With a nearly $900 million budget shortfall to make up, Oklahoma lawmakers are set to again consider raising the cigarette tax in their quest for new revenue.
Last year, with a $1.3 billion hole, a $1.50 per pack tax hike fell by the wayside, a casualty of political hardball.
Besides being a way to discourage smoking, a cigarette tax increase was a popular funding mechanism in 2016. There were bills using per-pack increases to pay for teacher raises, common education and health insurance.
The one with a real shot called for a $1.50 increase, with the projected $180 million in additional revenue going into a revolving fund to be spent on certain health care services. Needing a three-fourths majority in the House and Senate, that bill failed on a 40–59 House vote 10 days before the end of session, much to the chagrin of State Treasurer Ken Miller.
"And I will fault — though it may be unpopular — the minority caucus for holding that up. That could have been passed with bipartisan support," Miller said. "It should have last year. It should this year, and if we can quit thinking about ourselves and politics, we can get more done."
House Appropriations Chair Leslie Osborn agrees.
"We can play political games up here all day, but I had the damn votes on the board and the Democrats bucked it out," Osborn said.
House Minority Leader Scott Inman has a different version of events.
Last April, former Oklahoma Health Care Authority CEO Nico Gomez proposed the Medicaid Rebalancing Act of 2020. With some shuffling, Oklahoma could add 175,000 uninsured to the Insure Oklahoma plan, reduce the burden on the state Medicaid program and undo provider rate cuts driving rural hospitals to insolvency.
Expanding Insure Oklahoma would require roughly 40 percent of the increased cigarette tax revenue, but it would eventually bring in a more than nine-to-one federal match. Inman said his caucus struck a deal with majority leaders.
"We talked to the governor and Preston Doerflinger, and they did cartwheels, they were so excited that we were going to get on board," Inman said. "Because guess what? Every member of the House democratic caucus was going to support the cigarette tax and Insure Oklahoma expansion. Every member of the Senate democratic caucus was going to support Insure Oklahoma and the cigarette tax."
Inman said that changed when former U.S. Senator Tom Coburn and conservative think tank OCPA told Republican leaders in the Oklahoma legislature the plan was Medicaid expansion by another name.
"And I, as the majority leader, got a phone call from Clark Jolley, and I walked into his office and he said, 'Mr. Leader, the deal is off.' … He said, 'But give us the cigarette tax,'" Inman said. "And I said, 'If we have to do the cigarette tax today, you'll just roll it into your budget, and next year when I ask for Insure Oklahoma expansion, you'll go, "We can’t afford to pay for it."'
"And my caucus, who fought for six years for the unpopular position to expand Medicaid in Oklahoma, we said, 'We’re going to live to fight another day.'"
Osborn said while Insure Oklahoma expansion was off the table, she had the backing of other health-related state agencies because of Republicans' alternate plan for the cigarette tax revenue.
"We could have got Medicaid provider rates to where they should be. We could have lifted therapy caps. And I got 50 Republicans to vote for a tax, and Scott Inman locked the Democrats up and said, 'Do not vote for it if they don’t give us something,'' Osborn said.
Inman firmly believes Insure Oklahoma expansion needs to happen. He said Democrats will come to the table over the cigarette tax this session, but another issue Inman takes with last year’s fight is he said Republicans were trying to tie Democrats to Oklahoma’s first tax increase in decades.
Inman said Republicans asked him to get all Democrats to vote for it, allowing members of their own caucus to oppose it.
"We have fewer people now, by the way. We have 26 instead of 30. But if we’re going to be asked to put 26 on the board, right, then why shouldn’t the Republican caucus have to bring all 75 of theirs?" Inman said.
Osborn has filed the only cigarette tax bill of 2017 so far: a $1.50 per pack increase with revenue going to a healthcare revolving fund appropriated at lawmakers’ discretion.
A new fight could pop up over that, however, as Miller thinks any new revenue should go to the general fund rather than being earmarked.
