Tax cuts and flat budgets: What's next for lawmakers in Oklahoma's big budget debate

This week, the Oklahoma Senate went public with its plan for the state's budget. Outlined in a simple Senate resolution, the plan would earmark close to $14 billion for fiscal year 2025. The resolution also includes a $312 million line item to pay for a cut in the state's portion of the grocery sales tax.

In addition, the Senate wants to allocate about $500 million for deferred maintenance and infrastructure needs. The cost of those needs — including state agencies and higher education campuses — is about $25 billion. Senate leaders said they understood the importance of improving and upgrading state infrastructure but added there wasn't enough money to fund all the needs this year.

"We can make a start at it," Senate Pro Tempore Greg Treat said. "But our revenues are limited."

The Senate's budget also allocates $100 million for workforce development. In short, the state would fund the Oklahoma Workforce Commission to "increase the number of degrees, licenses, certificates, and other credentials granted to fulfill workforce needs in critical occupation areas identified by the commission."

In total, the Senate budget proposal is close to $2 billion more than last year — but those figures include millions set aside for one-time expenses and funds to pay for the cut to the state's portion of the grocery sales tax.

More: The Oklahoma Senate has sent a $12 billion budget to the House. What's on the bipartisan plan?

And even with the extra funds, the final budget probably won't be that much, but instead a plan that echoes the governor's call for a flat budget.

Cave: No secret that governor wanted 'flat budgets'

In fact, Stitt has called for flat spending across the board, this year, saying he didn't want to grow government. But the governor's call has another element, too — the personal income tax cut. One agency leader, who asked not to be identified because she was not authorized to speak about the issue, said Stitt pushed agency heads to not request budget increases.

"We were told to keep it flat," the source said. "Because he wants his income tax cut."

Stitt's spokesperson, Abegail Cave, echoed that statement in an email to The Oklahoman, saying "It was definitely no secret that the governor wanted flat budgets."

But Cave stopped short of saying the governor pressured agencies to not request budget increases in a carefully worded statement: "As for any official communication about restricting what they could or could not ask for — there was none to my knowledge," Cave wrote.

That's not how Treat heard it.

More: In spite of Gov. Stitt's call for 'flat' budgets, education leaders are seeking more money

Speaking at his weekly news conference Tuesday, Treat said members of the Senate's appropriations team, seeking to get information to write the budget, called some agencies in more that once to try and get a full picture of agency needs.

"We went through a vetting process," Treat said. "We asked them (agency leaders) to come back in and said, 'did you really mean what you said on a flat budget?"

Treat said some agencies recanted but "many stayed the course."

But those who requested flat budgets did so at the behest of the governor, he said. "The governor did use his prerogative as the governor to put pressure on agencies to try and submit a flat budget where they might not have of their own volition," the said.

Up next budget debates between House and Senate

Even with the "flat budget," the difference between the Senate's budget plan and some early spending bills passed by the House is in the billions of dollars. Last week the House passed bills cutting taxes and allocating revenue that totaled more than $3.5 billion.

Those differences, Treat said, will need serious talk.

"We can't do everything they sent us and still balance the budget," Treat said. "We don't know what the House wants to spend yet. We don't know what they are advocating for in the budget."

More: How will the Oklahoma grocery tax cut actually affect my bill? What to know

Even so, Treat said, some agency funding remains at last year's level or saw only a slight increase.

Under the Senate's plan, common schools would have roughly the same budget as last year, about $3.9 billion. The higher education system would see a $1.036 billion allocation and the Department of Career and Technology Education would receive more than $196 million.

"Education is still a big winner," Treat said. "We kept our commitment to transportation, health care and DHS (the Department of Human Services). We even appropriated some to DHS that they didn't ask for."

Two years ago DHS officials launched a plan to process the applications of nearly 5,000 Oklahomans with developmental disabilities, including those waiting for several years. The Legislature agreed to spend $32.5 million in 2022 to end the waitlist, reversing years of underfunding that led to the lack of care for thousands of Oklahoman.

Treat said funding that effort was a priority. "We felt the waiting list was important enough that we wanted to keep our commitment there," he said.

Still, while the Senate's plan goes into detail about spending for each state agency, Treat said the Senate doesn't want to spend every dollar. Members of the Senate, he said, want to hold back some funds, "just in case."

Treat: Keep $1 billion in savings 'just in case'

"We set a goal early on. Senator Thompson, myself, Senator Hall and others, that we wanted to have enough cash in reserve to weather a storm beyond what we can weather through the Rainy Day Fund, the F-Map savings account and the Revenue Stabilization fund," he said.

The goal was a $1 billion in savings. "We arbitrarily set that number at $1 billion," Treat said. "We wanted to keep cash on hand. We wanted to have enough cushion to be responsible. That's why we waited until the Feb. 15 numbers come out."

With the Senate's plan public, the focus now shifts to the House of Representatives. There, the negotiations could be difficult. House Speaker Charles McCall continues to push for billions in tax cuts and different spending priorities.

Treat said he expects some of the next month to be focused on budget negotiations between the House and the Senate.

"There will be a lot of tough stances, there will be a lot of wailing and gnashing of teeth, and then we'll come out and I think we'll prevail, and it will be very close to what we've talked about publicly," Treat said. "I respect the House of Representatives and their role to play in this. We will respect them the whole way through, but it will be arduous, and we'll think it won't come together, and it will magically come together in the end."

This article originally appeared on Oklahoman: Oklahoma Senate budget is just the start of lengthy negotiations