Archive for 2013

What’s unaffordable?

by | February 26th, 2013 | Posted in Blog, Education, Healthcare | Comments (2)

In her 2013 State of the State address, Governor Mary Fallin reiterated her opposition to accepting federal dollars to provide coverage to uninsured Oklahomans through Medicaid, as provided under the Affordable Care Act. In states that extend Medicaid, the federal government will pay 100 percent of the cost for the newly-eligible population for three years (2014-16) and 90 percent from 2020 onwards. Yet the Governor claims that extending Medicaid would impose large and unaffordable costs on the state:

According to a report from the Kaiser Commission on Medicaid and the Uninsured, the proposed expansion of Medicaid would result in a $689 million increase in state Medicaid costs between 2013 and 2022. Expanding Medicaid as proposed by the president would mean that a huge sum of money would be diverted from other priorities, like education and public safety, as well as existing health care programs.

The Governor’s assertion that extending Medicaid is unaffordable to Oklahoma is unconvincing in at least two respects. First, the study on which she bases her cost estimates makes clear that extending Medicaid would have a very modest fiscal cost to the state and would bring in over twelve new federal dollars for every additional dollar of state spending. Secondly, the state cost of extending Medicaid would be less than half the cost of the Governor’s proposed 0.25 percentage point cut to the top income tax rate over the same period.

In November, the Kaiser Commission on Medicaid and the Uninsured released the report which estimated that Oklahoma would spend $689 million more from 2013-2022 by extending Medicaid under the ACA (1). This estimate is significantly higher than the one developed by the Oklahoma Health Care Authority (OHCA), which had previously formed the basis of discussions of the cost of Medicaid expansion. In part, this is because the Kaiser Commission’s projections run through 2022, adding two years when the state share would be 10 percent. In addition, unlike OHCA, the Kaiser Commission assumes that extending Medicaid eligibility to 138 percent of the federal poverty level for working age adults will lead some people who  currently have employer-sponsored coverage or individual coverage to drop that coverage and enroll in Medicaid instead. The Kaiser Commission projects 204,000 more Oklahomans will enroll in Medicaid, of whom 126,000 are currently uninsured.

A careful look at the full Kaiser Commission report shows, however, that the actual cost to Oklahoma of extending Medicaid are modest and would yield tremendous benefits:

  • Kaiser_federal&stateFrom 2013-2022, the federal government would spend an additional $8.561 billion on the newly-eligible Medicaid population, or more than $12 for every dollar in state spending. The federal government would assume 92.5 percent of the total cost from 2013-2022.
  • The $689 million state cost of Medicaid expansion would be offset by $205 million in savings in reduced uncompensated care costs, reducing the net cost to $485 million (Table ES-4). This does not take into account savings from shifting services currently paid for with state-only dollars to Medicaid; Oklahoma currently spends an estimated $48 million annually on health services for low-income adults who could become Medicaid-eligible. Nor does it include revenue gains from the boost to state economic activity resulting from increased federal dollars.
  • The state costs would be especially modest in the early years. The state cost is projected to be just $11 million in 2016, which is less than the $23 million the state would save that year in uncompensated care costs (Table 15).
  • Extending Medicaid eligibility would increase state spending on Medicaid by just 2.7 percent from 2014 – 2022 (Table 6).
  • Medicaid payments to Oklahoma hospitals alone would increase by $3.6 billion from 2013-2022, an 18.5 percent increase  (Table 13).
  • Medicaid expansion would reduce the number of uninsured Oklahomans by 126,000 (Table 12). Currently nearly one in two working age Oklahomans with income below 133 percent of the federal poverty level are without insurance.

cost-tax-cut-MedicaidAccepting the Kaiser Commission’s cost estimates, Oklahoma can expect to spend an additional $485  million between now and 2022, net of reduced uncompensated care costs. The Governor contends that this spending would detract significantly from Oklahoma’s ability to make necessary investments in education, public safety, and other health care programs. Yet the Governor proposes cutting Oklahoma’s top income tax rate from 5.25 to 5.0 percent. This tax cut would cost about $125 million in 2014 and $1.48 billion from 2013-2022 (see Table), which is double or triple the state cost of extending Medicaid over the same period. More than two in five Oklahoma households would get no benefit at all from the tax cut, and the median benefit would be just $39 per household in 2014, as we discussed in this blog post. By contrast, extending Medicaid would provide health coverage for 125,000 uninsured Oklahomans. The economic benefits of an infusion of $8.56 billion in federal funds for health care over nine years would dwarf those of a $1.48 billion tax cut.

If we want to make the best decision for our state’s health and prosperity, turning down federal dollars to extend Medicaid to low-income Oklahomans is the truly unaffordable choice.

For a fact sheet version of this blog post, click here. For more analysis and information on expanding Medicaid, click here

(1) This number does not include  the “woodwork” population of those currently eligible but not enrolled in Medicaid. This population is expected to enroll in Medicaid whether or note the state extends Medicaid eligibility.

The tax shift returns

by | January 11th, 2013 | Posted in Taxes | Comments (3)

Yesterday, Senator Patrick Anderson (R-Enid) filed legislation to replace Oklahoma’s income tax with a flat tax of 2.95 percent. Anderson’s bill would do away with Oklahoma’s current tax brackets and eliminate all income tax deductions, credits and exemptions, including credits and exemptions for members of the military, retired seniors, the working poor, and families with children.

Sen. Anderson asserted that his bill “offers tax relief to all Oklahomans, and it has no negative impact on the state budget.” It is mathematically impossible for both of those things to be true. If everyone is paying less taxes, then revenue will drop. If some people are paying less in a revenue neutral plan, then others are paying more.

While Sen. Anderson’s plan may or may not be revenue neutral, it would definitely not offer “tax relief to all Oklahomans.” For example, here’s how it would affect married couples with 2 children:

Anderson-Plan

Like several of the failed tax proposals from last year, the result would be a major tax shift. The wealthiest households would receive a tax cut, paid for by significant tax hikes on those already struggling the most to get by. Moderate-income families with children, seniors, veterans, and military personnel would be especially harmed by the loss of tax credits, deductions, and exemptions.

Sen. Anderson said that seven states currently have a flat tax, but none of these states have eliminated all deductions, credits, and exemptions for vulnerable families, as Anderson is proposing.

See more on the tax debate at our tax reform information page. Find the basics about Oklahoma’s personal income tax in this fact sheet.

The matter with Kansas

by | October 10th, 2012 | Posted in Blog, Taxes | Comments (1)

Arthur Laffer and Gov. Sam Brownback. Photo by Mike Shields, Kansas Health Institute

Earlier this year, while Oklahoma lawmakers were adjourning their legislative session without a final agreement on Governor Fallin’s top priority of cutting the income tax, Kansas Governor Sam Brownback was celebrating his state’s adoption of major income tax changes. Governor Brownback has since referred to the tax plan adopted by the Kansas legislature as a “real live experiment.” While some will be pushing hard to replicate the experiment in Oklahoma, the Kansas example should instead give us pause.

The tax plan approved in Kansas, HB 2117, had four main components:

  • Lowering income tax rates, with the top rate dropping from 6.45 to 4.9 percent and the bottom rate dropping from 3.5 percent to 3 percent, and reducing the number of tax brackets from three to two;
  • Eliminating tax credits that benefited low- and middle-income households, including the Food Sales Tax Relief credit, Child and Dependent Care Credit, Homestead Property Relief Credit for renters, adoption credit, and others;
  • Raising the standard deduction for married couples and heads of household;
  • Exempting all “pass-through” business income from tax.

Other than the exemption for pass-through income, the legislation bears a close resemblance to the major proposals that were introduced this year in Oklahoma, which similarly would have lowered the top income rate and offset part of the lost revenue by eliminating key exemptions and credits that reduce taxes for low- and moderate-income Oklahomans. The similarities are not surprising in that tax cut proposals in both Kansas and Oklahoma were largely based on recommendations by economic consultant Arthur Laffer.

continue reading The matter with Kansas

For Oklahoma voters, education funding cuts are a major concern

by | August 22nd, 2012 | Posted in Blog, Education | Comments (0)

As students head back to school this month, they will encounter an education system facing a crisis in funding. Over the past four years, state support for public schools has been slashed by $220 million, or  11 percent, while school enrollment has increased by some 25,000 students. This equals a 14 percent decline in state support per person. In schools across the state, class sizes are larger, course offerings are fewer, and many school services have been reduced or eliminated. At the same time, schools are wrestling with new mandates for student testing, teacher evaluations, and reading proficiency that must be implemented with reduced resources. Meanwhile, Oklahoma voters this fall will vote on two state questions that would reduce local property tax revenues for schools, while federal education support could be cut by roughly one-tenth to one-fifth under various deficit reduction plans.

Oklahoma voters are paying attention and expressing their discontent.  Eight-eight percent of Oklahoma voters are very concerned (64 percent) or somewhat concerned (24 percent) about cuts to local public schools, according to a new Oklahoma Poll published in the Tulsa World. More than three in five voters (61 percent) believe that the state Legislature is not doing enough to fund public schools in Oklahoma. The poll also found that more than nine in ten voters said that a candidate’s position on funding for public schools is very important (65 percent) or somewhat important (29 percent) in determining their vote in November’s elections.

These findings that education funding is a major concern for voters reinforces an earlier poll conducted while Oklahoma legislators were considering proposals for major income tax cuts. Only 16 percent of Oklahoma voters said they would “favor cutting funding to Oklahoma’s public schools so that the savings can be passed along to taxpayers in the form of a tax cut”, compared to 81 percent who disagreed, including 67 percent who disagreed strongly.

In recent years, education has not been a priority of Oklahoma legislators. Most areas of state services absorbed cuts when the state was grappling with large budget shortfalls. But even though total appropriations has increased this year by $253 million, education funding has remained flat. Common education’s share of total appropriations has fallen to 34.1 percent, the lowest level since at least FY 2000. These polls results show that voters are paying attention and aren’t happy about the Legislature’s priorities. Whether legislators and the Governor heed the message remains to be seen.

Quick Take: New fiscal year off to mixed start

by | August 16th, 2012 | Posted in Blog, Budget | Comments (0)

This week’s announcement of General Revenue (GR) collections for the first month of the new fiscal year (FY 2013) provided mixed news for both overall collections and the performance of particular major taxes.

  • Overall GR in July was $382.7 million. This is $6.4 million, or 1.7 percent, above last year. However, as the chart below shows, state revenues have yet to fully recover from the collapse that accompanied the last economic downturn. This year’s July collections remain 15 percent below four years ago and are still not back to where they were a full six years ago.

  • Most major taxes showed growth compared to last year, showing continued strength in the state economy. July sales tax collections were up 9 percent from last year and are 6.5 percent above their pre-downturn peak. By contrast, while income tax collections were up 20.7 percent from last year, FY 2013 income tax collections remain 20 percent below their peak in FY 2007. This reflects both the continuing impact of income tax cuts that have phased in over the past eight years and the allocation of an increasing share of income tax collections to the ROADS fund and other purposes.

    continue reading Quick Take: New fiscal year off to mixed start

Guest Blog (Cal Hobson): Bonds. State Bonds.

by | July 11th, 2012 | Posted in Blog, Budget | Comments (2)

Cal Hobson served in the Oklahoma Legislature from 1978-2006, including one term as Senate President Pro Tempore. This is an edited version of an article that first appeared in the Oklahoma Observer.

In my opinion, when Gov. Mary Fallin’s ill-advised effort to further erode Oklahoma’s very modest tax base failed this past session that was a good thing. However, it also meant any serious consideration of issuing bonds to address just a small part of the cost to fix, repair or enhance our state’s infrastructure went down the drain with it.

Talk about throwing out the baby with the bathwater. Rarely done, always wrong. It didn’t have to be. We’ll explore why.

First, though, what are these things we call bonds? How much do we have? What have they paid for in the past? And, most importantly, why they have played such a critical – and get this – conservative role in Oklahoma’s progress so far and why they must  be used in the future?

continue reading Guest Blog (Cal Hobson): Bonds. State Bonds.

Post-session review: So whatever happened to…

by | June 18th, 2012 | Posted in Blog, OK Policy | Comments (0)

Of the 1,934 bills filed this past legislative session, only a small fraction of those saw any significant action by legislators.  Most bills are never heard by a committee, and almost all of them fall short of a hearing on the floor of either legislative chamber. This post reviews the bills from this session that OK Policy provided commentary and analysis on, some in-depth and some in passing, and reveals how far they made it through the legislative process.

As we previously noted, there were far fewer bills this session targeting immigrants than in previous legislatures.  HJR 1088, sponsored by Rep. Terrill would have denied bail to a person who has entered or remained in the country illegally. It was not heard in committee.  Another Terrill bill, HB 3014, was a draconian proposal to implement English-only restrictions. It was similarly denied a committee hearing.

Out of a wave of bills targeting the poor and people receiving public benefits, only a handful were successful.  HB 2388, a bill to drug test welfare recipients that we criticized early on, was substantially revised (for the better, for the most part) and eventually passed both chambers.

continue reading Post-session review: So whatever happened to…

Guest blog (Barry Friedman): What happened to promise of America?

by | June 12th, 2012 | Posted in Blog, Capitol Matters | Comments (3)

Barry Friedman writes a monthly column, “Barry Friedman At Large” for Tulsa People Magazine, is a  stand-up comedian, and the author of two books, “Road Comic” and “Funny You Should Mention It”. His website is at http://barrysfriedman.com/. This column originally appeared in the Tulsa World.

There they were, on their knees on the Supreme Court steps back in March, praying to overturn the Affordable Care Act (and if you’re calling it Obamacare, stop – it was approved by a majority in Congress), asking for divine intervention so insurance companies could once again indiscriminately drop coverage on diabetic 6-year-olds.

Closer to home, legislators considered tax cuts, while Oklahoma classrooms fill up like Chuck E. Cheese on a Saturday afternoon. It’s an odd world, where senior citizens who would otherwise be dead without Medicare carry signs that read “Keep government out of my medicine cabinet” and where those making $50,000 per year and are three paychecks away from their own tent at Occupy Tulsa but 300 away from being invited to Hilton Head for a meet-and-greet with the Koch Brothers, argue against Dodd-Frank.

If this is class warfare, it’s headed in the wrong direction.

So what happened to us?

Maybe to understand what went wrong in America, we should remember what went right. For more than 100 years there was a promise of the common good, a common wealth – not of money but of America itself.

continue reading Guest blog (Barry Friedman): What happened to promise of America?

STATEMENT: Failure of tax cuts is great outcome for Oklahoma

by | May 25th, 2012 | Posted in Blog, Taxes | Comments (1)

Oklahoma Policy Institute released the following statement in response to the announcement that there will be no tax cut this session:

The failure of every tax cut proposal that was debated this session is a victory for Oklahoma. The Legislature heeded Oklahomans from all walks of life who have spoken out against income tax cuts. After three straight years of budget cuts that have seriously weakened core services, Oklahomans have stated clearly that their top priorities are restoring funding for education, fixing the child welfare system, repairing our roads and bridges, and making other critical investments that will promote our prosperity and security. We have not made sufficient progress towards these goals, but preserving our largest revenue source leaves us in much better position to tackle our challenges in the years ahead.

The decision to reject tax cuts this year was especially responsible given the uncertainties in the energy industry and the broader state economy. We applaud those leaders who insisted that tax cuts must be paid for and who rejected efforts to tie the hands of future legislators with automatic triggers.

We know, however, that this is just a brief intermission in a long battle over the right tax policy for Oklahoma. Going forward, we must have a more honest and well-informed debate about what we expect from state government, how much our obligations will cost, and how we will pay for them. We need to look with renewed seriousness at our outdated tax system and do away with unnecessary tax preferences. And we must improve tax fairness and not allow middle- and low-income families to shoulder a larger share of the load.

Tax cuts for some, tax hikes for others

by | May 22nd, 2012 | Posted in Blog, Taxes | Comments (1)

Will Oklahoma families pay higher or lower taxes under HB 3061, the tax plan agreed to last week by Governor Fallin and legislative leaders? The answer depends on a number of variables, including household income, family size, and whether or not they claim itemized deductions on their federal and state tax return.

The tax policy specialists at ITEP, the Institute on Taxation and Economic Policy, calculated the change in tax liability for sample family types. They found:

  • A single parent with two children earning $20,000 per year will pay $45 more tax under HB 3061 than currently. This is primarily due to changes in the lower tax brackets that would tax more of their income at a higher rate.
  • A single parent with two children earning $40,000 per year will pay $75 less tax. This family would retain their current deductions and credits and would have part of their income taxed at a lower top rate.
  • A two-parent family with four children earning $100,000 per year will pay $134 more tax under the plan. Their taxes would increase because the additional tax from losing their personal exemptions (currently $1,000 per family member) and the itemized deduction for state income tax would exceed the benefit from a lower top rate.
  • A two-parent family with four children earning $250,000 per year will pay $93 less tax. In this case, the gains from the top rate cut will more than offset the loss of personal exemptions and the deduction for state income tax.

    continue reading Tax cuts for some, tax hikes for others

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