September 6, 2017 / 7:20 PM / 18 days ago

Oklahoma governor plans special session to fix budget shortfall

Governor Mary Fallin of Oklahoma speaks at the Republican National Convention in Cleveland, Ohio, U.S., July 21 2016. REUTERS/Carlo Allegri

(Reuters) - Oklahoma Governor Mary Fallin plans to call a special legislative session to fill a budget shortfall of $215 million tied to cigarette sales, according to a statement issued by her office on Wednesday.

“I am planning on calling a special session beginning September 25 for legislators to adjust the current fiscal year budget,” she said in a statement.

On Aug. 10, Oklahoma’s State Supreme Court ruled against a measure passed during the last legislative session that created a $1.50 “cessation” fee for cigarette packs. The fee was expected to add about $215 million to state coffers, mostly earmarked for health and human services agencies.

Fallin said in a statement last month that the ruling meant Oklahoma would also miss out on federal matching funds.

The fee was passed when lawmakers were attempting to fill an $878 million budget shortfall.

A special session would cost Oklahoma an additional $30,000 per day, according to an August statement by the state’s House Democratic Caucus.

Following Fallin’s announcement Wednesday, House Speaker Charles McCall, in a statement, said House Republicans would consider raising a cigarette tax in a special session “but will send it to a vote of the people if House Democrats again refuse to support the measure.”

If passed in special session, the cigarette tax would generate approximately $122 million for fiscal 2018’s budget, the statement said. The balance of money to plug the hole would come from existing budget sources as well as utilizing some of the state’s Rainy Day Fund

“The cigarette tax is the only feasible tax option Oklahomans have said they would support,” McCall said.

Oklahoma’s fiscal issues stem from tax cuts and structural changes to the state budget, further exacerbated by a decline in energy prices a few years ago, said Robert Dauffenbach, a senior associate dean for economic development and impact at the University of Oklahoma.

Oklahoma has a balanced budget requirement. Its fiscal 2018 budget totaled about $6.8 billion, according to Michael McNutt, a spokesman for Fallin.

The yield on Oklahoma 10-year general obligation bonds traded 20 basis points over the benchmark Thomson Reuters Municipal Market Data AAA yield scale at the close on Tuesday. The yield was little changed from the end of May, when the state’s legislative session ended.

Reporting by Stephanie Kelly; Editing by Daniel Bases, Andrew Hay and David Gregorio

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