In The Know: Senators release income tax plan; still at odds with House and Governor

In The KnowIn The Know is a daily synopsis of Oklahoma policy-related news and blogs. Inclusion of a story does not necessarily mean endorsement by the Oklahoma Policy Institute. E-mail your suggestions for In The Know items to You can sign up here to receive In The Know by e-mail.

Today you should know that Senate Republicans unveiled a revenue-neutral plan to cut the top income tax rate to 4.25 percent over the next two years while eliminating and modifying numerous tax breaks and exemptions. OK Policy released a statement that commends the Senate for recognizing tax cuts must be paid for but cautions against parts of their plan that would hike taxes on low-income families and seniors. House members and Governor Fallin continue to push for a larger tax cut without saying how it would be paid for in budget cuts or increases in other taxes.

Reuters analyzed state income tax collections across the country, finding that revenue is growing but not by enough to ease budget crises. The director of the Oklahoma School Boards Association writes in NewsOK that we need to stop the erosion of funding for schools. A Norman High School junior writes in The Norman Transcript about how choosing tax cuts over school funding has harmed her education. NewsOK examines how OU and OSU have reduced services and increased tuition following state budget cuts.

Chesapeake Energy Corp increased a planned loan by another $1 billion even as its credit rating deteriorated. The company’s troubles are putting thousands of Chesapeake workers’ retirement portfolios at risk, because they are heavily invested in Chesapeake stock. American Airlines said an estimated 2,100 jobs could be lost in Tulsa after mechanics rejected the company’s final labor contract offer.

NewsOn6 travelled to Oregon to find out what it’s like in an open carry state. NewsOK criticized “politics run amok” at the Oklahoma Capitol, citing the refusal to hear Jim Roth’s nomination to the election board, Labor Commissioner Mark Costello campaigning for Governor Scott Walker in Wisconsin, and a resolution against same sex marriage.

The Number of the Day is the total annual cost to the taxpayers of maintaining Oklahoma’s prison system. In today’s Policy Note, Planet Money graphs how federal government spending has changed in the last 50 years.

In The News

Senators release income tax plan; still at odds with House and Governor

Senate leaders Tuesday unveiled a revenue-neutral plan to slash the income tax by one-half of 1 percent over the next two years, a move that clearly caught officials from the House and governor’s office off guard. Flanked by the GOP caucus at a hastily called news conference, Senate President Pro Tem Brian Bingman released details of the plan that would pay for the cuts by eliminating and modifying numerous tax breaks and exemptions. A nearly 200-page bill later was approved by a Senate committee. Closed-door discussions between the House, Senate and Gov. Mary Fallin’s office on how to reduce the state’s income tax have been heating up in recent days as lawmakers race toward a May 25 deadline for adjournment. While none of the three sides would acknowledge talks have broken down, the move by the Senate shows there is no agreement on how to reduce the income tax.

Read more The Enid News and Eagle.

See also: STATEMENT: Senate Republican tax plan makes progress but still puts unfair burden on working families from Oklahoma Policy Institute

State income up in April, but may not be enough

Personal income tax collections in states in April might have grown an average of more than 7 percent, but for some the increase may not be enough to ease budget crises. Reuters found that the average increase of personal income tax collections in April 2012 from April 2011 for the 20 states for which data is available was 7.3 percent. April is typically a big revenue month for the 41 states with personal income taxes: wage earners face a mid-month deadline to report and pay tax liabilities incurred in the previous year. And in April 2011, states saw a sharp reversal in fortune, with some reporting growth in individual tax collections of more than 25 percent from the year before. This year, the growth continued, but for many states it was not as robust. The 10.3 percent jump in Oklahoma’s income taxes, fueled by a relatively low jobless rate, counter-balanced five months of slumping gross production taxes on oil and natural gas. Ohio in April took in $1.29 billion in income taxes, surpassing estimates by 6.7 percent but lagging April 2011’s total by 8.3 percent, according to its budget office. The lower revenue was due to the final step of a phased-in rate cut. Much of the reason for the 31.6 percent increase in Illinois was a 67 percent hike in the personal income tax rate approved in January 2011, according to the legislature’s Commission on Government Forecasting and Accountability.

Read more from Reuters.

School Boards head says more education funding a must in Oklahoma

Some lawmakers and the governor are saying next year’s budget will be flat. To them this means no increases in funding and no decreases. To everyone else, this isn’t the status quo. Flat equals a cut. Many Republican and Democrat legislators understand this fact and continue to stand up for public education. With no new funding for public education, children will continue to face larger class sizes and the loss of great teachers as well as programs and other learning opportunities. As enrollment increases in districts, funding from the state isn’t keeping up. Districts have implemented every cost-cutting method possible to avoid raising class sizes. However, schools can no longer make these adjustments without impacting the classroom. The children of our state should be a priority; unfortunately over the last several years, schools have continued to receive cuts that have been detrimental to the classroom.

Read more from NewsOK.

Abolishing income tax is not beneficial

My name is Emily Frech, and I am a junior at Norman High School. I am writing about the issue of the Oklahoma state legislature’s proposed abolishment of the state income tax, which will have a detrimental effect on Oklahoma high schools such as the one I attend. I am currently studying for my Advanced Placement comparative politics exam with a textbook published in 2005. The test will cover material up to 2010, yet I have no choice but to study with my outdated textbook, as no study guides exist for this particular AP exam. I was told I could purchase a new textbook on the Internet if I wished, but I could not afford its steep $112.23 price. Norman High’s comparative politics students are likely to obtain lower scores than students in other states because our state legislature chooses to cut taxes instead of providing for Oklahoma students.

Read more from The Norman Transcript.

In the face of a shrinking budget, University of Oklahoma department pulls out faculty phones

Try to call any professor in the University of Oklahoma’s Department of Industrial and Systems Engineering, and you’re bound to be disappointed. For the past several years, the department has been looking for ways to trim costs in response to several rounds of budget cuts. As the department’s budget continues to shrink, administrators tried to identify the cuts that students would feel the least. One solution they found, said department Director Randa Shehab, was pulling telephones out of faculty offices. Cost-cutting measures like that one aren’t unique, OU President David Boren said. As OU has seen about $100 million in cuts and unfunded cost increases over the past three years, the university’s individual colleges have had to absorb roughly 18 percent budget cuts. The Oklahoma higher education system has seen its budget slashed 9.4 percent over the past four years. In that period, OU has raised its undergraduate in-state tuition 8.8 percent. Oklahoma State University has raised its tuition 9.2 percent in the same period.

Read more from NewsOK.

Chesapeake hikes loan as credit ratings fade

Chesapeake Energy Corp increased a planned loan even as its credit rating deteriorated on Tuesday, adding pressure on the natural gas producer to deliver crucial asset sales. The company, which has sought to soothe investors angered by recent disclosures about its chief executive’s potential conflicts of interest, boosted a planned $3 billion bridge loan to $4 billion. There was strong demand for the junk-rated debt that it needs to cover a cash shortfall brought on by the weakest natural gas prices in a decade. Shares in Chesapeake slumped fell 5.6 percent to their lowest level in more than three years on Tuesday, hurt by news that Standard & Poor’s had cut the company’s credit rating another notch into non-investment, or junk, status to ‘BB-‘. Still, debt investors appeared eager to snap up the chance to buy into the company’s newest high-yield debt offering, with commitments for the loan offered by Goldman Sachs and Jefferies Group believed to have reached about $12 billion, more than three times the planned increase.

Read more from Reuters.

Big stock position puts Chesapeake employees at risk

The woes of Chesapeake Energy Corp are hitting shareholders hard, including its employees. Thousands of Chesapeake workers have retirement portfolios that are heavily invested in Chesapeake stock, which has declined sharply following revelations about Chief Executive Aubrey K. McClendon’s business dealings. But while retail and institutional investors have sold the stock, employees don’t always have that option. Overall, 38 percent of Chesapeake Energy’s Savings & Incentive Stock Bonus Plan – the only 401(k) plan available to the majority of the firm’s employees – is in company stock, far above the 10 percent many plan consultants advise. Currently, Chesapeake says about 4,000 employees are restricted from selling shares the company puts into their retirement portfolios to “match” the employee’s own contribution in the plan. Most companies stopped offering 401(k) matches in stock after the 2001 collapse of Enron Corp, where employees were unable to sell their shares as the company went bankrupt.

Read more from Reuters.

Union groups reject contract offer from American Airlines

An estimated 2,100 jobs could be lost at the American Airlines maintenance hub in Tulsa after mechanics rejected the company’s final labor contract offer, the embattled airline confirmed Tuesday. The Transport Workers Union said Tuesday that five of its work groups approved the company’s offer, while two others rejected it. The mechanics group, the largest TWU group at the Tulsa facility, rejected the offer, with 56 percent voting against it. The stores clerks group also voted it down, with 51 percent opposed. For the two groups voting “no,” the embattled airline said it would pursue its request before the bankruptcy court judge to throw out current labor contracts for pilots, flight attendants and mechanics. A ruling is expected in early June. Machinist Joe McGill said the vote to reject the offer was like “drawing a line in the sand” because workers were fed up with so many concessions to the company. For the five groups that voted “yes,” workers are giving up certain parts of their contract, such as retiree medical benefits, wages and vacation.

Read more from the Associated Press.

What it’s like in an open carry state

Oklahoma has looser gun laws in its sights. State legislators, last week, passed a bill that will allow Oklahomans to openly carry guns in public. The bill is now awaiting Governor Mary Fallin’s signature. Fallin has already pledged her support to a “responsible” open carry law if it came to her desk. Senate Bill 1733 would essentially allow people who get concealed carry permits to openly carry their guns as well. We wanted to see what an open carry state is like, so our Oklahoma Impact Team traveled to Oregon where it is already legal to carry guns openly in public. The open carriers said they’ve rarely had negative reactions from people. They say most people don’t even notice, but their guns do seem to attract the attention of children who then alert their parents. But local police say people do notice open carriers. “For someone to be walking through the streets of downtown Medford with a rifle slung over his shoulder, that’s going to generate a call for service,” said Medford Police Chief Tim George. “Someone is going to call us and say hey, there’s a guy walking around here that’s got this rifle.” Chief George says open carrying hasn’t caused any major problems but it definitely makes some people feel uneasy. When police get calls about guns they always go check it out.

Read more from NewsOn6.

Politics run amok at the Oklahoma Capitol? You bet

JIM Roth is right on the money in surmising that his nomination to serve on the Oklahoma State Election Board is being scuttled because of “politics run amok.” There’s plenty of that going on these days in and around the Capitol. Roth would bring to the election board a bright mind and great passion, just as he did as an Oklahoma County commissioner and a member of the Oklahoma Corporation Commission. We would argue that Roth was one of the best elected officials in the county’s history. Government needs more people like him, not fewer. Gov. Mary Fallin recognizes Roth’s abilities, which is why she plucked his name from the 11 submitted by the state Democratic Party to be considered for the election board post. In her view, he was the most qualified. If members of the Senate Rules Committee would spend 10 minutes with Roth, they would come away impressed by his professionalism and ability. Our guess is some members may know him already or know of him — including the fact Roth is gay. Could that possibly be the reason why his nomination isn’t being heard?

Read more from NewsOK.

Quote of the Day

Gov. Mary Fallin, one of the most adamant supporters of this bill, insists on her official website that, as governor, she will create “a system where good teachers and good schools are rewarded.” My school is not just good, Gov. Fallin, it is excellent. Please start treating it as such.
-Norman High School junior Emily Frech, writing in The Norman Transcript about how choosing tax cuts over school funding has harmed her education

Number of the Day

$4.5 million

The total annual cost to the taxpayers of maintaining Oklahoma’s prison system, housing an average of 24,549 inmates a day, FY 2010

Source: Pew Center on the States

See previous Numbers of the Day here.

Policy Note

50 years of government spending, in 1 graph

Of each dollar the federal government spends, how much goes to defense? How much goes to Social Security? How much goes to interest on the debt? And how has this sort of thing changed over time? The graphic below answers these questions. It shows the major components of federal spending 50 years ago, 25 years ago, and last year. Medicaid, Medicare and other health services are the huge gainers here. Together, they make up a quarter of government spending. Fifty years ago Medicare and Medicaid didn’t even exist, and federal spending on other health-related services made up a tiny sliver of the whole. Federal spending has grown roughly as fast as the overall economy over the past 50 years. In 1962, federal spending was $707 billion and accounted for 18 percent of U.S. GDP. In 2011, federal spending was $3.1 trillion and accounted for 24 percent of GDP. (The dollar figures are adjusted for inflation.)

Read more from Planet Money.

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Gene Perry worked for OK Policy from 2011 to 2019. He is a native Oklahoman and a citizen of the Cherokee Nation. He graduated from the University of Oklahoma with a B.A. in history and an M.A. in journalism.

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