User Charges
State and local agencies charge users who benefit from services. User charges differ from taxes in two important ways. First, user charges are a charge to people and businesses for benefits they receive specifically; taxes are general charges for services that benefit everyone in roughly equal shares. Second, user charges are to some extent voluntary and avoidable, while taxes are compulsory.
Users pay some or all of the cost of a service, depending on the policy goals of government.Because we believe that all of society benefits from higher education, tuition charges cover only part of the cost; the rest comes from taxes and federal grants. On the other hand, water and sewer utility costs are entirely paid by charges on those who use them. Fees have the advantage of putting the cost of the service on those who use it. This helps keep the service from being over-used. User charges also help put a value on the service. The major disadvantage to user charges is that they may be unfair to lower-income people. Families of the same size pay about the same for water or the same highway toll regardless of their income; it may be a bigger burden for a low-income family. In some instances like college tuition, government creates programs to help reduce the cost and impact on low-income customers.
Oklahoma governments received approximately $4.2 billion in user charges in 2008, an increase of 13 percent in two years. The average person paid $1,160 in user charges. Total revenue from user charges is split almost evenly between state government and local governments. The paragraphs below summarize the major revenue categories from largest to smallest in revenue.
Higher education tuition and fees represent the largest type, at approximately $1.5 billion or 36 percent of all charges. According to the Census Bureau, these charges paid one-half of the cost of higher education in 2008. In Oklahoma, as in most states, tuition has been increasing faster than the cost of living and incomes. Aid for students in need also has increased, however.
Hospitals are the second largest collectors of user charges, at $1.1 billion or 26 percent of all fees collected. Over three-fourths of this amount is collected by local hospitals operated by cities, counties, and special districts, with state hospitals, including mental hospitals and teaching hospitals, collecting the rest. The charges are paid by those treated in the hospitals or their insurers.
Sewerage and solid waste user charges, collected mainly by local governments, generated over $400,000 or 11 percent of total charges. These fees are based on how much waste each user generates and are designed to pay all costs of these operations. Additionally, most Oklahomans pay water, electric and other fees that are left off this chart because the Census Bureau classifies these as utilities rather than user charges. These generated nearly $1.4 billion in 2008.
A number of transportation systems–highways, airports, parking, and ports–collected approximately $300,000, or 8percent of total fees in 2008. The largest of these charges is tolls and other fees paid to the Oklahoma Turnpike Authority. The other major transportation user charges are at airports, which charge airplane owners landing fees and collect revenue from passengers as well. Most of this revenue is collected by the state’s two major airports. They depend entirely on fees to pay ongoing costs but receive some grants for construction. Parking and port facilities owned by local governments also collect fees.
Education fees raised approximately $300,000, or 7 percent of all fees, in 2008. These fees were at the local level, mostly at school districts. School lunch fees were the largest single source; others include fees for using facilities and for transportation. Fees make up a very small part of revenue for school districts. The Tulsa Public Schools reported fees were about 2.5 percent of all revenue in 2008.
Natural resource and parks and recreation fees generated approximately $90 million in 2008. City and county park systems collected much of this revenue, but the Oklahoma Tourism and Recreation Department collected $12 million from the 14 million users of state parks and the Oklahoma Department of Wildlife Conservation charged $27 million to users, mainly for hunting and fishing licenses.
Housing and community development fees represent just one percent of user charges and include rental payments for publicly owned housing and building and zoning fees charged by local governments.
Other user charges, totaling 10 percent of all charges, include revenues from many public functions, such as arenas and convention centers and license fees paid by professions that are regulated by the state, from doctors to used car dealers.
