Gov. Mary Fallin announced this week the Legislature must return in special session to deal with a $215 million shortfall after a proposed smoking cessation fee — approved by this past legislative session — was overturned by the Oklahoma Supreme Court a week ago.

Gov. Mary Fallin announced this week the Legislature must return in special session to deal with a $215 million shortfall after a proposed smoking cessation fee — approved by this past legislative session — was overturned by the Oklahoma Supreme Court a week ago.

Article 5, Section 55 of the Oklahoma Constitution states that no money shall be paid out of the state treasury, except through an appropriation by law.

“No money can be spent from any state fund unless the Legislature specifically appropriates it,” Fallin said. "Let's be clear. The director of the Office of Management and Enterprise Services (OMES) does not have the authority to transfer monies to the affected agencies from different sources without legislation directing him to do so.”

Fallin said state law (Title 62, Section 34.55) allows the director of OMES to borrow money from treasury funds to satisfy monthly allocations of appropriations made from the General Revenue Fund, but the appropriation has to be made by the Legislature.

Fallin said she and her staff have been discussing options with legislative leaders of both parties.

The projected estimation of more than $250 million a year through the cigarette cessation fee would have served as a hefty plug in an $878 million hole in the budget.

Sharp said since the Court ruled it a tax and not a fee, subsequently it was in violation of another constitutional restriction, no tax increase can be approved during the last five days of the legislative session.

The fallout from the court's decision is that it leaves the state still facing the conundrum of how to avoid catastrophic cuts to state agencies and services — hence the Fallin's call for legislators to get back to the table.

“A special session is the best option,” the governor said. “Failure to meet in special session would mean $215 million would be cut mostly from these three state agencies. These agencies and the people they serve cannot sustain the kind of cuts that will occur if we do not find a solution.”

State Sen. Ron Sharp said he knew a special session was likely.

“However, the institutional restraints of SQ 640 still exist,” he said.

The public is looking for a tax on items that does not effect them, personally, he said.

“It is difficult to find a tax on an item that at least one fourth of citizens are not effected,” he said.

Sharp explained the State Supreme Court ruled the cigarette cessation fee was a tax that requires a three-fourths majority of the State legislature.

“I would agree with the Court it was a tax,” he said. “But, there is a revenue problem in the state and agencies are not able to provide basic services.”

He said it isn't going to be easy getting legislators on the same page to agree on a revenue funding source.

At stake

The three agencies that would have received the bulk of the money from the proposed cessation fee are the Department of Human Services (DHS), the Department of Mental Health and Substance Abuse Services (DMHSAS), and the Oklahoma Health Care Authority (OHCA).

DMHSAS would have received $75 million (about 23 percent of its total appropriation), OHCA would have received $70 million (about 7 percent of its total appropriation), and DHS would have received $69 million (about 10 percent of its total appropriation).

Fallin said without legislative intervention, DMHSAS said it would run out of state appropriations in November. OHCA said it would run out of state funds in January and DHS said it would run out of state funds in May.

Background on SQ 640

State Question 640 was a citizen-initiated ballot measure that was approved by Oklahoma voters in a special session in March 1992 with 56.2 percent of the vote.

The Initiative Petition drive was circulated to prevent the Oklahoma State legislature from ever again raising taxes without a three-fourths supermajority of legislators or a vote of the people.

The supporters of SQ 640 acknowledged this three-fourths majority would be impossible for a popularly elected legislature to obtain.

As Stan Ward, attorney, and author of SQ 640 in 1991, stated before the State Supreme Court Aug. 8, 2017.

"SQ 640 made the voters the legislative body of Oklahoma," he said.

The language of SQ 640 is embedded in Article 5 of the Oklahoma State Constitution.

The State Supreme Court ruled the Cigarette Cessation Fee was a tax that met the three-fourths majority required in SQ 640.

Sharp said SQ 640 was a taxpayer revolt against House Bill 1017, the Education Reform Act, enacted in a special session of the Oklahoma State legislature in 1990.

According to okpolicy.org, HB 1017 was landmark legislation that funded a broad range of education initiatives through increased taxes. The Legislature appropriated more than $560 million over five years to implement a wide range of reform policies, including reduced class sizes, minimum teacher salaries, alternative teacher certification, funding equity, early childhood programs, school consolidation, new statewide curriculum standards, and statewide testing.

The new taxes raised by HB 1017 are allocated directly to the 1017 Fund and can be appropriated only to the Department of Education.