OKLAHOMA CITY — Gov. Mary Fallin and House Speaker T.W. Shannon differ on how to tackle several major budget issues, including the use of bonds to pay for infrastructure improvements and a tax incentive for horizontal oil and gas drilling, the governor’s chief budget negotiator said Thursday.
Secretary of Finance Preston Doerflinger said during a summit on the state budget that Fallin prefers a bond issue to pay for infrastructure improvements instead of the “pay-as-you-go” approach supported by Shannon and some House conservatives. The summit was hosted by the Oklahoma Policy Institute, a Tulsa-based think-tank that supports additional funding for state programs.
Fallin last year signed a signature proposal by Shannon to develop a long-term plan to address improvements to some of the state’s dilapidated facilities in part through the sale of state property, but Doerflinger said the governor has concerns about that approach given some of the state’s more pressing needs.
“Sometimes it’s OK to say maybe that wasn’t the wisest move,” Doerflinger said. “When we look at the pay-as-you-go model, that causes us to use current revenues on things that could otherwise be used on program areas.”
Doerflinger said Fallin also doesn’t support Shannon’s proposal to make permanent a 6 percent reduction in the gross production tax for horizontal oil and gas drilling. Put in place in the late 1990s when horizontal drilling was costly and experimental, the incentive that reduces the tax rate from 7 percent to 1 percent is now costing the state hundreds of millions of dollars each year since most new wells are drilled this way.
Shannon has said he wants the incentive, which is set to expire in 2015, permanently placed at 1 percent.
“That’s his prerogative to do so,” Doerflinger said, “but I don’t think at the end of the day anybody believes it’s going to remain at 1 percent and be made permanent.”
Shannon has consistently rejected the idea of a bond issue, and wants to push ahead with a cut to the state’s income tax as well as making the horizontal drilling tax incentive permanent.