Repeal of tax increases would impact Oklahoma hospitals

Posted on: 5/16/18


On March 29, during Special Session 2 (xx – second special session), HB 1010xx was signed by the governor. This bill will raise $400 million in new revenue. The day before HB 1010xx was signed into law, a group calling themselves “Oklahoma Taxpayers Unite” held a press conference, led by former U.S. Sen. Tom Coburn, warning lawmakers they would lead an initiative petition drive to overturn any tax increase. Should enough signatures be gathered and there is no challenge, the “repeal” would be placed on an election ballot for Oklahoma voters to decide. If the Oklahoma voters support “repeal” and the tax increases are overturned, Oklahoma hospitals, nursing homes and access to necessary health care services will be jeopardized.  

HB 1010xx is the first tax increase to pass in the Oklahoma Legislature since the passage of a constitutional provision limiting the Legislature’s ability to pass tax increases. SQ 640 was enacted in 1992 by a vote of the people. Oklahoma’s provision is more stringent than any other state.

SQ 640 provides that revenue raising measures must pass by a supermajority of both houses of the Legislature (76 votes – House, 36 votes – Senate) or the measure shall go to a vote of the people at the general election.  

The facts about the repeal of HB 1010xx

HB 1010xx, signed by the governor on March 29, raises $400 million:
  • Revenue raising measure meeting the SQ 640 supermajority requirement;
  • Adds $1 per pack cigarette tax;
  • Increases the gross production tax on new horizontal oil and gas wells from 2 percent to 5 percent, and;
  • Increases fuel taxes by 3 percent per gallon on gasoline and 6 cents per gallon on diesel.
    • The bill imposes a $5 per room per night tax on hotel rooms – this provision was repealed by the Legislature in later legislation. Only the first three items are included in the proposed repeal.
The effective date of the bill is Aug. 1 – meaning the taxes cannot be collected until Aug. 1. Most likely there will be an effort to suspend collection of the taxes until the “repeal” effort is resolved.

How repeal would affect Oklahoma hospitals  

More than $500 million in reduced reimbursement to Medicaid providers, including cuts of 18 percent in state Medicaid payment rates since 2010, has resulted in:
  • More than two-thirds of the state’s rural hospitals now operate with negative margins;  
  • A known 42 of 81 rural Oklahoma hospitals are now at risk of closing (iVantage Analytics);
  • Four hospitals have closed or no longer provide inpatient services;
  • Urban hospitals are now cutting jobs and laying off employees.
  • Oklahoma hospitals already provide more than $592 million in uncompensated care annually.
Every dollar the Oklahoma Health Care Authority spends on Medicaid provider rates attracts matching federal dollars. Because the federal match (Federal Medical Assistance Percentage, FMAP) is increasing in FY2019, the state can attract even more federal dollars with no state fiscal impact:
  • Providers can begin to “dig out” if appropriated state dollars from the recent legislative session are not cut due to the repeal of HB 1010xx.
  • Because of the FY2019 federal matching rate increase, the state can begin to restore hospital rates. 
Effort to repeal the tax increase  

A group called “Oklahoma Taxpayers Unite” have begun an effort to gather 41,142 signatures of registered Oklahoma voters. The signatures must be submitted to the secretary of state by July 18. Proponents of HB 1010xx could legally challenge the petition signatures, thus delaying the calling of the election.

If the required signatures are deemed legal, State Question 799 can be placed on the Nov. 6 ballot. However, there is some speculation that the issue could be on the Aug. 28 primary runoff ballot.

If in a statewide vote, voter’s repeal HB 1010xx, lawmakers have several options:
  1. The governor calls a special session to attempt to pass taxes that do not require the supermajority, such as eliminating or reducing tax credits and tax exemptions like sales taxes. Such efforts were attempted in 2018 session without much success.
  2. The governor calls a special session because severe cuts will have to be made to balance the state’s budget.  
  • The repeal of HB 1010xx only stops the tax increases from taking effect – it does not stop the requirement to fund state programs such as the teacher’s salary increase and increases to providers – SB 1605, directing the Health Care Authority to increase Medicaid provider rates by 2 percent beginning Oct. 1, 2018 and increase 3 percent provider rates for long-term care facilities.
  • Most likely, 2018 bills appropriating increases in state programs will be repealed.
(Lynne White)

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