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The Weekly Wonk: Gross production tax must be part of budget deal

by | May 21st, 2017 | Posted in Blog, Weekly Wonk | Comments (0)

the_weekly_wonk_logoWhat’s up this week at Oklahoma Policy Institute? The Weekly Wonk shares our most recent publications and other resources to help you stay informed about Oklahoma. Numbers of the Day and Policy Notes are from our daily news briefing, In The Know. Click here to subscribe to In The Know.

This Week from OK Policy

Executive Director David Blatt explained why raising the gross production tax must be a part of the state’s budget plan and shared a memo that explained how much revenue various gross production tax options would raise. OK Policy issued a statement responding to the budget plan announced earlier this week that left out an increase in gross production tax rates.   Blatt’s Journal Record column argued that we should adopt criminal justice reforms now to save money in the future.

Policy Director Gene Perry wondered if legislators would again pass a last minute budget without time for consideration or scrutiny. Perry also argued that a focus on spending, rather than the real people that benefit from that spending, is leading lawmakers astray.  Finally, Perry reminded us that spending cuts have very real consequences for many Oklahomans – real people and real lives are at stake.

OK Policy in the News

OK Policy data was referenced by Wayne Greene in his Tulsa World editorial arguing that the gross production tax should be restored to 7%. Perry was interviewed by Governing Magazine for a piece about the declining adherence to democratic norms at the state and national level. 

Policy Analyst Carly Putnam was quoted by The Oklahoman in a story about SB 478, a bill that would allow out-of-state companies to sell insurance policies in Oklahoma as long as those policies meet minimum coverage standards. Policy Analyst Ryan Gentzler contributed to a story by NBC News about the lack of success in states that have adopted a strict tough-on-crime stance toward drug crime.

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Amid budget deadlock, a reminder of what’s at stake

At the state Capitol, lawmakers remain deadlocked over how to find enough revenue to avoid crippling budget scenarios. The main barrier appears to be legislative leadership’s refusal to allow a vote on removing huge tax breaks for oil and gas producers. On Wednesday night, oil and gas industry lobbyists preemptively held an end-of-session party for lawmakers, but without a budget deal the session may not end anytime soon.

Meanwhile, school districts left in the dark about what their budgets will look like next year have already begun to make cuts. Tulsa Public Schools approved a plan to close three schools and lay off 37 teachers; Oklahoma City is increasing class sizes and selling their administration building; Woodward is shutting down a summer program and cutting staff; Muskogee is ending a popular STEM program. These cuts are only the latest in what is approaching a decade of squeezed education funding — students in 1st grade when we started cutting funding are now high school freshmen. More than 200 schools across the state have already gone to a 4-day school week, and dozens of school districts are looking at or have already shortened their school year.

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In The Know: Lawmakers divided on oil and gas tax increase

by | May 19th, 2017 | Posted in In The Know | Comments (0)

In The KnowIn The Know is your daily briefing on Oklahoma policy-related news. Inclusion of a story does not necessarily mean endorsement by the Oklahoma Policy Institute. Click here to subscribe to In The Know and see past editions.

Check out OK Policy’s resources for the Legislative session, including Advocacy Alerts, the Legislative Primer, the What’s That? Glossary, and Online Budget Guide.

Today In The News

Lawmakers divided on oil and gas tax increase: Tempers flared Thursday and budget talks — at least briefly — collapsed as lawmakers remained deeply divided on whether to increase taxes on the oil and gas industry. As several purported bipartisan revenue-raising compromises have collapsed in the final days of session, lawmakers exchanged barbs about whether their counterparts on the other side of the aisle were negotiating in good faith . Meanwhile, the political showmanship ramped up as protesters crowded into the Capitol [Stillwater News Press]. We must end oil and gas tax breaks to save Oklahoma communities [OK Policy]. Learn more about how to ask lawmakers to end the special tax breaks for oil and gas producers.

Big Oil is set to make a lot more money in Oklahoma, why can’t it pay more taxes? The critical issue behind all of the recent turmoil at the state Capitol — and one of the keys to a revenue solution for Oklahoma — is the gross production tax. That’s the tax the state applies to natural gas and oil, and, despite its critical place in the current political climate, it’s not well understood [Wayne Greene / Tulsa World].

1,000th abandoned well site cleaned up in Osage County, Oklahoma: Osage County landowners Vicki Hayward and James Wright soon will be able to let their grandchildren safely play on their property after crews this week began clearing out a nearly century-old abandoned oil field site. “It’s a dream come true,” Hayward said of the cleanup effort. “It’s beyond our expectations. It means so much to us to see the land restored.” [NewsOK]

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In The Know: Teacher pay raise, cigarette tax increase stay alive in House committee

by | May 18th, 2017 | Posted in In The Know | Comments (2)

In The KnowIn The Know is your daily briefing on Oklahoma policy-related news. Inclusion of a story does not necessarily mean endorsement by the Oklahoma Policy Institute. Click here to subscribe to In The Know and see past editions.

Check out OK Policy’s resources for the Legislative session, including Advocacy Alerts, the Legislative Primer, the What’s That? Glossary, and Online Budget Guide.

Today In The News

Teacher pay raise, cigarette tax increase stay alive in House committee: House Republicans apparently aren’t giving up on teacher pay raises or a cigarette tax increase this session, despite repeated setbacks. Two teacher pay bills, a single $1,000 bump and the “1-2-3” plan introduced at the start of the session, and a measure to reapportion cigarette taxes if an increase is adopted were heard late Wednesday in a key House committee. All three measures passed [Tulsa World].

House Democrats trying to influence negotiations on raising revenue to fill budget hole: Negotiations on revenue-raising options continued Wednesday at the Capitol as lawmakers struggle to come up nearly $1 billion to fill the fiscal year 2018 budget hole. The talks came after a $345 million revenue-raising package failed in the House late Tuesday. Republican and Democratic legislative leaders met with Gov. Mary Fallin on Wednesday morning and again in the afternoon, said House Appropriations and Budget Committee Chairwoman Leslie Osborn, R-Mustang [Tulsa World].

Weekend session at Oklahoma Capitol remains a possibility: At the close of business Wednesday, Oklahoma House leadership told lawmakers they should be prepared to work Friday, Saturday and Sunday. The announcement, whether it was a saber-rattling wakeup call or simply the reality of the situation, capped the midpoint of a week where legislators have to choose whether to raise about a billion dollars in revenue or endure massive budget cuts across state government [NewsOK].

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Focus on “government spending” instead of real people is leading lawmakers astray

by | May 17th, 2017 | Posted in Budget, Taxes | Comments (0)

Right now most Oklahomans are worried about how our lawmakers will fill a huge budget shortfall following years of cuts that have contributed to teachers fleeing Oklahoma classrooms, left Oklahomans with severe disabilities and children in the child welfare system at risk of losing basic protections, and created an extremely dangerous environment in prisons for both inmates and staff, among other damaging effects. State agencies large and small report having overstretched staff with stagnant wages and low morale; inability to maintain buildings and equipment; and serious struggles to maintain quality services or perform their core mission. These cuts are rippling out to threaten entire communities, especially in areas of small town and rural Oklahoma where residents have fewer local resources to make up for disinvestment by the state.

Amid all of this turmoil, the Oklahoma Council of Public Affairs is working hard to convince lawmakers that our budget problems don’t exist. In a series they’re calling the “bogus budget”, they add up all of the spending by various state agencies and argue that if the total hasn’t plummeted, we don’t need to worry about their funding.

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In The Know: Facing massive budget cuts, Oklahoma House rejects revenue package

by | May 17th, 2017 | Posted in In The Know | Comments (0)

In The KnowIn The Know is your daily briefing on Oklahoma policy-related news. Inclusion of a story does not necessarily mean endorsement by the Oklahoma Policy Institute. Click here to subscribe to In The Know and see past editions.

Check out OK Policy’s resources for the Legislative session, including Advocacy Alerts, the Legislative Primer, the What’s That? Glossary, and Online Budget Guide.

Today In The News

Facing massive budget cuts, Oklahoma House rejects revenue package: A tax revenue package that would have injected $342 million into next year’s budget failed after a contentious day of political fights over how Oklahoma’s government should be funded. Despite warnings from Democrats that they wouldn’t support the measure, House leadership pressed forward with a three-pronged tax increase on cigarettes, gasoline and production of oil and gas [NewsOK]. The Republican budget proposal ignores popular solutions [OK Policy]. 

GOP’s $345 million tax bill falls well short of passage in House: A Republican attempt to stampede a $345 million tax bill through the House came up far short of the 76 votes required for passage Tuesday night, but did get 51, which means it could wind up on a statewide ballot sometime in the future. The defeat came despite an impassioned plea from Appropriations and Budget Chairman Leslie Osborn, R-Mustang, who entered the Legislature nine years ago as a true believer in slashing taxes but Tuesday night said she had been wrong [Tulsa World]. 

Will legislators again pass a last-minute budget without time for scrutiny? With fewer than two weeks left in Oklahoma’s legislative session, we still have little idea of what the state budget will look like. The budget is the single most important responsibility of lawmakers, but we’re again expecting a last-minute deal that will be rushed through in the final days and hours of session. Last year, a budget deal was announced May 19th. That same day, the General Appropriations bill, which ran 100 pages, included some 200 sections, and made appropriations of $6.8 billion to over 70 state agencies, was introduced and passed out of committee [OK Policy].

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Statement: Republican budget proposal ignores popular solutions

Oklahoma Policy Institute released the following statement in response to Republican leaders’ new budget proposal:

The proposal announced today by Republican leadership does not address the hundreds of millions Oklahoma is giving away each year to the oil and gas industry. Oklahoma’s effective tax rate on oil and gas drilling is less than half what it is in peer states. Phasing out the state’s generous tax break on drilling after 18 months instead of 36 months would bring in nothing to close next year’s budget shortfall. In future years, this proposal would continue the tax break during months when wells produce 35 to 45 percent of their total 10 year production.

Oklahoma can legally change a higher tax rate on oil and gas production in exactly the same way as Republicans are proposing higher taxes on cigarettes and motor fuels. As a recent memo by Oklahoma tax experts Jerry Johnson and Michael Clingman explained, “The gross production tax is a tax on production and the incidence of the tax occurs when the oil or gas is actually produced. It is appropriate to adjust the rate for future production.”

Restoring the historical tax rate of 7 percent would bring in as much as $313 million for next year’s budget. Restoring a 5 percent rate would bring in as much at $198 million.

A balanced approach to fixing our budget cannot only include revenue increases that fall most heavily on moderate- and low-income Oklahomans while leaving in place tax cuts that primarily benefit the wealthy. In addition to restoring the historical gross production tax, other measures like ending the capital gains exemption, limiting itemized deductions, and restoring the Earned Income Tax Credit need to be part of the mix.

Many of the options being ignored by Republican leadership have broad popular support. The latest proposal leaves these good options on the table for no legitimate reason. Lawmakers need to do better to develop a budget that puts Oklahomans first and saves our schools, public safety, health care, and other vital services from deeper cuts.

Will legislators again pass a last-minute budget without time for scrutiny?

by | May 16th, 2017 | Posted in Budget | Comments (0)

With fewer than two weeks left in Oklahoma’s legislative session, we still have little idea of what the state budget will look like. The budget is the single most important responsibility of lawmakers, but we’re again expecting a last-minute deal that will be rushed through in the final days and hours of session.

Last year, a budget deal was announced May 19th. That same day, the General Appropriations bill , which ran 100 pages, included some 200 sections, and made appropriations of $6.8 billion to over 70 state agencies, was introduced and passed out of committee. It was approved by the House the next day and given final passage by the Senate on May 22nd. Most bills are required to be made public for at least 48 hours before they are voted on, but the Legislature ignored that requirement for the budget — even holding a vote open for almost an hour as legislators were pressured to vote to suspend the rule.

The result was a budget that went into law with very little scrutiny from most lawmakers, the media, or the public. That’s how they passed a budget that provided a big funding increase for legislative staff while slashing nearly every other area of government services. That’s how they passed a budget that on the surface held common education harmless but in reality eliminated $33 million in funding for textbooks.

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In The Know: Cigarette tax hike down, but not out

by | May 16th, 2017 | Posted in In The Know | Comments (0)

In The KnowIn The Know is your daily briefing on Oklahoma policy-related news. Inclusion of a story does not necessarily mean endorsement by the Oklahoma Policy Institute. Click here to subscribe to In The Know and see past editions.

Check out OK Policy’s resources for the Legislative session, including Advocacy Alerts, the Legislative Primer, the What’s That? Glossary, and Online Budget Guide.

Today In The News

Cigarette tax hike down, but not out: The Oklahoma House couldn’t muster enough votes to raise the cigarette tax rate on Monday, potentially throwing budget talks into more of a tailspin. The measure needed 76 votes to pass unimpeded, but the final tally was 63 to 34. Both Republicans and Democrats voted against it, but the Democrats have said they have enough votes to put it over the edge if Republicans also move a production tax on oil and gas [NewsOK].

Five days to find revenue: Oklahoma lawmakers hoping for a deal in last days of session: Oklahoma lawmakers have until Friday to find about a billion dollars’ worth of revenue or adopt a budget with more agency spending cuts, an act that could draw a veto from Gov. Mary Fallin. The past few weeks of session have been fraught with tense negotiations and false starts on new revenue as budget writers in the House, Senate and governor’s office try to cobble together a coalition willing to raise taxes while curtailing valuable tax incentives [NewsOK].

Budget deals suffer another setback: An integral part of both chambers’ budget plans got spiked Monday afternoon, but officials insist the measure can be revived. Both plans to fill the state’s nearly billion-dollar budget hole while protecting essential services such as education and corrections hinge on a $1.50 increase per pack tax increase on cigarettes. That would pay for health care services, such as Medicaid and mental health. Budget officials project that would bring in about $180 million. Although a majority in the House of Representatives voted to approve the cigarette tax, supporters didn’t meet the elevated bar set on revenue measures [Journal Record].

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How much new revenue will ending oil and gas tax breaks bring in?

by | May 15th, 2017 | Posted in Taxes | Comments (4)

As the budget debate has intensified in recent weeks, legislators and advocates have heard dramatically different estimates of how much additional revenue could be raised by ending or reducing the special tax rate for oil and gas production. Some have claimed that ending the gross production tax break would only bring in an additional $20 million next year, while others have suggested the impact could be as high as $350 million.

A new memo prepared for OK Policy by two leading tax experts, Jerry Johnson and Michael Clingman, provides clarity to this issue. The memo explains why honest revenue estimates vary so greatly and presents solid numbers on how much additional revenue would be generated if GPT is increased to 5 percent or 7 percent on new wells. It finds that if the Legislature is willing to apply the higher rate to wells drilled prior to the law being passed, which is well within its legal authority, the state would generate from $150 million to $313 million more for next year’s budget.

Here’s a summary:

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