Tuesday, February 21, 2017

OCPA presents "First Steps" state budget ideas to save $413M


First steps on the road to balancing Oklahoma’s state budget 
without increasing taxes on working Oklahomans

Across Oklahoma, many citizens are undoubtedly grateful that numerous state lawmakers have expressed a desire for state government to become more efficient with the tax dollars already taken from Oklahomans, as opposed to further increasing their constituents’ taxes.

In order to help close the budget gap for Oklahoma’s state government, the Oklahoma Council of Public Affairs proposes the following 13 ideas. These are the FIRST STEPS state lawmakers should consider taking before tax increases on working Oklahoma families and entrepreneurs are even considered.

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Medicaid Enrollment Audits
Most states, including Oklahoma, have programs to prevent fraud by providers who are reimbursed by Medicaid. Many states, however, lack robust procedures to verify that Medicaid enrollees are and remain legally eligible. A number of states, including Illinois and Pennsylvania, have implemented Medicaid enrollment audits and eligibility verification efforts to remove Medicaid participants who are no longer eligible. If Oklahoma applies these reforms, the annual savings based on the experience of other states would be $85.6 million.

HealthChoice Enrollment Audits
Due to the generous benefit structure of Oklahoma’s self-insured state and education employee health coverage plan, some participants do not withdraw when no longer eligible. If HealthChoice implemented robust procedures to verify that enrollees remain eligible and remove those that are not, the annual state savings would be $6 million.

HealthChoice Select Provider Reform
Following the example of Oklahoma County, other municipal governments, and private sector employers, lawmakers passed legislation in 2015 authorizing cost savings incentive programs that reward employees if they seek low cost providers. HealthChoice finally completely implemented the program last month and projected annual savings will be $65 million.

3-Year Moratorium on Agency “Swag,” Advertising, Memberships, Sponsorships, and Transportation Project Art
State agencies spend more than $39.8 million a year on advertising, memberships, sponsorships and transportation project art. This includes funding for an organization that lobbied for Obamacare, the “Stimulus Package” and radical climate change policy initiatives. In previous tough years for state government, the state has placed a moratorium on non-essential spending like the requirement that new road and bridge projects include art. A 3-year moratorium on non-essential agency advertising, memberships, sponsorships and arts on transportation projects (unless required as a condition of federal law) would save annually $39 million.

Consolidation of Administrative and Back Office Functions of Higher Education
Former Rep. David Dank was most known for his work to highlight the vast administrative growth in higher education. He regularly noted that Oklahoma has 52 higher education centers and a number of state colleges and universities far higher than many other states. Oklahoma’s higher education non-teaching overhead (as a percentage of the private-sector workforce) is an astonishing 61 percent greater than the national average. If Oklahoma eliminated non-instructional higher education positions to reach the national average, it would result in elimination of 12,000 positions and save $328 million in wages and salaries. By cutting just 10 percent of this total number and consolidating back office functions, eliminating non-essential administration such as the numerous former politicians and political staffers who have made their way to higher education, the state would save annually $32.8 million.

Repeal Sales Tax Exemption for Tickets to NBA and NHL Games Effective on July 1, 2017
Repealing the sales tax exemption for tickets to National Basketball Association and National Hockey League Games would save annually $2.2 million.

Repeal Sales Tax Exemption for Admission to Professional Sporting Events Effective July 1, 2017
Repealing the sales tax exemption for admission to professional sporting events would save annually $492,000.

Repeal Zero Emission Tax Credit for Any New Projects or Activity Effective on July 1, 2017
Repealing the Zero Emission Tax Credit for any new projects or activity effective July 1, 2017 or after would conservatively save $15 million per year.

Cap Zero Emission Tax Credit Liability Payout at $15 million Annually Effective July 1, 2017
Capping the annual payout of the zero emission tax credit existing liabilities at $15 million (the same level for economically at-risk wells) would conservatively save the state $50 million, since the total annual liability is conservatively estimated at $65 million. This reform would save annually $50 million.

Cap Ad Valorem Reimbursement for Wind at $15 million Effective July 1, 2017
Wind energy developers made multiple representations to lawmakers and the public when wind incentives were first adopted that the cost of the incentives would be very low. In fact, payment of the incentives has caused the state to borrow from other funds for 33 percent of the most recent fiscal year. Wind facilities were given a special carve-out to be added for the purposes of ad-valorem reimbursement by state taxpayers and the wind projects increased significantly the amount state taxpayers are on the hook for ad-valorem reimbursement for wind. Capping the ad valorem reimbursement for wind at $15 million would conservatively save the state $15 million, since the total annual ad-valorem reimbursement for wind is approximately $30 million. This reform would conservatively save annually $15 million.

Repeal Sales Tax Exemption on Wind Turbine Sales Effective July 1, 2017
The Oklahoma Incentive Review Commission has noted that Oklahoma has already exceeded its renewable energy goals. The Commission also found “that a significant portion of the expected new development in wind facilities is to provide energy for transmission to users in other states. In this case, there is no real benefit for Oklahoma consumers in subsidizing the generation of this electricity.” Given these findings and the substantial amount that taxpayers are on the hook for wind tax credits, it makes sense to repeal this sales tax exemption to help balance the state budget. FERC interconnect filings show that as many as 3,152 new turbines are planned for Oklahoma. Since the total liability is estimated at $284 million for 2017, repealing this sales tax exemption would conservatively save the state $40 million.

Repeal the “Hollywood Subsidy” Film Incentive Effective July 1, 2017
The state of Oklahoma pays a subsidy for films made in Oklahoma. It’s absurd to ask Oklahomans to subsidize Hollywood while threatening Oklahomans with tax increases. This program is capped at $5 million a year so savings from this reform would save annually $5 million.

Tobacco Settlement Reforms
(Does nothing to take away from any existing TSET programs, grant commitments or the current endowment)
This reform would require a vote of the people at a special election. All future payments to the Tobacco Settlement Endowment Trust from the Master Settlement agreement would be directed to a rural healthcare infrastructure fund. This fund would be used for the cost of health care reimbursement to rural areas that struggle with revenue stream diversity for their hospitals and have suffered actual dollar losses. The fund would also be used to fund the Physician Manpower Training Commission and shore up nursing home provider rates. This would not change any of TSET’s current activity and would allow them to keep their existing endowment, earnings and current commitments. Annual settlement payments to the endowment are approximately $57 million. Shifting those funds to these new initiatives will allow for replacing funds that will be cut from the unsustainable Medicaid budget to prevent unwarranted tax increases on Oklahomans. This reform will annually save $57 million.

Total Savings: $413 million

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