The 54th Legislature Closes; House Passes Monumental Reforms and Passes Major Milestones

OKLAHOMA CITY – This week, the Second Session of the 54th Oklahoma Legislature proclaimed Sine Die and ended the session passing several monumental reforms and measures.

“I believe this has been a very successful policy session with the passage of numerous significant measures which will shape the future of our state,” said House Speaker Jeff Hickman, R-Fairview. “The House addressed several challenging issues, many of which have been deferred by previous Legislatures for years or even decades.

“We have worked hard to ensure Oklahoma continues to be a leader in energy production and lowered the tax burden on our citizens. We addressed public safety needs, developed a stable state pension system and increased compensation for state employees, and invested more dollars into Oklahoma classrooms and tended to the crumbling Capitol.”

Currently, Oklahoma faces a state pension crisis and carries more than $11 billion in unfunded pension debt. House Bill 2630, authored by Rep. Randy McDaniel, creates a defined-contribution system for new employees who are part of the Oklahoma Public Employee Retirement System (OPERS) based off of models used in the private sector. If signed into law, the system will phase out the state’s current and broken system over the next several decades, reduce the state’s unfunded pension debt and allow employees the retirement mobility that the modern job market demands.

“The current pension system has resulted in massive unfunded liabilities and lacks the economic freedom modern pension systems offer,” said Rep. Randy McDaniel, R-Oklahoma City. “Service and hard work should be compensated, and our state employees and taxpayers deserve a system that is modern, efficient and secure.”

The defined-contribution system would take effect November 1, 2015, and would only impact newly hired employees. Current employees and retirees would not be affected.

Senate Bill 1246, authored by Rep. Leslie Osborn, will reduce the personal income tax rate from 5.25 to 5 percent in Fiscal Year 2016 if state revenue projections are greater than projections in December 2014. If growth continues, then a second reduction will take place lowering the rate from 5 to 4.85 percent no sooner than two years after the 5 percent rate is enacted if sufficient funds are there to cover the cost of the reduction.

Since Republicans took the majority in the House in 2005, they have passed several tax reductions taking the rate down from 7 to 5.25 percent. In the same time, Oklahoma has seen revenue increases either equal to the rate of inflation or greater.

“Our state has seen economic growth and record revenues due to our competitive income tax policies and pro-business environment,” said Rep. Osborn, R-Mustang. “This measure allows Oklahomans greater control over their hard-earned money. They will either spend or invest those dollars and further strengthen our economy.”

After a recent study requested by the governor found state employee salaries to be up to 20 percent below market, particularly in the areas of public safety, corrections and social services, the House took the lead to address the issue of state employee compensation.

House Bill 3293 establishes a framework to move state employee pay within 90 percent of private-sector counterparts within four years. It will also delete old salary tables and give the Human Capital Resource Division of OMES authority to set pay structures and determine if targeted pay band adjustments are necessary, rather than across-the-board pay raises as in years past.

“Keeping our best employees is important to the long-term operational ability of the core functions of our state government,” said Osborn. “The state is losing employees left and right to higher-paying private sector jobs. That doesn’t even account for state employees that are reaching retirement age and leaving service. We must do something to attract and keep the best and brightest of the next generation so Oklahomans can receive proper execution of its state government.”

The measure will boost salaries for state employees at 25 state agencies. The raises would range from 6.25 percent up to 13.5 percent. In total, more than $36 million is included in the budget for state employee salaries, which have lagged behind private sector counterparts for years.

House Bill 2562, authored by House Speaker Jeff Hickman, provides an incentive on oil and natural gas production from all new wells drilled after July 1, 2015 which makes the effective gross production tax rate two percent for 36 months. After the first 36 months, the gross production tax rate of seven percent applies.

“Exploration and production of oil and natural gas drives our economy in Oklahoma,” said Speaker Hickman. “This measure provides certainty to employees and employers across the state and allows us to maintain a strong competitive position as an energy producing state.”

For decades, the State Capitol has suffered from neglect and is literally falling apart on the inside and the outside. This session, the House took action and passed Speaker Hickman’s House Joint Resolution 1033.

HJR 1033 calls for a $120 million bond issue to conduct much needed repairs and renovations to the Capitol building. The repairs will be overseen by a nine-member oversight committee made up of Republican and Democratic lawmakers. The 10 year term of the bond could save taxpayers up to $100 million dollars which is a considerable savings compared to previous proposals.

“The decades of neglect have not only resulted in locking the front doors of our State Capitol and in embarrassing barricades around the exterior, but now the interior is literally becoming a safety risk for our visitors and employees,” said Speaker Hickman. “Our Capitol building is a symbol of our great state and its people, and it should be treated and maintained with honor and respect.”

The House also passed a state budget that significantly increased the funding of common education. Senate Bill 2127, authored by House Appropriations and Budget Chair Scott Martin, calls for an annual budget of approximately $7.1 billion. The budget includes an $80 million increase for Fiscal Year 2015 to common education and a $25.5 million dollar supplemental appropriation for FY 14 creating a roughly $200 million total increase to K-12 funding over the past two years.