Vaughan: Tax code must be revised to recapture funds
Since I am a committee chair and sit on the Appropriations and Budget Natural Resources and Regulatory Committee, I am one of about 30 who help Gov. Mary Fallin with the budget. Revenue projections are down. $36/barrel oil is our breakeven for oil severance taxes in this year’s budget. (I did not vote for the budget extension last May) If we don’t achieve a balanced budget, we must cut expenses to meet payroll. 1/3 of state revenue is (or should I say ‘was’) petroleum severance taxes. There is also “trickle down.” When oil and gas prices are down, our economy suffers, people lose jobs and income tax dwindles.
The situation didn’t come as a stunning surprise. Oklahoma alone among states has a rainy day fund. The conventional solution would be to raid the fund and cut agencies. That would amount to 13.5 percent cuts and a $330 million slash in common education. This is not acceptable. Instead, we will try to revise the tax code to recapture hidden funds. Some funds are held by noncritical uses. Serious money is available through what are called revolving funds, pass-throughs and agency sharing. Gov. Fallin also wants to raise tobacco taxes, for health reasons as much as anything, and these will add revenue. But the biggest opportunity is to shave sales tax exemptions. Oklahoma gives away more sales tax exemptions than it raises in revenue. It’s high time we modernize our tax code and question ancient favors that were dished out to special interests. Finally, agencies will have to become more efficient with 3-6 percent cuts.
Concerning income tax revenues, since 2005 Oklahoma has been reducing income tax rates, as prudent, from 7.25 percent to 5 percent. That in turn, created more jobs, more income, and over $300 million more revenue than if the rate had remained at 7.25 percent (studies by OCPA and State Treasurer). The economy has diversified. For the first time in our history, Oklahoma’s population has actually grown during an oil downturn (two years running). It’s now at 3.91 million and we have Thunder basketball because Oklahoma City’s metro can support a team.
Our teachers are in great need of a pay raise. Other states steal our best and brightest because they offer better salaries. Oklahoma’s pensions are strong (and much sounder than 5 years ago). What is needed is a pay increase of about $3,000 per teacher. This can be achieved if we consolidate Oklahoma’s expensive school administrations (but not the schools). We will work with the State School Superintendent to make a better system where teachers are freer to teach. And finally, the idea of ESVs (portable payments for parents to choose ‘elsewhere’ when their child attends a failing school) may be adopted by the legislature.
It might seem like magic to fix an enormous budget hole without a big, ugly tax increase or to give teachers a raise during a budget shortfall. It’s not a rabbit-out-of-a-hat deal. It is wiser use of our resources and re-organizing government and taxes. Conventional thinking is that this is never done. We’ll show ‘em. Oklahoma rises to the occasion when it meets a great challenge.
Rep. Steve Vaughan represents House District 37, which includes Osage and Kay counties.