Gaming, cigarette tax shortfalls spur grumbling

Saturday, February 11th 2006, 12:59 pm

By: News On 6

OKLAHOMA CITY (AP) _ Lt. Gov. Mary Fallin has urged lawmakers to hold back spending tobacco and gambling revenue because collections are lagging behind original projections, but other state officials say that would be breaking faith with voters.

Republican lawmakers have for months criticized Democratic Gov. Brad Henry and state Treasurer Scott Meacham for the way the tobacco tax law was written. They also say tobacco compacts negotiated with American Indians have harmed non-Indian retailers.

Fallin, a Republican, has joined the criticism, along with GOP U.S. Rep. Ernest Istook, who wants to challenge Henry for re-election.

The lieutenant governor said all officials know for sure is that ``whatever we take in from gambling and tobacco keeps bouncing around like a rubber ball on steroids. It is not good public policy to count on these dollars.''

She suggested that instead of lumping those dollars into ``the state budget we write in May, we might be smarter to hold back and see what actually comes in and appropriate these dollars as supplementals next spring.''

Her comments came two days after Meacham told an education subcommittee that lottery projections are on track, but collections from electronic gaming are far below expectations.

The lottery is expected to generate $65.5 million for education during the current fiscal year and $124 million for next year.

The projection for electronic games, however, was lowered for this year from $53 million to about $20 million. Next year's projection by the Office of State Finance was lowered from $71 million to $41 million.

Despite the reduced projections, Henry and Meacham say the tobacco and gambling proposals approved by voters in November 2004 will produce more than $200 million next year for education and health care programs that the state would not have otherwise.

The tobacco tax itself brought in $91 million more in its first year, although that was 20 percent below what had been anticipated.

Enforcement problems and a greater decline in smoking than expected are the chief reasons tobacco tax collections have been running $4 million a month lower than projected, officials say.

Meacham said the state now has a year's experience with the tobacco tax, which is intended to go for health programs such as the new cancer center and the trauma care system.

``That revenue is very predictable. It's has just been consistently less than what the Tax Commission projected it would be,'' he said.

Tulsa area retailers have been hit hard by a loss in market share, mainly because some tribal smoke shops are selling cigarettes with a cheaper 6-cent tax stamp that was intended for use only by smoke shops in border areas.

New rules have been adopted by the Oklahoma Tax Commission to solve that problem, but they are the target of lawsuits.

Fallin said legislative leaders should proceed with caution in appropriating lottery, casino and tobacco tax revenues until the revenue situation is more clear.

Meacham said gaming revenue also has been ``very consistent, although it has been less than we thought it would be. The projections for Fiscal Year 07 have been revised to reflect the actual collection history.''

He said electronic games subject to a tax will grow in the future and he expects enough games will eventually be in operation at Indian casinos and horse race tracks to produce the $71 million a year that was originally projected.

Voters ``would not be happy'' if policymakers withheld the gambling and tobacco revenue from education and health care, Meacham said.

He said most of the money is earmarked for those purposes under state questions approved by voters and does not go through the regular appropriations process.

Paul Sund, Henry spokesman, said that using Fallin's rationale, lawmakers could not spend motor vehicle tag money this year, based on current projections, since revenues from that source came in lower than expected earlier this year.

Sund accused Fallin of trying to score political points with the issue.

Fallin is a candidate for the Republican nomination for the 5th District Congressional post that Istook is vacating.