CapitolBeatOK’s Top Five News Stories for 2018: Fallin’s conservative collapse, Republicans back in charge, medical pot prevails, economy recovers, teachers strike and taxes hike
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Published: 01-Jan-2019

NOTE: This is the first installment in a three-part series

Oklahoma City –  In Oklahoma state government, the top story of 2018 is the collapse of conservative governance in the latter years of the administration of Republican Governor Mary Fallin -- and all that flowed from that.
There was always something about Mary. Doubts about her seriousness of purpose as chief executive abounded from the start, especially after she chose a political mechanic as her chief of staff in 2010, rather than the substantive policy professional who had served her effectively in Congress. 
After ups and down during her first six years in office, Fallin’s final fail began in Fall 2017. 
After months of comparatively modest state government tax revenues in the wake of flat prices for oil and gas, the chief executive vetoed a budget-balancing measure.

Republican leaders in both the state House and Senate were shocked at her step, saying they had been assured of the governor’s signature. Even as that fight unfolded, all the leaders were pointing to early signs of economic recovery (https://capitolbeatok.worldsecuresystems.com/reports/oklahoma-house-speaker-mccall-says-gov-fallin-s-veto-was-a-complete-reversal-of-her-promise). 
House Speaker Charles McCall, R-Atoka, said at the time Fallin’s veto was “a complete reversal of her promise” during budget negotiations. Senate President Pro Temp Mike Schulz, R-Altus, said the veto created unnecessary chaos and uncertainty for state agencies. Ultimately, however, the veto stood. 

A few months later, during the 2018 legislative session, Speaker McCall gave blessing to the largest tax hike package in state history, working with the governor and a united Democratic caucus to secure the super-majority required for such hikes. The upper chamber went along with the new reality.
In her last few months in office, then holding the lowest approval ratings of any U.S. governor, Fallin made few choices reflecting serious conservative management of the state she twice was elected to run. It was an interesting final act for a veteran politician, who lost her conservative base of support while gaining little or no perceptible gain with the other side. 

Fallin’s shift away from her campaign promises did not begin in 2017, to be sure. She ran for governor in 2010 and was reelected easily in 2014 after repeatedly promising to “right-size” state government. In both elections, she raised and spent millions of dollars promising efficiencies in state government, hinting agency consolidations and an end to some government functions would be forthcoming. But few conservative policy analysts would agree that Fallin truly delivered.
This is written not to be uncharitable, but to pursue clarity about the actual results, rather than the stated intentions, of her eight years in charge of Oklahoma state government. 

The second top story is that despite Fallin’s transformation into tax collector for growing government, Republicans dominated the 2018 elections by projecting – in most but not all individual campaigns – messages that rejected Fallin’s already-controversial legacy.

Tulsa businessman Kevin Stitt emerged from the back-of-the-pack to become the Republican Party standard-bearer in the November balloting. He explicitly rejected the Fallin record, drawing to his banner disaffected conservatives on his way to a solid statewide victory built on strongly conservative advertising themes and campaign messaging. He won 73 of the state’s 77 counties. 
The Legislature that Governor-elect Stitt will work with is still Republican, but less conservative than the one Fallin boxed in with her historic veto and subsequent rhetoric and actions.
Ultimately, some Republican leaders worked behind-the-scenes to defeat foes of tax hikes in the GOP primary and runoff cycle. For good (or bad) measure, they even defeated candidates who had in the end backed some or most of the revenue-raising.
Despite more than a year of turmoil, the GOP still holds comfortable majorities at the state Capitol but it is unclear at the moment what those majorities will work toward.
(Democrats gained one seat in the Senate, yet ultimately lost one district in the state House after a victorious Democrat legislator from southeast Oklahoma switched to the GOP. The national blue tide did reach important parts of the Oklahoma City and Tulsa areas, but Democratic strength actually eroded elsewhere.)  

Two other Republican statewide elected officials who won in November – the incumbent Superintendent of Public Instruction and the incoming Commissioner of Labor – in 2018 became allies of labor unions and many lobbyists at 23rd and Lincoln on taxation, the size of government and related issues.

While it seems confusing or daunting to reconcile the first two stories in CapitolBeatOK’s annual listing, both happened, both are significant and both have implications for Oklahoma’s Future. 

Medical Marijuana approved, and a booming state economy marks business recovery

Each of the following two stories could easily be discerned as more significant, in the near- and long-term, than mere political events, but in CapitolBeatOK’s estimation they finish third and fourth. 

Voter approval of medical marijuana is the third top story in the year that was. In a tale that unfolded over several years, in fits and starts leading to ultimate success, Oklahomans embraced legalized pot for medicinal purposes. And then, things got perhaps more interesting.
The final popular verdict came in a primary election marked by unusually high turnout (and on a day when the proposition, State Question 788, clearly drove the high participation).
The June 26 results found 506,782 (56.84 percent) in favor of medical pot, to 384,872 opposed (43.16 percent). 
Quickly crafted rules for implementation (from the state Department of Health) drew overwhelmingly negative responses (https://capitolbeatok.worldsecuresystems.com/reports/the-massive-marijuana-mess-rules-reactions-and-stormy-conditions-but-wait-a-minute).
In late August, more than 1,600 people and businesses applied for medical marijuana licenses, even as controversy continued. By the fall, legislators were involved in seeking a less-contentious process, even as implementation (of a sort) edged ahead for the statutory (not constitutional) provision. 
Legal medical marijuana sales, featuring varied products, began on October 29. By year’s end, the medical marijuana industry was firmly laced into the state business community, even as fierce industry debates with physicians and law enforcement continued. 
This story isn’t over, but it has certainly begun. 

The impressive recovery of the Oklahoma economy is CapitolBeatOK’s fourth top news story.  One of the most challenging times in recent state history, in terms of tax receipts, lingered even as the tax hikes outlined above were enacted. 
To roll back the clock and refresh memories, as CapitolBeatOK reported in mid-2016, drawing from Treasurer Ken Miller’s regular monthly summary:  
“The federal Bureau of Economic Analysis issued state gross domestic product (GDP) figures in June [2016] showing the Oklahoma economy contracted starting in [the] second quarter of 2015 and continued to do so through the fourth quarter of the year. Recessions are typically defined as two consecutive quarters of GDP reduction.” (https://capitolbeatok.worldsecuresystems.com/reports/gross-receipts-to-oklahoma-treasury-june-report-documents-downward-trajectory-scope-of-recession) 
That economic trough, of course, impacted government tax revenues. Overall revenues were still in a pinch in the June 2016 report, substantially lower than the previous year, although Miller other by that point highlighted scattered positive developments. 
It was not until August 2017 that a truly brighter picture emerged, when one of Miller’s reports found that “total Gross Receipts to the Treasury during the past 12 months [were] higher than collections during the prior 12 months for the first time since August 2015.” (https://capitolbeatok.worldsecuresystems.com/reports/oklahoma-treasurer-ken-miller-reports-gross-receipts-turn-positive-for-first-time-in-two-years)
Economic evidence achieves clarity only months or years at a time. In his final report as Treasurer (another gross receipt report is due soon after end of his tenure on January 1, 2019), Miller’s communications office said in a press release:
“November gross receipts, at $1 billion, and 12-month gross receipts, at $12.8 billion, are the highest on record. ‘The economy continues to propel treasury collections,’  Treasurer Miller said in his report, dated December 5. ‘With 20 consecutive months of growth in monthly gross receipts and unemployment at its lowest in 17 years, Oklahoma is on track to finish 2018 on a high note.’”
Despite that good news, widely-predicted softening in the price for oil (and thus in state tax receipts) is unfolding as you read this: 
“November gross production payments reflect oilfield activity from two months prior, in September, when West Texas Intermediate crude oil at Cushing averaged $70.23 per barrel. November’s lower crude prices of about $55 per barrel will not be reflected until January remittances.” (https://capitolbeatok.worldsecuresystems.com/reports/miller-time-will-end-january-2-gross-tax-receipts-for-past-12-months-highest-on-record) 
Writing based upon the sustained recovery of the past year, policy analyst Curtis Shelton noted recently:
“The last fiscal year, from July 2017 to June 2018, saw a record amount of revenue — $5.85 billion brought into the General Revenue Fund. This current fiscal year has already seen an increase of $314 million deposited into the General Revenue Fund compared to the same time last year (https://omes.ok.gov/sites/g/files/gmc316/f/boe12192018.pdf).”
However, as Shelton, who studies fiscal policy for the Oklahoma Council of Public Affairs, summarized the fiscal picture, 
“The State Board of Equalization released on December 19 its revenue certification for fiscal year 2020, which begins next July. If spending continued at its current pace, the budget for fiscal year 2020 is estimated to exceed the current budget by $612 million.” (https://capitolbeatok.worldsecuresystems.com/reports/oklahoma-has-rosy-revenue-projection-for-fiscal-year-2020)
For the near-term, in the absence of economic setbacks for the business sector, state government tax revenues seem likely to stay on an upward path. Still, leaders across the political spectrum might be expected to look with renewed intensity at the wide range of business incentives and tax givebacks.

A Teachers’ strike, and the state of Education

The fifth place choice as a top news story can be viewed as an extension or partial trigger for the first place story, and that is tax-funded education. The teachers' strike during the spring legislative session shut down many public school districts. Many, including Oklahoma City, paid teachers for the time they spent away from classrooms but at the Capitol, rallying for both tax hikes and the application of new revenues to teacher pay increases. 
The dynamic was a chicken-and-egg sort of thing, to use an old analogy. 
Which came first, the collapse in conservative governance under Fallin, or the Oklahoma Education Association’s reemergence as the state’s most powerful lobby? 
Assisting the OEA’s return to Capitol control (of a sorts) were business leaders who sent sometimes contradictory messages, but including themes unmistakably favoring at least some hefty revenue increases.
In any case, the sight of massive crowds of teachers circling the state Capitol, derisive shouts aimed at legislators in the halls and from the galleries of the two chambers, and the fact of underlying popular support for better education all combined to create the perfect (or imperfect) storm.  
A similar dynamic was witnessed four decades ago, when then-Governor Henry Bellmon signed the historic House Bill 1017 to finance more state spending on public schools. 

Educational quality in the Sooner State remains vexing. That reality is the underlying key element of all the education stories of 2018.
Although education at all levels (common schools PK-12, colleges and universities, and CareerTech) already garners more than half of state spending, student achievement in common schools remains flat or declining. In recent weeks, contending that still more money is needed, the OEA has promulgated budget ideas that would direct all of the recent impressive state government revenue growth toward education expenditures. But will those spending increases, if they transpire, pressure the system for reforms that improve student performance? 
There are arenas of excellence within traditional public education, including clusters of superior teachers, but those arenas are frequently suburban and occasionally rural. 
Urban districts operate with excess capacity and space, and sustain large central-office operations, yet there is fierce opposition to any proposals that hint at the “C” words (closure and consolidation of districts or of administrative functions), both in urban and rural settings.  

Many of the state’s public charter schools produce positive results, including at schools with the same socio-economic demographics facing traditional public schools in urban areas. But as the New Year begins, one veteran senator from the majority party is crafting proposals to reduce charter school support (it is already lower per-student than traditional schools) and erode independence from state strictures. 

School choice -- allowing education tax money to “follow the child,” including when parents decide to place their child in a private institution -- has enhanced opportunity in several arenas, including in Oklahoma City and Tulsa. But parental choice in education is expected to be under siege in the coming two years. 

Note: In part II of this series, CapitolBeatOK will present the sixth through tenth place stories in the annual listing of news events that impacted Oklahoma government and policy during 2018. 

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