OCPA Report: Casino compacts should be renegotiated

New report shows Oklahoma’s casino compacts should be renegotiated

OKLAHOMA CITY—A new report by the Oklahoma Council of Public Affairs (OCPA) highlights the need for Oklahoma to renegotiate its gaming compacts.

“It’s clear from the data, Oklahoma casino operators are getting an incredibly special deal,” said Jonathan Small, OCPA president. “I encourage
 everyone to read this report. After doing so, there should be no doubt about it; Oklahoma’s gaming compacts must be renegotiated.”

The report compares the Oklahoma gaming industry to other states’—specifically looking at exclusivity fees and tax rates.

“Oklahoma’s gaming industry is the third-largest in the nation bringing in $4.4 billion last year. However, the state only collected $153
 million in fees, one of the lowest totals in the country,” said Curtis Shelton, OCPA Policy Research Fellow. “With the gaming industry now the eighth largest industry in the state, it’s clear that these tribal compacts have an enormous impact on all Oklahomans. This study provides a foundation of facts for this important issue.”

As the report points out, the exclusivity fees paid by tribal casino operators in Oklahoma are not only much lower than the tax rates paid by commercial casinos in most other states but are also lower than the fees paid by comparable tribal casinos in other states.

The financial impact created by Oklahoma’s low fees can be seen when comparing how much the state collects on slot machines at casinos versus slot machines at race tracks. The state receives an average $24,000 for each racing machine, but just $2,833 per Class III slot machine in tribal casinos.

Oklahoma casinos also have more Class II machines, which are subject to no state fees, than comparable casinos in other states. While Oklahoma is the third-largest gaming market in the United States behind only Nevada and California, there are 28,640 untaxed Class II machines in Oklahoma casinos compared to just 2,342 in California. Of all untaxed class II games in states where class III compacts have been signed, 80 percent of those machines are in Oklahoma.

“One fact stands out above all others: Oklahoma has more slot machines than all but a handful of states—yet collects less revenue than most,” Shelton said.

About the Oklahoma Council of Public Affairs
The Oklahoma Council of Public Affairs (OCPA) is a public policy research organization focused primarily on state-level issues. OCPA conducts
 research and analysis of public issues in Oklahoma from a perspective of limited government, individual liberty, and a free-market economy.

OCPA: Is TSET putting nightclubs ahead of doctors?

TSET putting nightclubs ahead of doctors?

OKLAHOMA CITY (April 15, 2019) – Oklahoma’s Tobacco Settlement Endowment Trust has spent as much, and sometimes more, promoting bars and nightclubs and a boathouse foundation than it has on recruiting rural doctors to Oklahoma, records show.

Curtis Shelton, Policy Research Fellow at the Oklahoma Council of Public Affairs, a free-market think tank, said those findings demonstrate that Oklahoma is not getting the maximum health benefit from its tobacco dollars.

“As the endowment has grown, so has the scope of TSET’s spending,” Shelton said. “It’s now worth asking if TSET’s spending practices are truly improving Oklahoma’s health statistics, or if it is time to reform the system and redirect future settlement payments to higher priorities such as rural healthcare.”

Thanks to payments from the 1998 Master Settlement Agreement, the Oklahoma Tobacco Settlement Endowment Trust (TSET) now holds more than $1 billion in payments from tobacco companies. TSET is supposed to spend earnings from that endowment on health causes, but the constitutional provision creating TSET includes vaguely defined goals, which has led to questionable spending practices.

In 2015 TSET created a program called Free the Night that promotes bars and nightclubs that have smoke-free areas. Between 2015 and 2018 that program received $1.05 million in TSET funding.

Between 2015 and 2017, TSET gave $781,500 to the Oklahoma City Boathouse Foundation. (TSET did not give to the Boathouse in 2018.)

Oklahoma’s Physician Manpower Training Commission (PMTC), which works to attract medical professionals to rural areas, received less from TSET from 2015 to 2017 ($617,500) than did the “Free the Night” program and the boathouse foundation during that same time.

From 2015 to 2018, TSET’s total spending on the physician program barely exceeded the total amount spent on nightclubs, but the amount going to doctor recruitment was still far less than the amount of TSET money spent on the nightclub and boathouse programs combined during those years.

Polling commissioned by the Oklahoma Council of Public Affairs and conducted by WPA Intelligence found that 78 percent of Oklahoma voters support redirecting future payments from TSET to rural health care needs. The poll found an outright majority – 58 percent – “strongly” support the proposal.

Legislation to enact that change, House Joint Resolution 1017, has already passed the Oklahoma House of Representatives on a 73-27 vote.

Shelton recently wrote about TSET spending, based on updated financial information. That analysis can be viewed at https://ocpathink.org/post/misplaced-priorities-at-tset.

OCPA column: Limited government should also be effective

Limited government should also be effective

by Curtis Shelton, policy research fellow at the Oklahoma Council of Public Affairs

Who runs Oklahoma’s largest state agencies? This is a hard question to answer. Governors and legislators appoint members to agency boards. Those boards then choose agency directors. The directors nominally report to the board, but board members are volunteers who only meet occasionally and only know what agency staff tells them. Historically, these boards have a terrible track record when it comes to asking hard questions or holding anyone responsible.

Last week, Gov. Kevin Stitt and legislative leaders announced an agreement to increase accountability for five state agencies. The reforms will give the governor authority to hire and fire directors of the Oklahoma Health Care Authority, Oklahoma Department of Transportation, Oklahoma Department of Corrections, Oklahoma Office of Juvenile Affairs, and the Oklahoma Department of Mental Health and Substance Abuse Services. These are some of the largest state agencies.

The largest is the state’s Medicaid agency, the Oklahoma Health Care Authority (OHCA). According to the state Senate Appropriation Report for fiscal year 2019, OHCA had $1.1 billion in appropriations with a total budget of $5.8 billion. The smallest of these agencies is the Office of Juvenile Affairs with a total budget of $110 million. The Department of Transportation, Department of Corrections, and the Department of Mental Health and Substance Abuse Services have total budgets of $1.8 billion, $588 million, and $471 million respectively.

In all, the five agencies account for $8.7 billion of the $27 billion total budget reported by the state Senate. That is nearly a third of the total state budget that has limited accountability to current elected officials.

As of today, these agencies are run by boards whose members may have been chosen by previous governors and former legislators. The board members, and the directors they choose, have no direct accountability to the people for their results. When things go awry, as in the case of the recent financial scandal at the Oklahoma State Department of Health or past crises at the Oklahoma Department of Human Services, assessing who is responsible is difficult. Changing how agencies operate often seems impossible.

A limited government shouldn’t mean an ineffective one. Oklahoma’s current government structure pits its executive branch against itself and makes any real reform difficult. With the proposed changes, the people will know exactly who is responsible—the governor. With that responsibility comes the authority to hold these agencies accountable for how taxpayers’ dollars are being used.

Curtis Shelton serves as a policy research fellow focusing on fiscal and tax policy for the Oklahoma Council of Public Affairs.

OCPA column: Gov. Stitt’s budget is the most transparent in years

Gov. Stitt’s budget is the most transparent in years

by Curtis Shelton, policy research fellow at the Oklahoma Council of Public Affairs

Gov. Stitt’s first State of the State address officially marked the start of the legislative session. Along with his speech, he delivered his first annual Executive Budget Book. This is the governor’s proposed budget for the upcoming fiscal year.

This year’s Executive Budget Book stands out from those in years past by including not just appropriations but also total spending. While state appropriations for fiscal year 2018 were $6.8 billion, total state spending reached $17.3 billion. The proposed budget highlights the top 12 state agencies, showing how much money they receive from state appropriations, direct apportionments and agency fees, and federal money. It is encouraging to see the new governor take a holistic approach to the budget. This is a level of transparency from the executive branch that Oklahomans have not seen in some time.

In his budget, Gov. Stitt proposes a $1,200 teacher pay raise which would move Oklahoma teachers’ salaries to number one in the region. The governor also asks lawmakers to use the unneeded $30 million bailout to the Oklahoma State Department of Health to pay for performance audits and increase funding for the Quick Action Closing Fund (a fund that can be expended by the governor for economic development and related infrastructure development).

The governor has also focused on improving government instead of simply expanding its scope. By identifying one-time expenditure items—such as certain criminal justice reforms—state government will provide support for citizens without increasing its operational budget with recurring costs.

According to state officials, certified revenue is projected to increase by $612 million. However, numerous obligations held by the state must be accounted for with this surplus. Some of these obligations include replacing the lost federal money for graduate medical expenses and the Children’s Health Insurance Program (CHIP) due to a reduced federal matching rate, as well as debt payments for the State Capitol restoration project. The governor has also proposed directing the rest of this surplus money to the state’s Rainy Day Fund with the goal of raising the account to $1.1 billion by fiscal year 2020.

With one more revenue estimate to go in late February, the final surplus prediction is not yet official. Falling oil prices suggest the estimated surplus will fall below that $612 million mark. Regardless, Oklahoma is still enjoying a better economic environment than it has had in several years and has a governor who appears intent on encouraging this growth rather than extracting every last drop of revenue in order to expand government.

Curtis Shelton serves as a policy research fellow focusing on fiscal and tax policy for the Oklahoma Council of Public Affairs.

OCPA: "Messaging" Matters, So Do Facts

"Messaging" Matters, So Do Facts

by Curtis Shelton, OCPA Policy Research Fellow

As chair of the House Appropriations and Budget Committee, Rep. Leslie Osborn was one of the legislature’s budget negotiators earlier this year. She used that position to make the case for a litany of tax increases, claiming that Oklahomans are “tired of us doing things the way we’ve always done them.” This begs the question: what has the state been doing?

As one of the most conservative states when it comes to election results, some might assume that the Oklahoma legislature continually cuts taxes. In fact, the state ranks 36th in per capita tax collections. A study shows that Oklahoma historically has had an above average tax burden compared to the rest of the nation. While there have been some state tax cuts, Jonathan Small has shown that the legislature has also increased revenue.

Despite changes in tax laws and fluctuations in revenue, what has remained constant year after year has been the increase in state government spending. According to the data from Oklahoma’s most recent Comprehensive Annual Financial Report (CAFR), state government has increased spending in 22 of the last 23 years. Despite recessions in 2008 and 2015, when many Oklahoma families had to make tough choices, Oklahoma government continued to spend.

During the same interview Leslie Osborn said that “more than ever the message and the meaning is going to matter more.” Message matters, but it is imperative they be not only sincere, but also based on facts. Oklahoma government has been growing, not shrinking. People might question the priorities in the budget or in how agencies spend money, but the total burden on Oklahomans is higher than ever.

The Oklahoma Supreme Court opinion striking down SB 845 states “by strictly limiting the Legislature's ability to enact laws that generate additional revenue—the people's preference that when revenues shrink, so too does their government.” This is the people’s will as expressed in the Oklahoma Constitution. Maybe the state should try doing things this way?