Perspective - April 2017 by OCPA

APRIL 2017

OKLAHOMA COUNCIL OF PUBLIC AFFAIRS

WORKERS' COMP REFORM IS WORKING

In Case You Missed It Speaking to a hostile crowd at a recent public forum, OCPA president Jonathan Small made a strong case for parental choice in education.

Attempts to undermine the newly adopted State Questions 780 and 781—even before they take effect— must be decisively rejected.

OU is advertising a paid position exclusively for social justice warriors—paid for by Oklahoma taxpayers. bit.ly/2n00j16

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Former Governor (and current OCPA trustee) Frank Keating says, “I signed wind industry tax breaks, and I was wrong.” bit.ly/2mJENvo

In fiscal year 2017, TSET plans to spend $770,663 on billboards.

“In shelving a modest school choice bill because some Republicans capitulated to education establishment lobbyists,” The Oklahoman rightly notes, “the Republican majority undermined their campaign vows to advance conservative policy and ignored the needs of some of Oklahoma's neediest children.”

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PERSPECTIVE

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OCPA has identified $413 million in savings—much-needed first steps on the road to balancing Oklahoma’s state budget without raising taxes.

An Oklahoma state senator compared school choice legislation to Josef Mengele.

Higher education has a prejudice problem: bias against conservatives, Republicans, and libertarians. usat.ly/2lLIlyd

OCPA’s Jonathan Small tells the state’s largest newspaper that State Question 640 was and is a good idea. bit.ly/2msOa0B

High-tax, big-spending states are out of money. bit.ly/2mOiqX0

Donald Trump’s new enemies are Democratic operatives with bylines.

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Brandon Dutcher, Editor

OCPA Trustees

OCPA Researchers

Glenn Ashmore • Oklahoma City

Mike O’Neal • Edmond

Robert D. Avery • Pawhuska

Larry Parman • Oklahoma City

Lee J. Baxter • Lawton

Bill Price • Oklahoma City

Douglas Beall, M.D. • Oklahoma City

Patrick T. Rooney • Oklahoma City

Steve W. Beebe • Duncan

Melissa Sandefer • Norman

organization. OCPA formulates and

John A. Brock • Tulsa

Thomas Schroedter • Tulsa

promotes public policy research and

David Burrage • Atoka

Greg Slavonic • Oklahoma City

analysis consistent with the principles

Michael Carnuccio • Yukon

Charles M. Sublett • Tulsa

Tom Coburn, M.D. • Tulsa

Robert Sullivan • Tulsa

William Flanagan • Claremore

William E. Warnock, Jr. • Tulsa

Josephine Freede • Oklahoma City

Dana Weber • Tulsa

in Perspective are those of the author,

Ann Felton Gilliland • Oklahoma City

Daryl Woodard • Tulsa

and should not be construed as

John A. Henry III • Oklahoma City

Perspective is published monthly by the Oklahoma Council of Public Affairs, Inc., an independent public policy

of free enterprise and limited government. The views expressed

representing any official position of OCPA or its trustees, researchers, or employees.

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Robert Kane • Tulsa Frank Keating • Oklahoma City

EMERITUS BOARD

Gene Love • Lawton

Blake Arnold • Oklahoma City

David Madigan • Lawton

David R. Brown, M.D. • Oklahoma City

Tom H. McCasland III • Duncan

Paul A. Cox • Oklahoma City

David McLaughlin • Enid

Henry F. Kane • Bartlesville

Ronald L. Mercer • Bethany

John T. Hanes • Oklahoma City

J. Larry Nichols • Oklahoma City

Lew Meibergen • Enid

Lloyd Noble II • Tulsa

Daniel J. Zaloudek • Tulsa

Steven J. Anderson, MBA, CPA Research Fellow Tina Dzurisin Research Associate Trent England, J.D. Dr. David and Ann Brown Distinguished Fellow for the Advancement of Liberty Jayson Lusk, Ph.D. Samuel Roberts Noble Distinguished Fellow J. Scott Moody, M.A. Research Fellow Andrew C. Spiropoulos, J.D. Milton Friedman Distinguished Fellow Wendy P. Warcholik, Ph.D. Research Fellow

Larry Arnn

William F. Buckley

George W. Bush

Jeb Bush

AMERICAN ENTERPRISE INSTITUTE’S

Dick Cheney

Dinesh D’Souza

ARTHUR BROOKS APRIL 4, 2017 OKLAHOMA CITY •

Mitch Daniels

Artur Davis

Steve Forbes

Tommy Franks

For more information, contact Rachel Hays at 405.602.1667 or rachel@ocpathink.org

John Fund

Laura Ingraham Frank Keating Brian Kilmeade

Ed Meese

Newt Gingrich David Horowitz Mike Huckabee

J. Rufus Fears

Brit Hume

Charles Krauthammer

Art Laffer

Rich Lowry

Russell Moore Stephen Moore Peggy Noonan Marvin Olasky

Sarah Palin

Star Parker

Joe Sobran Thomas Stafford John Stossel

Cal Thomas

Dana Perino Michael Reagan

Clarence Thomas

Jim DeMint

Scott Walker

Paul Ryan

Malcolm Wallop

Jeane Kirkpatrick

John Walton

J.C.Watts

Allen West

Walter Williams

Past OCPA speakers are pictured above.

Workers' Comp Reform Is Working By Mike Brake

For decades, advocates of growth and prosperity for Oklahoma argued for three crucial reforms: income tax cuts, right to work, and reform of our costly, unwieldy workers' compensation system. Cuts in the top income tax rates began in the 1990s and have continued sporadically since. Right to work won voter approval in 2001. And in 2013, state legislators finally passed a sweeping workers' comp reform measure that transformed Oklahoma’s system from an adversarial one to an administrative system designed to be fair to all while controlling costs. It was necessary. Before the reforms, Oklahoma workers' comp premiums were the sixth-highest in America. In fact, for the five-year period from 2006 to 2010, Oklahoma premiums rose a staggering 23.4 percent, the second-highest rate of increase in the country. If there is one indicator of the success of the 2013 reforms, says Robert Gilliland, chairman of the Oklahoma Workers' Compensation Commission created by the new law, it is that from 2012 to 2016 (a period only partially covered by the reforms) Oklahoma premiums recorded a 34.3 percent drop—the best in the nation. In hard dollar terms, workers' comp premiums paid by Oklahoma employers in 2013 before the reforms passed totaled $961.5 million. In 2015, premiums totaled $792.7 million, despite an increase in employment in those two years of 2.45 percent. When you adjust for that increase, the amount paid by employers for workers' comp insurance dropped in the first two years under the new system by 19.5 percent. “Employers could use those savings to hire more workers' or expand their business or add new safety features to better prevent injuries,” Gilliland said.

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Workers' compensation was originally designed to protect injured workers' without driving their cases through the civil courts. It was insurance, not a lawsuit system, but in Oklahoma for most of our state’s history it was hard to see the difference. Cases dragged endlessly through the special Workers' Compensation Court as medical costs skyrocketed along with legal fees. As in any adversarial legal system, it was to the benefit of many lawyers to seek delays and ratchet up fees. The result was that sixth-highest premium ranking in a state where other costs of doing business usually ranked in the bottom 10. Some joked in those years that the Oklahoma Workers' Compensation Court of Existing Claims was more like a giant cash register or slot machine where lawyers lined up to yank levers and dispense insurer-provided dollars, grabbing the first third or so for themselves. It was no wonder that some employers, looking at the graphs showing ever-soaring workers' comp costs, opted to go elsewhere. The 2013 law abolished the old court system and replaced it with a three-member commission who in turn appoint administrative law judges to hear the cases. (Cases filed under the old law are still winding through a Court of Existing Claims which is expected to work itself out of existence by 2020, further cutting costs.) Gilliland says most cases are now adjudicated within 8 to 10 months, compared to the year or two that was common under the old system. That boosted medical costs significantly to the point where amounts paid out by insurers were dramatically out of balance. Today, he said, that balance has been largely restored. Another crucial reform curtailed the often-notorious practice of “doctor shopping,” where lawyers referred injured workers' to physicians known to be overly generous in awarding disability

Falling premium costs, more rapid handling of cases, and fewer cases filed ratings. Under the new system the employer selects treating physicians from a suggested pool of no more than three. That also allows for continuity of care. The new goal of the system is to help injured workers' get well and return to work where possible, or receive fair and prompt compensation where their disability proves permanent. That’s quite a contrast from the old lever-yanking money machine. But injured workers' are hardly at the mercy of heartless employers and insurance companies, as some critics of the reforms would like to claim. Claimants still have a right of appeal, Gilliland says. They can appeal to the three commissioners within 20 days after a judgment has been rendered, and those appeals are decided on a same-day basis. But so rare are such appeals that of some 11,000 cases processed under the new system in its first three years, only 165 reached the commissioners. What, aside from the clear savings of more rapid handling of cases, has led to the dramatic cost reductions? There have been judicious reductions in benefits by about 30 percent and limitations on the length of eligibility for some temporary disability payments, Gilliland says. But perhaps the most significant savings has resulted from the reduction in filed cases. In 2012, Gilliland says, there were about 15,000 workers' compensation cases filed with the old court. In 2014, after the new system was implemented, those filings fell to an astonishing 3,800. They rebounded in the second and third years under the new system to some 6,200 and 7,700, respectively, but the trend line was clear. There were significantly fewer workers' comp cases entering the system at one end, and those being handled were being decided more rapidly at the other. Those numbers, Gilliland says, show that many of the cases previously filed were marginal at best.

“You don’t suddenly see a bunch of people not getting hurt,” he says, noting that lawyers who have continued to handle workers' comp cases seem to be doing a better job of screening them. Of course some of those lawyers have resisted damage to the golden-egg-laying goose that the old system represented. There have been a number of court cases filed seeking to declare portions of the reform law unconstitutional, though Gilliland says those challenges have merely “nibbled at the edges” and have not seriously changed the fundamental nature and purpose of the law. One successful challenge ruled an opt-out provision in the law unconstitutional, but that only impacted 65 employers. Other challenges have clarified provisions dealing with injuries suffered in employer parking lots and those from cumulative overuse, and another challenge still pending has delayed conclusions in a number of disability cases. But Gilliland says the spirit of the law is intact, as are its beneficial effects. Among them is the new image of Oklahoma as a state where workers' comp operates under a fair and balanced system, where costs are sensibly controlled, and where businesses can use that money they save to grow and thrive. Mike Brake is a journalist and writer who recently authored a centennial history of Putnam City Schools. He served as chief writer for Gov. Frank Keating and for Lt. Gov. and Congresswoman Mary Fallin, and has also served as an adjunct instructor at OSU-OKC.

www.ocpathink.org

End Tax Cronyism in Oklahoma Tax cronyism is the subversion of sound, pro-growth tax policy—away from universal and uniform applicability to all taxpayers and towards the interests of the politically favored and connected. These sorts of tax provisions create competitive disadvantages in markets and massive economic distortions. They foster uncompetitive tax policy and and enable “quid pro quo” corruption. Regrettably, Oklahoma is plagued by tax cronyism, which is the fruit of a rotten and failed ideology: economic central planning. The remedy is simple. Over the long term, policymakers should aim to end tax cronyism in all its forms. In the short term, they should increase transparency and accountability, thereby letting sunlight disinfect this rotten policy regime. Tax reforms that unleash the creative potential of mankind by easing the burden of government on all productive, industrious economic activity are anything but narrow, unjust, unearned economic privilege. Tax cronyism, on the other hand, tends to favor the big, old, and sluggish “incumbent” firms for benefit. ` Tomorrow’s titans of innovation and engines of economic growth are today’s faceless dreamers working 90-plus hours a week in some garage or basement, barely making ends meet, lacking a spare minute or dollar to spend convincing the political class to cut them a break. Sound, pro-growth tax policy targets the dreamers inventing the future, not those clinging to their share of the past. A 2014 report from the American Legislative Exchange Council (ALEC), “The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth,” provided the first comprehensive state-bystate count of tax carve-outs. According to the Oklahoma Tax Commission’s “Tax Expenditure Report” for the 2012 fiscal year, Oklahoma carved out more than $1.565 billion from income taxes on individuals and businesses. Moreover, this only includes Oklahoma state-specific carveouts and not those carve-outs codified in the federal tax code and thus carved out of Oklahoma’s tax base through federal tax

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By William Freeland

code conformity. The U.S. Treasury Department estimated those federal provisions totaled $158 billion for the corporate income tax and $1.146 trillion for the personal income tax in the 2014 fiscal year, summed nationwide. Billions of dollars more were and are carved out for targeted “economic development” incentives given directly to specially selected firms, property taxes abatements and loopholes, and from the sales and use tax base. Understanding the failure of tax cronyism begins with the recognition that the offending tax provisions and economic development programs are not pro-growth tax policy. Tax cronyism harms state economic competitiveness. Taxes are not to be an economic tool; they are the funding mechanism for the tools of the state. The tax price of the mediating institutions of the state are largely a fixed cost. Thus, every dollar exempted from the tax base is a dollar that must be grabbed through higher tax rates. Visualize this dynamic by contrasting the “seen” and “unseen” effects of tax cronyism. Society sees the ribbon cutting ceremonies that are the personification of tax cronyism. These spectacles feature the fortunate recipient of politically granted privilege commending the political class for their assistance. In conjunction with the attending policymakers and bureaucrats, all speakers promise a vibrant economy and shared prosperity. But the promises of these ribbon-cutting ceremonies are empty. Unseen are the small businesses and start-ups not privileged by tax cronyism. They now face higher tax rates under a more narrow tax base. Their growth is stunted by higher tax rates, reducing their ability to expand operations, hire new employees, and reward their current employees with a path up the economic ladder through promotion and profit-sharing. Those firms not granted a lower tax burden by the political process must compete on the economic stage with their more fortunate counterparts granted tax-based economic privilege. Firms must compete for customers on the basis of price and quality, talented employees on the basis of opportunity value,

Case Study: Oklahoma Wind Power Tax Credits and investment capital on the basis of return. Firms receiving tax carve-outs are better situated to compete on these margins. Thus, tax cronyism creates cascading, second-order benefits to the fortunate few firms that receive it, creating an unbalanced playing field and a more stagnant economy. The Tax Foundation has two studies that attempt to measure the implications of this tax complexity. Their “State Business Tax Climate” and “Location Matters” studies look beyond the general, top-line state tax rates and consider the imbalance that exists in the messy details of state tax codes. Oklahoma ranks 33rd in the Business Climate Index and averages only 19th across the seven “model firm” hypotheticals analyzed in “Location Matters.” In short, Oklahoma’s tax code is uncompetitive, harming the advancement of shared prosperity. Tax cronyism is a big part of the problem. By striking the root of the problem, Oklahoma has the opportunity to be an island of economic sanity and an incubator of economic promise in a sea of red tape.

A prime example of tax cronyism can be found in Oklahoma’s wind power tax credit regime. The credit subsidizes producers of wind energy in an attempt to spur investments in the technology, making this otherwise uncompetitive energy source more competitive with peers in the marketplace. A paper by economist Byron Schlomach of the 1889 Institute has noted that these credits result in a revenue loss for the state, estimated at $88 million for the current fiscal year and $123 million in 2017. Schlomach observes: When economic benefits are claimed for tax-subsidized wind power, and jobs and windmills are pointed to as evidence of those benefits, the reality is these do not represent benefits, they represent costs. They are more like paying someone to repeatedly dig up the same sidewalk and pour new concrete again. Pointing to the fifth new sidewalk and the contractor with money in his pocket, who lobbied the city council for a job constantly rebuilding the same sidewalk, is not pointing to an economic benefit, but to pure, unadulterated economic waste.

Policy Reforms With the goal of ending tax cronyism firmly in sight, Oklahoma can take immediate steps to cultivate a policy environment that is fertile ground for a privilege-free tax climate. • •

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Embrace Transparency: Ensure rigorous reporting on all tax preferences and grants. Seek Clarity: There must be no exemptions or exceptions from the label of tax cronyism where it is appropriate. Similarly, the terms must not be abused by demagogues to wrongly malign sound policy focused on marketdriven growth. Cronyism anywhere advances cronyism everywhere. Ensure Accountability: All tax carve-outs must have a clearly stated purpose and that purpose must be translated into critical, measurable performance metrics. Moreover, those metrics should be measured by a rigorous economic assessment by independent experts, relying on sound methods of analysis, and frequently reviewed by policymakers Avoid Gimmicks: Policymakers should avoid the temptation to “improve” tax cronyism by “building a better mousetrap.” The problem of cronyism is excessive economic central planning. New layers of complexity cannot fix the problems or reduce the costs of public policy complexity.

By taking bipartisan aim at tax cronyism, Oklahoma can unlock an economy of the future.

That contractor needlessly replacing sidewalks as a result of lobbying, wining and dining his friends on the city council, is no different from those pushing for wind power today. Oklahoma’s legislature was not talked into taxsubsidizing wind power because of global warming. The legislature was duped by the same fallacy Frederic Bastiat explained two hundred years ago—the seen and unseen. Wind turbines, new wires, and the people hired to put them in place are easy to see. Impossible to see are the lost opportunities and productive activities the money used to invest in wind power could have alternatively financed. Moreover, consider the words of renowned investment guru Warren Buffett, who is substantially invested in wind power generation: “On wind energy, we get a tax credit. … That’s the only reason to build them. They don’t make sense without the tax credit.” Consider the implications: •

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William Freeland is an independent public policy analyst, research economist, and data scientist with a decade of experience in public policy research and advocacy. He has worked as a research analyst and economist for the American Legislative Exchange Council (ALEC), as an economist at the Tax Foundation, and as a member of the research faculty at the George Mason University Law and Economics Center.

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Investors like Buffett would not be directing financial capital to wind power without the existence of the subsidies. Wind power cannot stand on its own two feet without the government placing its thumb on the scales of energy markets. Investment capital is being directed towards less fruitful and less efficient ends, thereby creating social loss. Energy firms generating power through other means must now not only compete against the future potential of wind energy, but must compete against these firms that have the explicit financial assistance and backing of government. This not only tilts markets today, but may leave the state with more expensive and less reliable energy in the future. Instead of competing in the energy space on the basis of efficiency, reliability, or forward-looking innovation, the financial impetus in the market is now increasingly to compete on the basis of political favoritism. Instead of directing resources and talents towards better serving consumers, firms spend big on political influence. This shift from traditional entrepreneurial behavior to “political entrepreneurship” is a social loss. Tax rates elsewhere must rise to compensate for the loss of revenue from these credits, thereby reducing Oklahoma’s competitiveness.

www.ocpathink.org

The New Civics: Using ‘Service Learning’ to Teach Progressive Advocacy In Oklahoma and across the country, a new effort is diverting university resources and student time to progressive causes, propagandizing students into progressive beliefs, and creating a cadre of radical activists. By David Randall

There’s a nationwide “New Civics” movement that uses the language of civics to teach progressive politics to students. The National Association of Scholars has published a report on this called “Making Citizens: How American Universities Teach Civics.” The New Civics uses service learning—spending time in “community service” to outside groups—as its basic pedagogy. The movement starts with relatively innocuous goals, such as organizing students to pick up litter. This gets students used to being organized, and trains them to organize others. The more advanced New Civics groups use terms such as “service learning,” “civic engagement,” and “global civics” to describe what they do. These terms may sound neutral, but in practice they amount to efforts to recruit students into one-sided political activism. The INVST Community Leadership Program at the University of Colorado, Boulder, for example, “offers transformative service learning for social and environmental justice.” “Social justice” is generally a euphemism for a radical left agenda—in today’s vocabulary, for progressive politics. In their own words, advocates of service learning define social justice “in the classroom” as working for the “explicit recognition of oppression in its multiple forms,” where the “fabric of oppression” adheres to white people, males, Christians, heterosexuals, wealthy and middle class people, temporarily able people, and people from Western European cultures. The New Civics as a movement wholeheartedly embraces social justice in this sense. Essentially, New Civics is an effort to divert university resources and student time to subsidize progressive organizations, propagandize students into progressive beliefs, and create a cadre of radical activists. Oklahoma isn’t as badly affected as most states. Oklahoma State University-Oklahoma City’s service-learning program includes a fairly unpoliticized list of community partners, such

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as the American Red Cross, Community Literacy Center, Feed the Children, and “The Hugs Project.” The University of Central Oklahoma also includes an unpoliticized list of community partners, and so does Oklahoma State University, where servicelearning partners include the Stillwater Public Library, Stillwater Area United Way Agencies, and Tiny Paws Kitten Rescue. But Oklahoma isn’t immune to the radicalization of the national New Civics movement. At the University of Oklahoma, the Women’s and Gender Studies Program’s Center for Social Justice uses two key aspects of the New Civics: service learning and engaged research. The Center’s mission statement illustrates the conflation of civics and progressive activism: “Creating a platform for gender and social justice advocacy and awareness, the Center provides opportunities for students to become engaged citizens.” The Center for Social Justice has already introduced to Oklahoma the conflation between being an “engaged citizen” and “social justice advocacy.” At Oklahoma City University, the Vivian Wemberly Center for Ethics and Servant Leadership runs the basically unpoliticized service-learning program—but the Wemberly Center also runs the World House Scholars Program, in which “All World House scholars participate in service learning projects each year, [and] complete courses addressing issues of peace, justice, and ecological sustainability.” The “scholars curriculum” includes service-learning courses such as “SOC 2013: Introduction to Sociology: Poverty & Social Justice,” which focuses on “investigation and critical examination of basic sociological concepts and perspectives with special attention on poverty and social justice issues and strategies for positive social change.” Part of Oklahoma City University’s service learning is already devoted to progressive advocacy. At the University of Oklahoma’s School of Social Work, a graduate student named Kate Quinton blogs on the department

website that “Oftentimes I think we separate civic engagement and the roles of social work. But we can’t. … If we plan to stand for social justice, we must use our voices to advocate for our clients.” Kate Quinton presumably learned the inseparability of civic engagement and social justice from her professors; soon she will apply it to her career. The professors who teach about the New Civics in Oklahoma are also true believers of the associated radical theories. Tami Moore, a professor in Oklahoma State University’s School of Education, specializes in research on “civic/democratic engagement.” In a book on service learning, Moore writes about the possibility of applying postcolonial theory to civic engagement—“postcolonial theorists for the most part understand power as an oppressive force. … Thus the community is not merely the passive object of the university’s power. This is also an important factor to recognize and account for in researching university/community partnerships.” Postcolonial theory doesn’t much apply to the Tiny Paws Kitten Rescue—but service learning in Oklahoma in the hands of the New Civics advocates is ultimately about understanding power as an oppressive force, not about rescuing kittens. And service learning is becoming mandatory. Oklahoma City University requires that its undergraduates engage in service learning; so too does East Central University. The University of Central Oklahoma (UCO) is working to integrate service learning throughout the whole curriculum. And what does UCO hope to accomplish with the New Civics? It wants to turn students into “global citizens”: “These activities challenge students to integrate their identities as members of their home communities and as global citizens who interact productively with individuals from diverse cultural backgrounds.” The phrase “global citizen” means, if anything, an American disaffected from his first loyalty to America. There is, however, nothing of educational value here. Elsewhere, the University of Central Oklahoma phrases a “learning outcome” for service learning in rather sinister language: “Demonstrates evidence of adjustment in own attitudes and beliefs because of working within and learning from diversity of communities and cultures. Promotes others' engagement with diversity.” UCO, in short, wants to manipulate students’ personal beliefs and train them to do the same to others. In the University of Central Oklahoma’s defense, it draws this language from the Association of American Colleges & Universities model “VALUE Rubrics,” a set of guidelines that colleges are supposed to follow. These rubrics have succeeded

in transmitting New Civics and progressive politics, bound up together, to colleges throughout the country. But that is precisely the point: once any college in the country starts to promote the New Civics, it gets caught up in the radical progressive national movement. The University of Central Oklahoma’s own attitudes and beliefs are being adjusted. It is wonderful when anyone chooses to volunteer. OSU-Oklahoma City’s list of community partners includes Alleve Hospice and the Oklahoma City National Memorial Museum, and there aren’t better ways to give your time than to help them out. But as wonderful as volunteering is, it isn’t education. Service learning, civic engagement—these are dodges to disguise progressive political advocacy. We should support volunteering and real education in the classroom, but we should get rid of the New Civics subterfuge that smuggles progressive advocacy into our colleges and universities. The New Civics ruins real education and real volunteering—at the expense of students, parents, and taxpayers. David Randall (Ph.D. in history, Rutgers University) is director of communications for the National Association of Scholars.

www.ocpathink.org

Prosperity Districts: Giving Freedom a Chance Shouldn’t Oklahoma have at least one tool in the public policy toolbox to deliver less government, less regulation, and more constitutional fidelity for a local community that wants it? We certainly have enough tools that do the opposite. There are at least 23 different kinds of mini-governments called “special districts” with which Oklahoma law allows communities to bury themselves in ever more government. They have innocuous names and widely divergent purposes like conservancy districts, water districts, irrigation districts, community junior college districts, hospital districts, municipal parking station districts, emergency medical service districts, and so on. They are layered on top of federal, state, and county government, sometimes on top of cities and towns, and even sometimes on top of each other. More than 640 of them exist in Oklahoma, according to the U.S. Census Bureau. Despite their diversity in purpose, these “special districts” all have one

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thing in common: whichever one they are, wherever they land, each and every one of Oklahoma’s special districts delivers bigger, more intrusive, and more expensive government in their footprint. All of them have regulatory, taxing, and/ or borrowing authority to support various spending programs that would not otherwise exist. Not a single special district in Oklahoma—not even the enterprise district management authority (which exists to manage supposedly businessfriendly enterprise zones)—truly delivers less government or more fidelity to the constitution for any Oklahoma community than existed before the district’s creation. Shouldn’t there be at least one? That’s the question being answered in the affirmative by the Prosperity States Compact bill advanced by House Speaker Charles McCall and state Sen. Kyle Loveless in the Oklahoma legislature, and also by state legislators in Arizona, Mississippi, and North Dakota. The Prosperity States Compact would allow for the creation of the sort of special district

that has never existed, but should: the Prosperity District. What does the Prosperity District do? Simply put, it hits the reset button on big government for any local community that wants to. The sole purpose of a Prosperity District is to serve as a delivery vehicle for the best free-market and limitedgovernment public policies possible in our political system. Once formed, it repeals within its boundaries all of the inefficient, corrupt, and just plain stupid “spaghetti code” regulations and governing authorities that have been layered on top of the state and federal constitutions, the common law, and the criminal law. The Prosperity District replaces that heap of bad public policy with a streamlined local government that is designed to deliver the prosperity that naturally arises from freedom and responsibility. In essence, a Prosperity District is a local government that is strictly limited to protecting individual rights and furnishing user-fee-supported, competitively bid municipal services. It has no eminent

domain authority, no civil forfeiture authority, no taxing authority, and no power to give anyone something for nothing unless everyone within its boundaries agrees to do so. Unlike any other special district, a Prosperity District is not another layer of government. It overrides and displaces all other local governments that might otherwise occupy the same space. It wipes the slate clean above the constitutional, common law, and criminal law baseline, and embeds in any community that wants it the state of the art in freedom-friendly public policy. And it gets even better than that.

eventually push back and reform federal regulations as well. Once a second state joins Oklahoma in passing the Prosperity States Compact legislation, an interstate compact will be formed (as you might have guessed). And with Congressional consent—usually in the form of a joint resolution signed by the President—the Prosperity States Compact will then achieve the status of federal law. With that, the free-market and limited-government best practices of the Prosperity District would override any conflicting mandate of any federal agency. It might sound too good to be true, but

environment. By starting small and only in communities that want to form them, Prosperity Districts will not threaten the established order as much as statewide or national reform. And once one takes root, the renewed proof of the freedom concept will be unstoppable in its ripple effects. After all, the Soviet Union fell in large part because of the example set by West Berlin. China became the economic powerhouse it is today in large part by replicating most of the economic policies of Hong Kong. It started in a few special economic zones in four cities and later grew to encompass most of the country.

A local Prosperity District—proposed by House Speaker Charles McCall and state Sen. Kyle Loveless—would hit the reset button on big government for any Oklahoma community that wanted to. Although a Prosperity District starts by repealing and replacing burdensome state and local regulations when formed, it can

the Prosperity States Compact actually uses a proven method of delivering deep reforms in an unfavorable political

The United States itself was a similar example to the world once. These and other examples demonstrate that deep reform in a small area can deliver results that are so obviously successful that the most powerful interests, adverse cultures, and ideologies get swept aside in the rush to replicate the success. Passage of the Prosperity States Compact would allow communities in Oklahoma and sister states to become beacons of freedom and prosperity, showing the way to restore first the states and then the nation to their founding principles—from the grassroots up, rather than the top down. Don’t Oklahomans—and Americans— deserve that chance? Nick Dranias is the president and executive director of the Compact for America Educational Foundation. He is a constitutional scholar and policy innovator, and is the author of more than 50 published articles about law and public policy. He has appeared as a

China became the economic powerhouse it is today in large part by replicating most of the economic policies of Hong Kong.

constitutional scholar on Fox News, MSNBC, NPR, and many more media outlets.

www.ocpathink.org

Keep Education–and Choice–in the States Education reformers face an enormous temptation to use federal power to foist choice upon the states, which would be destructive not only for the U.S. constitutional order but also for the long-term prospects of school choice itself.

PERSPECTIVE // April 2017

The election of Donald Trump as president and the confirmation of longtime school choice leader Betsy DeVos as education secretary are ushering in a major debate about using the federal government to promote school choice. There is much the federal government can and should do to promote choice within legitimate constitutional boundaries. However, education reformers now face an enormous temptation to use federal power to foist choice upon the states, which would be destructive not only for the U.S. constitutional order but also for the long-term prospects of school choice itself. The wheels of temptation are already turning. For years, some reformers have floated a proposal to make funding under Title I of the federal education code “portable.” These funds are currently shipped from the federal government to local school districts based on local poverty rates, in hopes of helping close the achievement gap between rich and poor students. The proposal is to let parents who live in districts receiving Title I funds claim their children’s share of this funding and use it to finance school choice. The president campaigned on a promise to promote school choice at the federal level. His choice of DeVos seems to indicate—to the limited extent that such things can be predicted— that some attempt to fulfill this promise may occur. Naturally, Title I portability is now rising to the top of the education policy agenda. In the past, reformers like Marco Rubio have proposed federal tax breaks for donations that support private school scholarships; for now, though, Title I is making the most noise. Advocates of this reform mean well, and certainly it could be expected to do a significant amount of short-term good by extending a lifeline to students who need choice. The longterm cost of selling out our principles for a quick fix, however, would be high. Let’s start where all public policy ought to start, but where almost none does start these days—with the U.S. Constitution. One of the key weaknesses of the Constitution from the very start was its inadequate clarity about the division of power between federal, state, and local governments. This weak point grew into a fatal flaw in 1913 with the 17th Amendment, which eliminated the only effective check on the growth of federal power: the election of U.S. Senators by state legislatures rather than by popular vote. Title I portability would take advantage of, and thereby strengthen, one of the most important ways in which the federal government tramples on federalism: grant programs. In almost every area of policy, from education to poverty to medicine to police, the federal government saps state and local control by offering states and localities funding. These funds

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By Greg Forster

come with strings attached, putting the federal government in the driver’s seat. I speak with some urgency on this issue because I have repented from this kind of thinking myself. When the No Child Left Behind law was first enacted, I supported it because I figured: “As long as the federal government is going to send huge piles of money to the states for education anyway—and it will—we might as well get something good in return.” I have come to see why that argument is wrong. The real problem is not where the money goes but where the money comes from. If the federal government found a giant pot of leprechaun’s gold every year, so that the only question was how to use the money, it might be worth discussing whether some of that money should go to the states. But that’s not how things work. The federal government gets the money for Title I and other federal grant programs by taking it from the states by taxing their citizens. Each state has a limited tax base; its citizens can only pay so much in taxes (a lesson we all learned from Arthur Laffer a generation ago). Higher federal taxes reduce the ability of states and localities to raise their own tax revenue. We gave the federal government the power to tax us in order to fund federal programs—like the military, the State Department, the Supreme Court, national cash-for-clunkers buybacks, and stimulus programs that feed cocaine to monkeys. If the federal government can tax the citizens of the states in order to fund state programs, imposing its own mandates as a condition of receiving the funds, then we no longer really have state governments. The states are just administrative departments of the federal government. It’s important not to overstate how bad things are here. This process of federal takeover is gradual, and it has not reached complete federal control. In fact, state and local control remains significantly more robust in education than in most policy areas. But make no mistake about where things are heading. If we want to continue living in a democratic republic and not in a technocratic oligarchy, we should be fighting tooth and nail to resist the process of federal takeover, not strengthening it. Title I portability would accelerate our already-breakneck slide toward a society with a permanent coastal ruling class. There is even an exception that proves the rule. When Bill Clinton proposed federal reform of welfare programs, which turned out to be a tremendous success, some conservatives balked at the idea of the federal government imposing welfare reform. Charles Krauthammer pointed out, however, that the federal government had already taken almost complete control of welfare programs, and had badly broken them. Under the principle of ancient wisdom known as “you break it, you bought it,” he said, the federal government ought to fix what it had broken before returning these programs to local control. That still makes sense to me. But it’s much better to avoid federal control in the first place. Title I portability would establish federal control of education.

What irony! Conservatives took the lead in fighting against the Common Core initiative on federalism grounds, because the federal government was using Common Core as an opportunity to establish control of education. Will they now hand over our schools to the feds for a promise of school choice? Damage to the constitutional order is not the only price to pay, however. Title I portability would be a short-term win for school choice, but the cause of choice itself would be imperiled in the long term. It would be the states, not the federal government, which would create systems for parents to access choice through Title I portability. And not just the states, but the education bureaucracies of the states. So the bureaucrats most directly threatened by school choice would be the ones designing the programs. In other words, these programs would be designed to fail. Think it can’t happen? In Florida a decade ago, a school voucher program for students in academically failing public schools was totally sabotaged by the way the state education bureaucracy implemented it. Difficult application procedures and other artificially created obstacles made it extremely difficult for parents to access the choice to which they were entitled. And make no mistake, the movement would pay a huge price for that. Just as successful school choice programs make it easier to create more programs, failed programs do the reverse. Just look at how the failure of one very poorly designed voucher program in Louisiana is being used by teacher unions nationwide to discredit all school choice. There is plenty the federal government can do within the limits of its legitimate authority to promote school choice. Right now it sponsors a tiny, underfunded, artificially restricted school voucher program in Washington, D.C.; that program should be exploded into a universal choice program for the whole city, with all students and all schools eligible. School choice on military bases and in U.S. territories could be explored. If we had a president with a really wicked talent for mischief, and he wanted to use it for something more productive than infantile 3 a.m. tweets, he might consider offering Education Savings Accounts as a job benefit for all federal employees. While Title I portability represents a short-term opportunity for school choice, if we enact it we will foreclose much greater opportunities for school choice in the long run. We would be helping thousands of kids today, but we would damage our chances to help millions of kids for generations. The school choice movement needs to decide whether it is in the business of quick fixes or an epochal transformation of the education system. Greg Forster (Ph.D., Yale University) is a Friedman Fellow with EdChoice. He is the author of six books, including John Locke’s Politics of Moral Consensus (Cambridge University Press, 2005), and the co-editor of three books, including John Rawls and Christian Social Engagement: Justice as Unfairness. He has written numerous articles in peer-reviewed academic journals as well as in popular publications such as The Washington Post and the Chronicle of Higher Education.

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To Get to the National Average, Oklahoma Higher Ed Needs to Shed 13,680 Non-Instructional Workers' By J. Scott Moody and Wendy P. Warcholik

The U.S. Census Bureau keeps track of all types of data on Oklahoma’s higher education system. The chart at right uses Census data to examine the dramatic size and growth in the number of non-instructional workers' (per 100 private-sector workers') in Oklahoma’s higher education system. Two major points may be gleaned from this chart. First, Oklahoma’s higher education system employs 2.5 non-instructional workers per 100 private sector workers, which is a whopping 70 percent higher than the national average and the 5th highest level in the country for 2015 (the latest data available). To get to the national average, Oklahoma’s higher education system would have to shed 13,680 non-instructional workers'—to 19,489 workers' from the current level of 33,169 workers'. This would result in total annual savings, on average, of $374,835,665 in wages and salaries—in addition to the millions of dollars in supplemental benefits that would be saved. Second, and even more troubling, is that the linear growth line shows that the rate of growth in non-instructional workers' is higher than the national average. And though a dip in 2014 did moderate Oklahoma’s growth rate somewhat, that dip does not appear to be a permanent one. A significant rebound occurred in 2015. Some politicians and higher education officials have tried to explain away Oklahoma’s elevated level of non-instructional employees. For example, some focus on the 15-year growth in “health care services and research” as the primary driver of this trend. But that explanation falls short for two reasons.

PERSPECTIVE // April 2017

First, the bloat in non-instructional staff exists over the entire 24-year period. The differential with the national average is not a recent phenomenon. This suggests a systemic overstaffing relative to higher education systems in other states. Second, taxpayers can reasonably ask why Oklahoma is in the “health care services and research” business in the first place. Is the private sector somehow deficient in this area, such that the state must put taxpayer dollars at risk for these activities? Just because higher education is doing it doesn’t mean they should be doing it. In addition, some officials blame Oklahoma’s growth in non-instructional staff on the need to comply with federal regulations. But they don’t explain why Oklahoma would be more severely impacted by federal regulations than other states. No one would dispute the need for non-instructional workers'. But this chart strongly suggests that Oklahoma’s policymakers must demand a thorough

accounting from higher education officials as to why the state diverges not only in the size of its non-instructional workforce but also why it has historically grown faster than the national average. OCPA research fellow J. Scott Moody (M.A., George Mason University) serves as chief executive officer of State Budget Solutions. Formerly a senior economist at the Tax Foundation and a senior economist at the Heritage Foundation, he has twice testified before the Ways and Means Committee of the U.S. House of Representatives. Moody is the co-creator of the Tax Foundation’s popular “State Business Tax Climate Index.” His work has appeared in Forbes, CNN Money, State Tax Notes, The Oklahoman, and several other publications. Economist Wendy P. Warcholik (Ph.D., George Mason University) is an OCPA research fellow. She formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator of the Tax Foundation’s popular “State Business Tax Climate Index.”

@OCPAthink 1. OCPA's Trent England and Jonathan Small are pictured here at a live broadcast in the state Capitol rotunda. 2. OCPA president Jonathan Small defends educational choice at a public forum February 28 in Oklahoma City. Small debated Alicia Priest, president of the Oklahoma Education Association. 3. Trent England testifies in support of the Electoral College at a legislative hearing last month in Connecticut. 4. OCPA president Jonathan Small speaks at CPAC 2017, the Conservative Political Action Conference, held in February in National Harbor, MD. (Photo by Gage Skidmore)

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QUOTE UNQUOTE “God gives parents the responsibility to be the primary educators and formers of their children’s faith. Parents should be able to consider the best option for their children’s whole education and formation. ... Families of all backgrounds deserve access to a faith-based education, or whatever education they believe is best.” Wade Burleson, senior pastor of Emmanuel Baptist Church in Enid. “I am very pro public schools,” Burleson says, but he also believes creating Education Savings Accounts (ESAs) is crucial.

“Unlearning Classism” Title of a workshop offered this spring by the OU Center for Social Justice. Other workshops include “Unlearning Racism,” “Unlearning Ableism,” and “Unlearning Sexism.”

“We are doing a better job in public education today than ever before in history. Our kids are the best and brightest ever being produced, and for someone to indicate that 100 years ago kids were being educated better or 50 years ago is someone who has not studied history.” State Sen. Ron Sharp (R-Shawnee), February 20, 2017

“Remember: once you organize people around something as commonly agreed upon as pollution, then an organized people is on the move. From there it’s a short and natural step to political pollution, to Pentagon pollution.” Saul Alinsky, Rules for Radicals

“Bullying was the highest-reported reason given by high school noncompleters for dropping out.” Natalie Shirley, Oklahoma’s secretary of education and workforce development, commenting on a new study examining why Oklahomans leave school.