Sunday, August 02, 2020

1889 Institute: Sell Unneeded State Assets to Shore up State Pensions

Sell Unneeded State Assets to Shore up State Pensions
By Benjamin Lepak

Oklahoma’s government owns a lot of property. This includes land and buildings, but it also includes valuable assets like the state-owned electric power company, the Grand River Dam Authority (GRDA). GRDA reports nearly $1.8 billion in assets on its most recent balance sheet, with a “net position” of more than $622 million. Or the Tobacco Settlement Endowment Trust (TSET), which has a $1.2 billion endowment producing roughly $50 million annual investment income.

We would be better off if some of these assets were liquidated. Physical assets could be sold or leased to private entities where they would be more economically productive, pay taxes, and relieve the state of maintenance expenses.

The proceeds could be directed to long-term funding challenges like unfunded pensions and infrastructure. The needs are not small. Oklahoma faces $7.9 billion in unfunded pension obligations, totaling approximately the entire rest of the state budget.

Those debts will be paid through heavy tax increases and sharp budget cuts from other parts of government unless another funding source is found. This punishes current and future taxpayers for decisions made by politicians decades ago. Selling long-held state assets would ease the pain.

A recent study by the 1889 Institute identified nearly $6 billion in assets the state could liquidate for long-term funding needs. And that’s just from 7 state-owned assets. There are many others that should be evaluated.

To do so, the study proposes a process to fully review all state-owned property and vest final decision-making outside the agency controlling the property. Basic principles like transparency and competition would guide the process.

The recently created Legislative Office of Fiscal Transparency (LOFT) is an ideal vehicle. LOFT is a committee of legislators, has a paid staff, and has the ability to tap into outside expertise. Importantly, it also has the power to compel information from sometimes recalcitrant state agencies. If anyone can get the true, comprehensive picture of state-owned property, it should be LOFT.

There have been discussions in the past about shedding some of the state’s assets, but local and special interests have always managed to protect their piece of the pie and kill such efforts. To some degree, this is understandable. If one of these massive government assets is in your town, you don’t want to see it go away.

But this is exactly why this type of effort is best carried out by the Legislature. Every part of the state is represented in that body, and its members are directly accountable to the people. No blue ribbon commission can claim that type of legitimacy.

What will be required, ultimately, is political courage.

Benjamin Lepak is Legal Fellow at 1889 Institute.


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