Protecting vital services while balancing the budget (Journal Record)

By Arnold Hamilton

Barring an upset of biblical proportions, Oklahoma’s Legislature will balance the 2016-17 budget on the backs of the middle class and the working poor.

If lawmakers can even bring themselves to raise new revenue, it most likely will be via expanding sales taxes to services like haircuts. Whose bottom line does that most affect? Those of modest means, not the Gucci set.

If the budget balancing act focuses primarily on spending cuts, you can take it to the bank the decisions will disproportionately affect services most often accessed by the least among us.

One area that remains sacrosanct for the Republican legislative majority is the state’s 900-pound gorilla: the energy industry.

Oklahoma’s tax breaks and incentives for oil and gas operators surely are the most generous in the nation – no doubt the result of the outsize influence the industry wields among lawmakers addicted to gushers of campaign contributions.

The Oklahoma Policy Institute calculates that tax breaks and other production incentives cost the state treasury about $609.8 million in the fiscal year that ended June 30, 2015, including $473 million from taxing horizontal wells at 1 percent and deep wells at 4 percent as opposed to the standard 7 percent.

Since the GOP majority began its tax-cutting frenzy earlier this century, Tulsa oilman and philanthropist George Kaiser has more than once blown the whistle on what amounts to corporate welfare for his industry.

Indeed, he’s long argued that higher production taxes have little impact on whether to drill. Oil and gas producers will go wherever the oil and gas is located and can be reasonably extracted. Producers aren’t going to flee oil-and-gas-rich Oklahoma just because the state imposes a drilling tax equal to Texas and North Dakota – two states similarly blessed with an abundance of carbon resources.

Two years ago when Kaiser made his feelings known again, the State Chamber of Oklahoma’s boss, Fred Morgan, dismissed Kaiser as “a social philanthropist” who’s “very interested in growing the size of government.” Most fellow producers ignored Kaiser’s remarks, quietly but effectively working the political system that has helped them bolster profits and socialize losses.

This week, though, with lawmakers down to the final hours in which to deal with a $1.3 billion budget hole, another important voice from the oil patch has been heard.

Longtime, independent oilman Mike Cantrell of Ada created a stir when he urged his fellow producers to “step up” and “lead the way” in helping resolve the state’s fiscal nightmare.

His idea – gasp – surrender “all tax credits” and repeal or “seriously modify” rebates that “allow small producers to apply for a gross production tax rebate on wells that lose money over a year’s time.”

In fact, he warned, failure to eliminate or suspend the tax credits could result in downgrading of the state’s credit rating – “making a bad situation disastrous.”

“An industry that has historically contributed up to 30 percent of the state’s revenue is, by some estimates, now actually taking more from our state than we are contributing,” he wrote. “As a lifelong oilman and a lifelong Oklahoman that, for me, is unacceptable.”

Most of the state’s oil and gas barons smugly ignored Kaiser’s wise counsel, choosing to view him as a free-spending, big government liberal who, of course, embraces higher taxes. Cantrell, an unabashed conservative, isn’t so easily ignored.

Cantrell clearly understands the gravity of Oklahoma’s budget crisis – and displays uncommon courage, speaking out when many of his fellow producers are ducking.

Implicit in Cantrell’s message: We’re all in this together. Everyone is needed to ensure vital public services are protected – schools, roads, health care, child welfare. Will the Legislature get the message in time?

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