OPEA Retiree Day at The Capitol - Tuesday February 16th
Welcome Policy Director Sean Wallace To The OPEA Staff
OPEA welcomes our new Policy Director Sean Wallace to the office today. Sean, a former fiscal staff member at the Oklahoma State Senate, will assume the role played by Trish Frazier as She transitions into a well-deserved retirement. Sean will be responsible for tracking legislation and working with OPEA staff and members on legislation that impacts Oklahoma's state employees, retirees and state agencies. Sean is familiar with state employees and their concerns from his previous work with employees of the Department of Corrections. Please join us in welcoming him to the OPEA team. (Sean Wallace (L) with OPEA Executive Director Sterling Zearley).
Tax Incentive Review Is Only The First Step
Recently, OPEA members asked about two pieces of legislation passed into law last session regarding the evaluation of tax incentives. While we appreciate this first step taken by the Governor’s office, Senate and House members in the passage of HB 2182 and SB 806 and OPEA supported their passage, they are only a first step in determining whether tax cred
its and incentives are helping Oklahoma's economy.
HB2182 requires all tax incentives to be evaluated by a newly formed Incentive Evaluation Commission at least once every four years and SB806 requires that new incentives have measurable goals. OPEA supported passage of these laws but believe they are only a first step in determining whether tax credits and incentives are helping Oklahoma's economy.
The first law, HB2182 effective November 1st, establishes an independent group to look at our current incentives and reccomend whether they should continue, be modified or repealed. The second law requires measurable goals for any new tax incentives and does not directly impact those incentives already in place. While OPEA appreciates this initial step, much work is needed to make sure potential revenue not currently collected due to ineffective tax incentives is made available for state services. These laws will not increase revenue in 2016 and only have the ability to make recommendations in the future. The ultimate responsibility for revising or eliminating ineffective incentives lies with lawmakers.
The Commission will be supported by The Office of Management and Enterprise Services' (OMES) staff with help from the Department of Commerce and the Tax Commission and its members include a certified public accountant appointed by the Oklahoma Accountancy Board, the president of the Oklahoma Professional Economic Development Council or his or her designee, an internal auditor appointed by the Governor, an economist from an Oklahoma college or university appointed by the President Pro Tempore of the Oklahoma State Senate, a lay person who is not an elected official appointed by the Speaker of the Oklahoma House of Representatives, the Chairman of the Oklahoma Tax Commission or his or her designee who is also a member of the Oklahoma Tax Commission, the OMES director or his or her designee who is an OMES employee and the Oklahoma Secretary of Commerce or his or her designee who is an Oklahoma Department of Commerce employee. The Tax Commission, Commerce and OMES appointees will be ex officio and nonvoting positions.
The law states that the commission shall ensure that each incentive is evaluated at least once every four years unless the Commission determines that the incentive is exempt from evaluation because it has a minimal fiscal impact.
By January 1, 2016, and by January 1 thereafter the Commission shall develop a four-year schedule for evaluating incentives. The evaluation schedule must be made so that the incentives having the highest fiscal impact to the state revenue system are evaluated before other incentives. In determining whether a program is an incentive, the Commission may consider legislative intent and may also consider whether the program is promoted as an incentive by any state agency. For each incentive, the Commission shall attempt to identify the goal or goals of the incentive.
Each evaluation shall include the following: An estimate of the economic and fiscal impact of the incentive, the results of the incentive for Oklahoma's economy as a whole, including both positive direct and indirect impacts and any negative effects on other Oklahoma businesses and a comparison to the results of other incentives or other economic development strategies with similar goals.
It will also assess whether adequate protections are in place to ensure the fiscal impact of the incentive does not increase substantially beyond the state's expectations in future years, assess whether the incentive is being administered effectively and assess whether the incentive is achieving its goals.
The Commission must include recommendations for how Oklahoma can most effectively achieve the incentive's goals, including recommendations on whether the incentive should be retained, reconfigured or repealed recommend any changes to state policy, rules, or statutes that would allow the incentive to be more easily or conclusively evaluated in the future.
OPEA expects the members of the commission to be named before the end of this calendar year. However, the first report will not be made available until December 1 2016. The earliest lawmakers could take action on discontinuing or revising any incentives would in early 2017.
It will be crucial that those named are truly independent and have the freedom to make recommendations based on facts and not be subject to outside pressure. OPEA members will need to pay close attention to the commission's finding and communicate our wishes to lawmakers.
While these laws are steps in the right direction, The ultimate responsibility for changing or repealing incentives deemed ineffective by the commission will still be the responsibility of the legislature and governor. Rather than this process, some states have taken an approach that "sunsets" all incentives but allows lawmakers to continue those that are effective. Lawmakers will need to exhibit the will to act on the commission's findings even if those findings are politically unpopular.
OPEA members must be diligent in seeing that work done by this committee achieves its purpose. If it finds incentives that are not achieving goals, Oklahoma's lawmakers must take steps to discontinue or revise the incentives. Oklahoma's need for resources to provide services to our citizens depends on having sufficient resources to efficiently and effectively administer the programs.
State employees and agencies have the responsibility to be good stewards of taxpayer funds. Oklahoma's lawmakers also now have the responsibility to make sure our state is only keeping in place those incentives that show they are achieving their goals.
Another Budget Cut for State Agencies?
It looks like Oklahoma is headed for another tight budget year in FY 2017. Once again, lawmakers are saying that our state’s revenue is not keeping up with the cost of providing core services to Oklahoma’s citizens and business. This year’s shortfall was around $600 million and the state was required to use “one-time money” in addition to the cuts made by state agencies to balance the budget. Most of the recent fiscal years have been “budget cut years”, so the declaration for agencies to prepare for another round of cuts comes as no surprise to the hard working men and women provide services.
When the legislative session begins in February, lawmakers will determine how much money to appropriate to state agencies for the 2017 fiscal year beginning July 1, 2016.
In a recent statement Gov. Fallin said, “I’m asking every agency to start planning for potential spending cuts and to develop a strategy that protects essential services” she said. “It’s important we get ahead of this issue as we enter a difficult budget year. Families and businesses tighten their belts during lean times; our state agencies can do the same”
Because state agencies have reduced or eliminated non-essential expenses during the last several rounds of budget cuts, there is not much more room to cut expenses without directly cutting or eliminating programs and services that our friends and neighbors access.
Her office talked about eliminating non-essential out of state travel and promotional items to market services agencies provide or cutting back on membership to professional organizations. Many agencies have already taken these steps during previous years’ budget cuts. The amount saved by further cutting these types of expenses will help some but will not come close to balancing next year’s budget.
Agencies must not balance their budget solely by reducing their staff. If they are forced to make cuts to balance their budget, reductions should be spread across their agency. That means they must reduce provider payments and cut, or eliminate private contracts in addition to any reductions in staff. Agencies must also protect the front line workers who are crucial to providing services. A reduction in the number of workers who work in our prisons, veterans’ centers, roads and highways would be detrimental to our state. Having fewer workers to inspect restaurants, provide services to seniors or protect vulnerable children and adults would also have dire consequences.
If you take a hard look at state services, there really is not an area of state government that can absorb significant cuts without hurting the services they provide.
Also, if cuts are necessary common education and higher education should also share some of the burden. The responsibility to balance next year’s budget must not fall solely on the backs of state agencies, their staffs or the people they serve.
Oklahoma must also review the amount of money that is spent outside the legislative appropriation process. Millions of dollars are never made available to lawmakers appropriate to state agencies for their services
Part of this review would be looking at Oklahoma’s corporate tax incentives to determine if those credits are accomplishing their goals. Using tax incentives to attract business and industry can be a great economic tool for a state. However, Oklahoma does not review the credits that it gives to see if they are beneficial to our economy. These credits have been discussed several times over the past few years, but little action has been taken. It is time to review those credits.
We don’t know how much the shortfall will be for next year but we can be certain it is going to be a significant blow to our state budget. Regardless of the amount, it must not be the sole responsibility of state employees to balance the budget. If cuts are made, those cuts must be absorbed by private service providers as well.
What Services Will Be Cut in 2016?
If next year's budget is as bad as leaders are saying, maybe it's time to look at raising revenue. Some forecasters say that the state's 2016 budget shortfall could be around one billion dollars. State agencies have had their budgets slashed the past several year and have reduced services and overhead to meet the budget. There is no more room to "cut" many state agencies unless critical services are eliminated.
It may be that Oklahoma is past the point of reducing services and to the point of eliminating services...so, lawmakers may have a tough choice to make. Does Oklahoma stop services to the elderly, the disabled, vulnerable children? Do we stop repairing roads and bridges? Do we cease services to veterans or close state parks that bring people and dollars to towns across Oklahoma? Do we reduce the number of troopers and other law enforcement officials who watch our streets and highways? Do we stop incarcerating violent offenders because we can't pay for the correctional centers or stop monitoring offenders who are on parole? Do we stop inspecting restaurants or other businesses that impact our lives?
These are just some of the scenarios that lawmakers must consider if the budget remains bleak and they choose not to find a way to increase funds in the state coffers. It is time for all state employees and retirees to find their state senator and representative and have this conversation on a face-to-face basis. Get to know your lawmakers and have this discussion soon. Ask them the tough questions, they work for you.