If Oklahoma wants to draw businesses, we might need to invest in our people (Capitol Update)

I don’t know whether large companies who make location decisions tell the winners and losers the unvarnished truth about why they made their decisions or not. Probably not. They’re not required to, and the truth might not be well received by the losers. Other than a public relations announcement about how wonderful the winning state and its leaders are, it’s left to the losers to speculate. And speculate we do. 

In the case of Panasonic’s choice of Kansas over Oklahoma for a $4 billion investment in a battery manufacturing facility, news reports indicated the company decided to go with Kansas for its favorable tax treatment and its proximity to Texas. Doubtful. Pryor, Oklahoma is 252 miles closer to Austin, Texas, than DeSoto, Kansas, is — one way. And taxes? According to the Tax Foundation rankings, the 2022 state-local tax burden for Oklahoma is a total effective tax rate of 9 percent, ranked 10th lowest in the country, while the Kansas rate is 11.2 percent, ranked 33rd lowest. Kansas is a relatively high-tax state.

By “favorable tax treatment,” Panasonic could have meant the tax incentive they were given to locate in Kansas. The Kansas tax break offer was roughly double that of Oklahoma with some other positive features. If that’s the case, maybe Oklahoma flubbed by not making a better offer. But I doubt it. Before the announcement, legislators were confident Oklahoma was the winner. In fact, one legislative leader told me several weeks ago he believed that the Panasonic board had already voted, and Oklahoma won. 

Chief among the reasons for Oklahoma’s optimism was the state’s low industrial energy costs. Kansas’ industrial electricity rate is 7.09 cents per kWh, 17th highest in the nation at 6.3 percent higher than the national average of 6.67 kWh. The Oklahoma rate is 5.09 cents per kWh, 49th in the nation at 23.69 percent below the national average. In April 2022, the industrial price of natural gas in Kansas was $6.52 per MCF compared to $5.95 for Oklahoma. Less difference, but still significant. With the distance to Texas and favorable operating costs advantages of Oklahoma, it seems improbable that Panasonic was bought off with a one-time $600 million gift.

Maybe we should face the fact that Panasonic — in one of the biggest opportunities to come along in a while — looked at both states and decided they liked what they saw in Kansas better. I’d like to speculate on one possible reason: Kansas cares enough about itself to invest in its people. Here’s one example. According to the Annual Survey of School System Finances by the U.S. Census Bureau, per pupil spending in 2019 for elementary and secondary public education (pre-K through 12th grade) in Kansas was $11,926. Oklahoma spent $9,323 or $2,603 less per student. In a classroom of 20 students, a Kansas school district has $52,060 more to spend throughout the system educating that class of children than an Oklahoma district. That’s more than just a marginal difference. 

I admit I cherry picked one area of interest to me, public schools. But it’s an important one, and I think you’d find similarities if you wanted to look at other obligations of a responsible state government. The point here is that Oklahoma lost out to a state with a significantly higher tax burden and with more resources to provide for its future. A state like that might be a more attractive location for a high-tech, forward-looking company. No one is asking for a tax increase. But, given the discussions we are having at the state Capitol, it might be important to remember the smartest response to every challenge is not just another tax cut.                 


Steve Lewis served as Speaker of the Oklahoma House of Representatives from 1989-1990. He currently practices law in Tulsa and represents clients at the Capitol.

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