The Oklahoma Budget and SQ779

The Oklahoma legislature has passed tax cuts in Oklahoma that are triggered by an increase in the estimated budget for the next year.

(Please see one of my previous blog entries for a more thorough look at this  procedure.  Short of writing a post the size of a Harry Potter novel it is a fair survey.  Click HERE to read.)

During the 2016 legislative session there has been little discussion of the time bomb waiting in the language of SB1246.  The revenue trigger in this law triggered the tax cut to 5% earlier this year.  There has been little discussion of the next trigger which will lower the income tax to 4.85%.  This trigger does not have to be met next year to trigger the tax cut.   The trigger stays in place yearly until there is enough revenue to trigger the cut.

When I was teaching I asked a lot of questions.  I already knew the answer.   Now I am asking a question and I am unsure of the answer.  But it is important to our state to know the answer going forward.

If State Question 799 passes, will the revenue from the additional $.01 sales tax be used to trigger the next tax cut?

If the Obama stimulus revenue was used to trigger a previous tax cut it seems logical that revenue from SQ 799 could be used to trigger the next one.  When I get a reliable answer I will update this blog post.

Anyone?  Anyone?

4/23/2016
I want to thank a member of the local media who did a thorough job of finding the answers to my question.  I also did some poking around on ok.gov.  Here is what I have to report.

The short answer is that funds raised from the passage of SQ779 will not and cannot be used to trigger the next cut.  Nor any future tax cuts based on revenue estimates.  If  you are happy with that then read no further.

There are many funds listed on the Oklahoma Tax Commission reports for each year. You can download the tax commission report for 2015 here and find all of them. They are listed single spaced from page 17 to 22.  So many funds…..  How many in state government knows what they all do?   The passage of SQ779 would add one more fund.    The law spells out how the money is to be distributed from that fund.  It is not deposited into the General Revenue Fund (listed on page 19 of the linked report).  The estimate of revenue for the General Revenue Fund is what has been used to trigger the tax cuts. Thus the SQ779 fund will not be a part of the trigger process.  The authors of the state question were evidently on top of this issue and others.

I thought I remembered reading that the revenue from the Obama stimulus program was used to trigger one of the tax cuts.  Some rather tedious searching of the Tulsa Word web site finally turned up the news report I remembered.  I slapped my forehead so hard when I read it that sometimes I think it still hurts.   Federal stimulus dollars and rainy day find money provided enough “growth” to trigger the tax cut.    The headline is misleading. Instead of saying “revenue growth” it says “economic growth”. If you want to read it:   Economic growth triggers cut in tax rate, Equalization Board says

While we are on this issue, it is important to note:  The process used to insure that there is sufficient economic growth to trigger a tax cut is a sham.  It is obvious to anyone who is a thinking person, but it needs to be said in plain language.  The legislature should just pass the tax cuts and not pretend that the economy is growing enough to justify the cuts.  The events of the last few years have pretty much put the lie to the Laffer theory as it applies to the Oklahoma income tax.

It is also painfully obvious that our method of estimating revenue needs an overhaul. This is not a politically sexy issue.   Candidates knocking on doors during the campaign are not going to get questions about it.  But it needs to be done.   Quality government as demonstrated by more accurate revenue estimates and the resulting improvement in the
budgeting process should not be a partisan issue.
From the Tulsa World, Feb 23, 2011:

“The drop in taxes was approved despite a state budget hole for fiscal year 2012 that is expected to be about $500 million due to the loss of one-time monies used to plug holes in the current budget. Those funds included federal stimulus dollars and money from the state’s ‘rainy day’ fund.”

Does this remind anyone of what we are facing now?  It seems that more are paying attention now. For the sake of the future of this state I hope this is so.

Here was one of the last things I received:

“The wording is odd, but the people who write the budgets say the Boren tax would not be included (in the general fund). What has happened, as I’m sure you know, is that 1017 money and gaming revenue that were supposed to be in addition to regular appropriations have gradually replaced them.”

I do know!  And so do other teachers.  Some will support this state question as I do and some not.  But I felt like it was important to ask this question now instead of dealing with it as an October surprise should it arise.  It is also good to know that the money raised will stay with Common and Higher Ed no matter how the other appropriations go.

I think this blog post is done.   But given the political realities of 2016, who knows?

 

 

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2 thoughts on “The Oklahoma Budget and SQ779

  1. Here is the REAL problem.

    The proposed Bill says that this money is earmarked for education and cannot be used for any other purpose. This is a very valiant move and to be commended.

    BUT, in the past, legislators know that they cannot touch this money, BUT they can change the appropriations for education that are NOT earmarked so they take money away from education from the appropriations so the bottom line stays the same or goes down.

    So, my QUESTION is..are we guaranteed that the appropriations from the state budget will not be reduced so that the extra tax will actually supplement the education budget, rather than just replacing other money and the public is stuck with an additional tax?

    This is something that ALL of us need to know before the election.

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    1. This blog entry was written to address a specific question about the income tax cut trigger mechanism and SQ779. I answered that question to my satisfaction and I hope it reassures others about that specific issue.

      As to your question, I would suggest that you find the full text of SQ779 and read Section 5. Section 5 deals with the safeguards to make sure that the funds raised by the new tax will be used to supplement education funding rather than supplant current funding. Is it a perfect air-tight system? Only time will tell. It appears that if the state equalization board plays fast and loose with the numbers in order to get around Section 5 then they can be sued to over turn their vote for violating the state constitution. That is not in Section 5, but that would proceed logically from the language of the measure. That’s some pretty serious insurance.

      I would highly recommend reading Section 5 of SQ779 if you want to evaluate further. I see no reason for anyone to accept my interpretation in this day and age. But it is obvious that every possible effort was made to make sure this measure accomplishes the goal of those who wrote it.

      The language is pretty clear and, unlike much of the legislation introduced in the Oklahoma legislature these days, it was written and evaluated by an excellent legal team. But the way things play out is often unpredictable in political endeavors. My bet is on SQ779.

      Like

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