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Capitol News Update     

 

August 12, 2013


 

           Last week State Treasurer Ken Miller published another issue of his excellent "Oklahoma Economic Report."  The report contains, among other things, a discussion of the recent history of the gross production tax on oil and gas in the context of our state budget.  The gross production tax had been in effect for many years when the legislature began giving tax incentives to the oil and gas industry in 1994.  The incentives were to spur drilling activity and partially to meet the competition from other oil and gas states that were offering incentives.  The theory was that the incentives were necessary to attract capital.  It was probably a good theory then because many investors had been burned during the then-recent "oil bust" of the 1980s.   

 

            The most significant tax breaks were for deep wells and horizontal drilling.  Both were expensive, and horizontal drilling was in its infancy.  The tax break was from 7% to 4% for deep wells and from 7% to 1% for horizontal drilling for 24 months or until the investment was recovered.  In 2002 it was extended to 48 months without regard to whether the investment had been recovered.  The cost to state revenues is about $100 million per year.  During the recent economic downturn the tax incentives were deferred rather than repealed, and the state agreed to repay the revenue to oil and gas producers with interest, which it is now doing.

 

            Ken points out that there is now discussion among policymakers of re-examining the tax incentives.  The reasons the incentives were granted may no longer exist.  Horizontal drilling is now commonplace and the economic incentives to drill deep wells are present regardless of the gross production tax rate.  In today's anti-tax climate, it's remarkable the discussion is even occurring since it could constitute a tax increase on the oil and gas industry.  I would guess if some of the incentives are decreased the revenue will be used for other tax cuts, not to support state services. 

 

            The oil and gas industry, as a major provider of jobs and state GDP, has always been politically potent in Oklahoma.  When I was first elected to the House in 1980 the industry was still smarting from an increase in the gross production tax rate from 5% to 7% passed in 1971.  Governor David Hall, who signed the tax bill, (among other tax increases) was defeated for re-election in the 1974 Democratic primary by a young House member named David Boren.  In the runoff, Boren defeated Sen. Clem McSpadden who had been President Pro Tempore of the state Senate in 1971 when the rate was raised.  It will be a surprise if any tax plan the industry opposes will pass.           

Group claims paying for prison reform hurts welfare programs

By Cary Aspinwall

Tulsa World

The burden of paying for prison reforms in Oklahoma and other states may hit welfare recipients hardest, according to a new study published in the Journal of Law, Economics & Organization.

Researchers at Rice University and Louisiana State University examined the impact of federal court orders condemning prison crowding and the outcomes among states following these orders.

Oklahoma was one of the states included in the study, because from 1974 to 1986, the state was under a federal court order to improve prison conditions due to the outcome of an inmate's civil rights lawsuit.

Using national data from 1951 to 2006, the researchers investigated states' reactions to federal court interventions, including the impact of court orders on prison spending, prison conditions, per capita prisoners, as well as state spending on welfare, education and transportation, among other areas.

Court intervention in state prisons increased per-inmate operating expenditures by about 27 percent, doubled per capita corrections capital expenditures and decreased the numbers of prisoners as well as prison mortality, according to the study.

But the funding for those changes had to come from somewhere in each state's budget. Often, it directly decreased money used for various forms of cash aid to welfare recipients, said Richard Boylan, Rice University professor of economics and co-author of the study.

These types of court orders resulted in a 22 percent decrease in the amount of money available for state welfare programs, according to the study.

The types of welfare impacted included Temporary Assistance for Needy Families (TANF) and Aid to Families With Dependent Children, federal funds distributed by states that became less common after the welfare reforms of the 1990s.

A negative impact on those types of welfare funding "does not mean that cash payments decreased in absolute terms," Boylan cautioned.

"This means that they decreased in comparison to states who were not under court order to improve prison conditions," he said. "For instance, they could have risen in states not under court order, while (they) remained the same in states under court order."

Archive articles from this era of Oklahoma's prison system seem to reflect Boylan's research findings. A January 1984 Tulsa World editorial discussed the $500 million spent after the federal court ruling to improve the state's prisons and DOC's budget increasing by tenfold in the resulting years.

"Citizens wondering where much of their tax money went have to look no farther than the prison system," the editorial stated.

Boylan said their study was able to control for other factors that could have affected welfare spending and still determined the prison spending increase was the likely cause - though politicians making tough choices regarding state budgets at the time may not have realized the outcome.

"We did not find any discussion by any legislature where they directly said that (they were taking money from welfare to fund prisons)," Boylan said. "That is what happened, whether intended or not."

The court orders to reform Oklahoma's prisons came as a result of an inmate's federal civil rights lawsuit. In 1973, before the case went to trial, a riot occurred at the Oklahoma State Penitentiary in McAlester.

In 1974, the courts ruled that several conditions in the prison violated the constitution and issued several orders to improve living conditions and protect inmates' rights.

Boylan's study found that court decisions such as this improved inmate mortality rates and prison living conditions overall in those states, but welfare programs often took a hit.

State revenue hits record high

By M. Scott Carter    

The Journal Record

OKLAHOMA CITY - After four years and seven months, the Oklahoma economy has recovered from the

Great Recession, state Treasurer Ken Miller said Monday.

Speaking at a Capitol press conference, Miller, a Republican, said gross tax receipts for the past year

were $11.3 billion, a figure that is $12.6 million (or 0.1 percent) above the previous record high set in December 2008.  "By at least this one measure, Oklahoma has regained and moved past the ground it lost during the Great Recession," he said.  Miller said a major portion of the state's tax revenue came from two areas: the gross production and motor vehicle tax sectors, which showed the largest growth during the past year. Data showed that the state's oil and gas industry generated $64.45 million in revenue for July, up by $11.13 million from last year. Motor vehicle taxes followed a close second, generating $64.33 million, an increase of $6.37 million

from last year. Miller attributed the growth in the gross production taxes to a successful transition from natural gas to oil.  "The price environment for oil is much better and that's the reason for the transition," he said. "And even with natural gas you've seen prices rebound from previous lows."  Last year, oil and gas industry officials were concerned that overproduction in the natural gas sector was pushing the price down. Miller said natural gas supplies have decreased and prices have increased.  He said the Aug. 5 report from Baker Hughes showed 168 wells under development in Oklahoma; of that figure 149 wells were for oil and 19 for natural gas.

"Right now the supply of natural gas has dropped considerably," he said. "When you're approaching a 20-percent reduction in the supply of a natural resource that's going to be better for prices if you're on

the producer's side." Miller said the increase in revenue also reflected a reduction in state income tax. In 2011, state

lawmakers lowered the state's income tax rate from 5.5 percent to 5.25 percent. That cut, the Oklahoma Policy Institute predicted, would reduce state revenue by about $38 million. Miller said the state's revenue picture continues to strengthen, even with the tax reduction in place.  Not all the news was positive. State records showed a slight increase in the state's unemployment rate.

But that upward tick, Miller said, was probably due to summer employment or temporary displacements caused by the tornadoes that struck the central Oklahoma area in May.  Miller said the state's June unemployment rate of 5.1 percent was still better than the national rate of 7.6 percent.  "Our lowest rate since the recovery was 4.9 percent," he said. "I think that's to be expected a lot of

times in the summer months. I think most would say we're still at or near full employment."

Miller also painted an optimistic picture for the nation's economy. He said the U.S. has shown signs the economy is improving in the home construction industry and with an increase in capital stock and

investment.  "Second-quarter growth was slightly impacted by federal spending reductions, especially military spending cuts," he said. "But the economy was strong enough to push past this fiscal drag. Accelerated growth is expected for the remainder of the year but a continued budget impasse in Washington could lead to a government shutdown and potential disruption of the economy."

Cole argues against government shutdown

By M. Scott Carter   

The Journal Record 

OKLAHOMA CITY - Despite complaints to the contrary, the U.S. Congress has been productive this

year, 4th District U.S. Rep. Tom Cole said Tuesday.

But while Cole praised lawmakers, he also urged members of the Republican caucus to avoid a

government shutdown over the president's Affordable Care Act.

Cole made the statements during a speech to the Greater Oklahoma City Chamber at the National

Cowboy and Western Heritage Museum.

Cole, R-Okla., said federal lawmakers have cut the deficit in half, made most of the Bush tax cuts

permanent, avoided a fiscal cliff crisis and fixed problems with student loan interest rates.

"The deficit is half of what it was three years ago," Cole said. "Now it's $650 billion. That's a pretty

major thing. There really has been some tough fiscal restraint."

And other areas of the government, Cole said, were working well.

As an example, Cole pointed to work done by the Federal Emergency Management Agency in central

Oklahoma.

"Hurricane Sandy relief was pretty controversial at the time," he said. "But if you don't think it

(federal emergency aid) matters, then go to Moore. Because of the Hurricane Sandy legislation, the FEMA

fund - the disaster relief fund - was refilled."

Cole said the $60 billion appropriation was necessary to help the country recover from natural

disasters, including the two EF5 tornadoes that struck central Oklahoma, including the lawmaker's

hometown of Moore.

"The money that we're operating on now is out of Hurricane Sandy relief," he said. "Absent that

solution, we would have been up the creek without the proverbial paddle."

Cole said other proposals such as the Violence Against Women Act and legislation that prevented

student loan interest rates from doubling were examples of how lawmakers on both sides of the political

spectrum could work together.

"The student loan issue was fixed on a bipartisan basis," he said. "The Republican bill closely

mirrored what President Obama wanted to get done. And in a district like mine, when you have five

colleges and universities, that's a big deal. The idea that there is not some bipartisanship in cross

workings is simply not the case."

Still, however, problems remain. Cole said the federal legislative process was not moving very

smoothly and the Senate has yet to pass any appropriations bills. 

"It seems there could be more rigid partisan battles leading into the fall," he said.

Cole also cautioned Republicans to avoid a government shutdown in the fight over the Affordable

Care Act.  "We are now in a great debate, which I don't think we should be having, on whether we shut down

the government in order to get rid of Obamacare," he said. "No one opposes Obamacare more than I do.

Each of us in the House has voted 40 times to repeal or replace it. But at the end of the day, if you vote to

shut down the government you change the discussion from why Obamacare isn't a good idea to why in

the world are you shutting down the government."

And the consequences of a shutdown, he said, would be harsh.

"No troops in the field are going to get paid," Cole said. "Veterans homes would all be shut down. The

National Weather Center, which did such a wonderful job of giving us warnings during the recent

tornado, would shut down. The FAA center shuts down. All those things happened, and sooner or later

you have to turn the switch back on. And, in all likelihood, the president will not have capitulated. In that

time frame you have made yourselves, I think by shutting down the government, incredibly

irresponsible."

Teague considered for secretary of energy, environment

By M. Scott Carter

The Journal Record  

OKLAHOMA CITY - The former chief of the Tulsa District Corps of Engineers Office is on the short

list of candidates for a post in Republican Gov. Mary Fallin's administration, The Journal Record has

learned.

Col. Michael Teague, the Tulsa District commander of the Army Corps of Engineers, is one of a

handful of candidates being considered by Fallin as her cabinet secretary of energy and environment. A

biographical sheet on the Corps of Engineers website said Teague received a degree in civil engineering

from Norwich University and was commissioned as a second lieutenant in the Corps of Engineers in

1985. Teague retired as chief of the corps in July.

On Wednesday, Fallin spokesman Alex Weintz said the governor was still vetting candidates for the

position, but declined to say who was on the governor's short list.

"We're still reviewing candidates and when we have a qualified candidate we will make an

announcement," Weintz said.

However, a source close to the Fallin administration confirmed that Teague was one of a few

candidates on the governor's short list.

In June, Fallin announced that she had combined both posts. Fallin made the announcement after two

of her cabinet secretaries - former Energy Secretary Mike Ming and Secretary of the Environment Gary

Sherrer - resigned.

The governor also shuffled another position in her cabinet, naming Robert Sommers, director of the

Oklahoma Department of Career and Technology Education, as secretary of education and workforce

development. Fallin also named Deby Snodgrass, executive director of the Oklahoma Department of

Tourism and Recreation, as secretary of tourism.

In addition, Fallin combined the posts of secretary of information technology with the secretary of

finance. Preston Doerflinger, the governor's chief budget negotiator and current finance secretary, will

assume the expanded role. Former Secretary of Information Technology Alex Pettit will continue to serve

as state chief information officer.

Fallin's decision to combine the energy and environmental posts drew criticism from the Oklahoma

chapter of the Sierra Club. In a media statement, the organization's Oklahoma director, David Ocamb,

said the decision could pave the way for conflicts of interest.

"Gov. Fallin would be best served by having two voices in the room when it comes to energy and the

environment," Ocamb said. "Not having that does a disservice to the state."

Dorman wants special session - if there is one - to include insurance

program

By M. Scott Carter

The Journal Record

OKLAHOMA CITY - Should the Oklahoma Legislature return to the Capitol this fall for a special session,

at least one lawmaker said he would push to include the state's health insurance program - Insure

Oklahoma - in the discussion.

But he may be facing an uphill battle.

State Rep. Joe Dorman, D-Rush Springs, said rumors continue to fly about when a special session

could take place. Should a session be called, Dorman said he would push to expand that call to include

the Insure Oklahoma program.

"Personally I feel it would be fine to wait four months to come back," he said. "But if we do come back

I will do everything in my power to make certain we expand the call of the session to include saving

Insure Oklahoma. We are about to see 8,000 people kicked off their insurance by our inaction."

Lawmakers, Dorman said, need to step up and address problems with the program.

"We're putting our small businesses in danger," Dorman said Wednesday. "And that's wrong. We

need to address the problem."

Still, while Dorman and many Democratic members of the Legislature have pushed to include the

insurance program in a call for a special session, Republican Gov. Mary Fallin and the Legislature's GOP

leadership said they only want to focus on changes to the state's tort system.

Recently, Fallin's spokesman Alex Weintz told the Associated Press that the timing of a special session

was still in question but not the topic - torts only.

"She is not planning to consider any other issue," Weintz said.

Many lawmakers have become concerned over the Insure Oklahoma program, after it was announced

that the program would end on Dec. 31. Should that happen, Dorman said, thousands of small businesses

and low-income Oklahomans would lose their insurance unless the state comes up with an alternative.

Debate over what subjects should be included in a special session has continued to grow.

In late July, state Sen. Patrick Anderson, R-Enid, set a letter to every judge in Oklahoma stating that he

was concerned the special session would include efforts to eliminate the Judicial Nominating

Commission and pass legislation to place term limits on members of the judiciary.

"The focus of the special session is going to be on attacking the judiciary," Anderson wrote. "Based on

some of the rumors I am hearing, I expect that there will be an attempt to place term limits on judges and

that there will be an effort to eliminate the Judicial Nominating Commission."

Dorman said he expected a special session to take place anytime from late August through mid-September.

Lawsuit would block morning-after pill law

By Tim Talley

Associated Press  

OKLAHOMA CITY - A coalition of reproductive rights advocates filed a lawsuit Thursday to block

enforcement of an Oklahoma law that restricts access to the morning-after emergency contraception pill.

The lawsuit filed in Oklahoma County District Court alleges that the law, approved by the Legislature

in May and signed into law by Gov. Mary Fallin on May 29, is unconstitutional and discriminates against

women by imposing restrictions on a form of contraception used only by women. It says the law is the

only one of its kind in the nation.

The law, which received bipartisan support in the House and Senate, primarily deals with regulations

regarding health insurance benefit forms. But a separate section requires women 17 and older to show

identification to a pharmacist to obtain the Plan B One-Step pill and generic emergency contraceptives. It

also requires women under 17 to have a prescription to obtain them.

Martha Skeeters, president of the Oklahoma Coalition for Reproductive Justice, which filed the

lawsuit, said the federal government approved the morning-after pill for unrestricted, over-the-counter

sales and that women in Oklahoma deserve the same access as women in every other state. The drug was

approved in June and became available in pharmacies and grocery stores on Aug. 1.

"It has taken over a decade for women in this country to see emergency contraception sold on the

shelves without restriction, and Oklahoma women shouldn't have to wait even longer," Skeeters said.

The emergency contraceptive is designed to prevent pregnancy by preventing ovulation or

fertilization and is not capable of terminating an existing pregnancy. It is generally not effective more

than 72 hours after sex.

The law's author, state Rep. Colby Schwartz, R-Yukon, said it was passed in response to the

government's decision to allow unrestricted access to the drug by adults and teens. Schwartz accused the

government of overreaching its authority and said the statute was intended to maintain the status quo in

the state.  "I'm kind of taken aback," Schwartz said after learning of the lawsuit.

Among other things, the lawsuit alleges that the law violates the Oklahoma Constitution's singlesubject

rule restricting laws to just one issue. Schwartz said both sections of the law deal with drugs that

are sold by pharmacies.

The lawsuit was filed against the Oklahoma State Board of Pharmacy and its six members by the

coalition and Jo Ann Mangili of Mounds, the mother of a 15-year-old girl. It seeks a temporary restraining

order and injunction against enforcement of the measure, which is scheduled to take effect on Aug. 22.

District Judge Lisa Davis set an Aug. 19 hearing in the case.

The lawsuit is the latest challenge to anti-abortion and related legislation adopted by the Republicancontrolled

Oklahoma Legislature by the New York-based Center for Reproductive Rights, which

represents the Oklahoma Coalition for Reproductive Justice and Mangili.

In December, the Oklahoma Supreme Court struck down laws challenged by the group that required

women seeking abortions to have an ultrasound image placed in front of them while they hear a

description of the fetus and that banned off-label use of certain abortion-inducing drugs.

Now, Oklahoma politicians are imposing barriers to safe and effective birth control measures, said

Bebe Anderson, director of the U.S. legal program for the Center for Reproductive Rights.

"The opponents of women's rights in the Oklahoma Legislature are like the worst kind of broken

record, repeating their attempts to deny Oklahoma women essential reproductive health care again and

again and again," Anderson said.

Have a good week.  Give me a call at 918.671.6860 if I can be of help in any way

                  Steve Lewis


 
 
This Week's Meetings


 

 

 
This Week's News
Group Claims Paying for Prison Reform
State Revenue Hits Record High
Cole Argues Against Shutdown
Teague Considered for Secretary of Energy
Dorman Want Special Session
Lawsuit Would Block Morning-After Pill
 

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