leadership of the Democrats was not at the negotiating table in the process until this week. In my opinion, they should have been there much sooner.

Possible avenues to solving the budget problem seem to include finding and cutting waste in agencies (though I doubt much will happen in this area), a cigarette tax, an increase in the oil and gas production tax rate, gas and diesel fuel tax increase (which would be dedicated to roads and bridges and would still leave Oklahoma below the regional average), reduction of a variety of business tax credits, an elimination of some oil and gas tax rebates.

Who knows what the final package will look like.

But now it is up to the House and the Democrats to decide if they actually want to fix the budget. Senate Republicans have been consistently pushing good policy. Unfortunately, on the House side and especially in the Democratic caucus, we have too many who are more interested in playing politics than governing and putting our great state’s citizens first.

My hope is that, since we are nearing our budget deadline, the politicking will give way to legislating.

I am interested in feedback from my constituents, so if you have any questions or comments, please email me at bergstrom@oksenate.gov. My office can also be reached by phone at 405-521-5561.

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Oklahoma Senate Making Progress, Hopefully

Capitol Considerations: 

A Weekly Column by Sen. Micheal Bergstrom

Making Progress, Knock On Wood

We do it all the time.

From the sidelines, we want to condemn the coaches, players, managers.

I am a huge Chicago Cubs fan. But those managers? There were some I thought were idiots. Who can argue with me about Leo Durocher during the 1969 season? So many times I yelled at him (through the TV, of course) about his needing to pull Ron Santo out in the clutch situations. I loved Santo, but he just wasn’t cutting it that season.

Cubs should have gone to the World Series that year, but instead, because of Durocher, in my estimation, it ended up being the year of the Miracle Mets.

Admittedly, I was 11 years old and may not have had all the facts.

Don’t we all do that?

We attack folks in the church, the classroom, the legislature.

Well, here in your state legislature we get a lot of that, and sometimes we deserve it.

All I can do is report to you what I’m doing and seeing.

This week I have two bills going to the governor’s desk. Senate Bill 563 makes it easier for school districts to save money when purchasing materials and services. SB 84 makes Student Reading Proficiency Teams (which decide if a student who fails the third grade reading test should receive a probationary promotion to the fourth grade) permanent and requires the collection of data to help us evaluate the success of the program.

Hopefully the governor will sign both bills.

Top concerns for me right now include funding DHS, healthcare, education, public safety and our prisons.

So far this session I have fought to get rid of the tax credits for wind turbines that those in the industry have told me they don't need to be profitable. We got rid of those credits, as far as new credits go, beginning July 1, saving taxpayers over $3 billion down the road. Unfortunately, it doesn’t help with this budget.

We are working on getting rid of some tax rebates to the oil and gas industry which will free up a little under $50 million, which is more than we would get if we raised the oil and gas production tax to 7% as some are calling for, but we won’t see any of that this year.

The Senate passed bills to move about $250 million from road and bridge funds to help fill the nearly $1 billion budget hole, and will replace much of that with revenue from a six cent increase in taxes on gas and diesel fuel, if that bill passes.

We passed a bill to uncouple Oklahoma’s income tax structure from the federal government. It will mean about $4 million in revenue this year, but possibly hundreds of millions of dollars in years to come.

The budget is being worked on continually, and has been the primary topic of discussion in the Republican Senate caucus all session and even before that.

Negotiations have been going on for quite a while between the House, the Senate and the Governor.

We voted in the JCAB committee on the Senate side on Monday on ways to fill a little under half of that budget hole. The House has to be fully on board, or we could be looking at massive budget cuts. Then there’s the Governor.

We are making progress on the budget.

Really, we are.

By the way, the Cubs won the World Series last year. That’s proof that there is always hope and things can turn out well.

Even in Oklahoma City.

I am interested in feedback from my constituents, so if you have any questions or comments, please email me at bergstrom@oksenate.gov. My office can also be reached by phone at 405-521- 5561.

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Still Working On the Budget

Capitol Considerations: 

A Weekly Column by Senator Micheal Bergstrom

     Believe it or not, the Oklahoma State Senate has not yet fixed all of our budget problems. However, several budget bills are being considered.

     Even though all options are still on the table, the solution will likely be a combination of new revenue streams, tax credit reform, agency efficiencies and apportionment reform. What that means is we are trying to find a bunch of money and get control over the money we are already spending. We are working hard to craft a budget which minimizes the impact of budget cuts on core services like education, public safety, health care and transportation. I think we’re moving in the right direction to create reforms to provide stability in the budget, but our work isn’t finished yet.

     Here is some of what we have done. House Bill 2343 is expected to increase compliance with state sales tax law and generate approximately $17 million in revenue. HB 2344 lowers the cap on the state film tax credit from $5 million to $4 million and the House this week also approved SB 170, which eliminates the “income tax cut trigger.” This means, if the governor signs it, there will not be another income tax cut.

     House Bill 2298, which was signed by the governor, ends future income tax credits for wind production. Current law allows owners of wind turbines that begin operation before 2021 to claim a credit on the income earned from energy production. Now with the governor’s signature, the new law will do away with wind tax credits beginning July 1.

     We are still focused on finding a way to fund teacher pay raises and get more money into classrooms, but with revenue sources limited, it’s a tough task. The Senate Appropriations Committee approved HB 1114 last week, which would give a $1,000 pay raise for teachers during the 2017-18 school year, a $2,000 raise during the 2018-19 school year, and a final $3,000 raise during the 2019-20 school year. We have not currently identified a way to fund this raise. Hopefully, over the next five weeks, we will be able to pull together a budget that works for the citizens today and lays the groundwork for the future.

     While we worked on the state budget and other important issues this week, we also had to grapple with the death of Representative David Brumbaugh last Saturday. Representative Brumbaugh lived in Broken Arrow and served House District 76 since 2010 and was a well-respected and dedicated legislator. On Thursday, we delayed Session to honor him as his body was carried by the state troopers to the Capitol rotunda where he lay in state. He will be greatly missed.

     His passing is a reminder to each of us that we are on earth for only a brief time and should do the best we can with the time we have. 

     I am interested in feedback from my constituents, so if you have any questions or comments, please email me at bergstrom@oksenate.gov. My office can also be reached by phone at 405-521- 5561.

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2nd Amendment Bills & More From Week 10

Capitol Considerations: 

A Weekly Column by Senator Micheal Bergstrom

We just completed our tenth legislative week and it’s hard to believe we’ve already passed the halfway mark on the session calendar.

On Monday, my first bill was signed into law by Gov. Mary Fallin and will go into effect later this year on November 1. Senate Bill 36 is a language clean-up bill to eliminate confusion and bring Oklahoma in line with federal definitions by adding the definition of the term "handgun" to the Firearms Act. It didn’t change any firearm laws, but just updated terms in statute. The bill also adds definitions to the Oklahoma Self-Defense Act.

I also authored SB 40, which relates to the felony pointing of a firearm. Currently, the law states that it is a felony to point a weapon at another person. This bill added the words “except in an act of self-defense.”

The reason for SB 40 is that if you are defending yourself by drawing your weapon against someone who is threatening you and you don't shoot that person, you can be charged with a felony. This has actually happened in Oklahoma.

Representative Bobby Cleveland is carrying the bill in the House.

This bill also added armed security guards and private licensed investigators into the already exempted law enforcement officers who may be called upon to pull their weapons in the course of their job duties.

SB 84, also one of my bills that is over in the House, deals with probationary promotion of third graders who fail the third grade reading test. The bill requires school districts to report certain information so that student progress can be followed, to help evaluate the success of the program which is part of the Reading Sufficiency Act.

An important bill, that is not one of mine, is HB 1693, the A-F school grade bill.  It creates a new and improved school accountability system and establishes the framework for one that is more useful and reliable and repeals the old system. The measure is now out of the Senate Appropriations Committee and heading to the Senate floor.

On Monday, the Senate also approved HB 2298, which moves up the sunset date of the zero-emissions (also commonly known as wind) tax credit to July 1, 2017. Many will argue that this tax credit accomplished what was intended, as it helped launch wind energy in Oklahoma, as is evident by the state’s rank of third in the nation for wind power, but with the massive budget hole, it made sense to sunset this credit earlier than originally planned.

Unfortunately we have not passed any kind of cap on the wind tax credits that will remain for another ten years, which means the state will likely be on the hook for hundreds of millions of dollars to the wind industry each year.

The bill is now headed to the governor’s desk for review.

I am interested in feedback from my constituents, so if you have any questions or comments, please email me at bergstrom@oksenate.gov. My office can also be reached by phone at 405-521- 5561.

Surprises and Gratitude

Capitol Considerations

A Weekly Column by Senator Micheal Bergstrom

Some Thoughts on Surprises and Gratitude

I have often been asked what I’ve been surprised by since I took office in November. Usually I say I haven’t had any real surprises; the process is about what I expected and I had a pretty good idea of what I was signing up for.

But there have been a few surprises.

In my last column, I suggested the budget crisis is worse than the one last year. Six months ago the revenue shortfall was projected at about $600 million. In a conversation with the Governor a week before the State Board of Equalization (BOE) released its December forecast, she suggested the shortfall might be lower than that.

Then the BOE projected an $868 million shortfall. I contend the real number may be much higher.

That was a surprise.

It was no surprise to me that agencies tend to become fiefdoms. In some ways that is legitimate. If an agency is doing a good job, meeting real needs of the citizens, it’s the director’s job to fight to keep the agency on track.

Unfortunately, agency heads often seem to think that their job is to continually expand and build their own personal power bases. I’ve heard talks about department heads whose attitude are, “Senator, you’re term limited and I’m not. I’ll be here long after you’re gone.”

Ask an agency head for help in carefully whittling a budget, rather than just giving the department a straight cut and the answer seems to always be, “We can’t cut anywhere. You’re just going to have to raise revenue.”

Then don’t be surprised if the department head releases a memo that will get into the press crying out like Chicken Little that the sky is falling, the agency is under attack, horrible suffering will soon follow and it’s all the legislature’s fault.

The degree of unwillingness of agencies to be transparent, honest in their dealings with legislators, and cooperative in the process, is a problem.

That was a bit of a surprise.

There is a serious budget deficit this year, there are those who are entrenched in agencies and elsewhere who see defending their fiefdoms as a war that must be won no matter the cost, but there are also so many things that I have found I must be grateful for.

And I am truly grateful.

There are the legislators I have gotten to know, many of whom have helped me, prayed for me and been a blessing. There are those in my district who have allowed me the privilege of being a senator. There are those who contact me to offer support and those who vehemently disagree with me, but whose arguments force me to think and analyze my positions. There is this Capitol building that I look at each morning on my way in, often telling myself something like, “This is so cool.”

There are the agencies I need to understand, and work with to serve our citizens, and be frustrated by at times.

And there is the budget that I have the chance to have a small part in addressing.

There have been a few surprises, and I am grateful for each of them.

I am interested in feedback from my constituents, so if you have any questions or comments, please email me at bergstrom@oksenate.gov.  My office can also be reached by phone at 405-521-5561.

You Thought Last Year Was Bad

Capitol Considerations

A Weekly Column by Senator Micheal Bergstrom

You Thought Last Year Was Bad

Hold on to your hats. This is going to be a bumpy ride.

The State’s budget problems are even worse than you thought.

Let’s start with the projected budget shortfall that’s somewhere in the $880 million range. (That doesn’t include the recent revenue failures.)  Now, let’s add to that the more than $100 million that we’re trying to come up with right now because some of the state’s agencies were only given funding in the current budget for 10 months.

You heard that right. Last year, the legislature solved part of the budget crisis by only budgeting funds for 10 months instead of 12. That is called ‘kicking the budget crisis can’ down the road. That can is now full of worms and needing to be dealt with.

So, here we are with a billion dollar budget shortfall.

Don’t worry. It gets worse.

It turns out last year the legislature decided to empty out the state’s ‘Special Cash Fund,’ which is sort of like a bank account a business might keep working capital in. The problem is, constitutionally, the State of Oklahoma has to pay its bills. That takes money. You know, cash.

So, to do that, the folks who pay the bills, also known as the Oklahoma Office of Management and Enterprises Services (OMES), had to borrow a little from the Rainy Day Fund, in the amount of $380 million.

Oh, and that has to be paid back to the Rainy Day Fund by June 30.

That means that our budget shortfall is actually just under $1.4 billion.

Last year it was $1.3 billion. So this year is even worse. If your head is starting to hurt thinking about that, just imagine how I feel.

The question is how do we fix this? Well, we need to start by putting everything on the table. Here are some examples.

One - We need to scrap the next income tax cut. The Senate has. Now it’s up to the House.

Two - Find every efficiency we can, though I doubt we are going to find a billion dollars that way.

Three - Get rid of some tax incentives and credits, and not just wind production credits.

Four -  Pass a production tax on electricity generated by wind.

            Five - Consider an increase of taxes on diesel and gas. They have not been increased in three decades.

Six -  Consider increasing the cigarette tax.

We will need to find a balance of where we can cut, like tax credits and line items in agencies, and where we can bring in more revenue if we are going to balance this budget and not just kick this can down the road again.

I am interested in feedback from my constituents, so if you have any questions or comments, please email me at bergstrom@oksenate.gov.  My office can also be reached by phone at 405-521-5561.