Perspective - December 2015 by OCPA

December 2015

OKLAHOMA COUNCIL OF PUBLIC AFFAIRS

Oklahoma’s Shrinking Private Sector

In Case You Missed It According to the Tax Foundation, the Boren tax hike would make Oklahoma’s combined state and average local sales tax the highest in the country.

ocpa.us/1M3rX2W

Former OCPA research assistant Patrick Gibbons suggests four ways to expand school choice in Oklahoma.

ocpa.us/1keb0rI

OCPA research fellow Steve Anderson explains the federal takeover of state budgets and what Oklahoma’s political leaders can do about it.

ocpa.us/1GyRGA0

OCPA president Michael Carnuccio says Oklahoma lawmakers should reject specialinterest provisions and instead pursue free-market health care reforms.

ocpa.us/1GyRK2K

Testifying before a House interim study (at the 2:28 mark), OCPA’s Trent England pulled back the curtain to show the true costs of “free” federal money.

ocpa.us/1MWM9zU

OCPA’s Jonathan Small says Oklahoma can increase teacher pay without having to adopt the Boren tax increase.

ocpa.us/1jUkloX

At a recent OCPA dinner in Tulsa, Arthur Brooks said a Hindu swami taught him that abundance without attachment is the key.

ocpa.us/1Hea8IX

OCPA distinguished fellow Andrew Spiropoulos says our state government must “reform its legal system, repeal costly and ineffective regulations, reduce taxes and fees, and eliminate barriers to entry that favor entrenched interests.”

ocpa.us/1M3s6U6

Jonathan Small explains why the well-intentioned War on Poverty has failed. ocpa.us/1RCPGHa

PERSPECTIVE OCPA Staff

OCPA Trustees

Brandon Dutcher ...........................................Editor

Blake Arnold • Oklahoma City

David McLaughlin • Enid

Glenn Ashmore • Oklahoma City

Lew Meibergen • Enid

Robert D. Avery • Pawhuska

Ronald L. Mercer • Bethany

Alex Jones .............................................Art Director

OCPA Researchers

Lee J. Baxter • Lawton

Lloyd Noble II • Tulsa

Sarah Andrews .......................Content Marketing Specialist

Steve W. Beebe • Duncan

Mike O’Neal • Edmond

Michael Carnuccio ...................................................President

John A. Brock • Tulsa

Bill Price • Oklahoma City

Brandon Dutcher .................................Senior Vice President

David R. Brown, M.D. • Oklahoma City

Patrick T. Rooney • Oklahoma City

Trent England ..........Vice President for Strategic Initiatives

Paul A. Cox • Oklahoma City

Melissa Sandefer • Norman

Dacia Harris .........................Development Projects Manager

William Flanagan • Claremore

Thomas Schroedter • Tulsa

Rachel Hays .........................................Development Director

Josephine Freede • Oklahoma City

Greg Slavonic • Oklahoma City

Ann Felton Gilliland • Oklahoma City

Charles M. Sublett • Tulsa

John T. Hanes • Oklahoma City

Robert Sullivan • Tulsa

Ralph Harvey • Oklahoma City

Lew Ward • Enid

John A. Henry III • Oklahoma City

William E. Warnock, Jr. • Tulsa

Henry F. Kane • Bartlesville

Dana Weber • Tulsa

Robert Kane • Tulsa

Daryl Woodard • Tulsa

Kenny Yoder ................................... Operations Associate

Gene Love • Lawton

Daniel J. Zaloudek • Tulsa

Teresa Yoder ........................................Director of Operations

Tom H. McCasland III • Duncan

Alex Jones ......................................Communications Director Trey Malone ....................................... Research Assistant Renae Page ................................................Executive Assistant Jonathan Small ................................Executive Vice President Hannah Wallis ............................Communications Associate

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 Adam Luck, MPP Research Fellow 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

Perspective is published monthly by the Oklahoma Council of Public Affairs, Inc., an independent public policy organization. OCPA formulates and promotes public policy research and analysis consistent with the principles of free enterprise and limited government. The views expressed in Perspective are those of the author, and should not be construed as representing any official position of OCPA or its trustees, researchers, or employees.

Oklahoma Education Spending

Where Is The Money Going? Meet Johnny

There are 18 students in Johnny’s classroom. Multiply that number by $8,687 (Oklahoma’s per-student expenditure) and you end up with $156,366 for that classroom.

Now, subtract the teacher’s salary of $44,285. The difference is

$112,081. It’s time for accountability in education spending.

It’s not how much we spend on education. It’s how we spend it. Source: Oklahoma Office of Educational Quality and Accountability, “Profiles 2014 State Report,” April 2015. The statewide gross student/teacher ratio for regular classroom teachers in 2013-14 was 17.9 students per teacher. The average expenditure per student was $8,687. The average salary of teachers was $44,285.

www.ocpathink.org

The School Choice Information Problem “I support school choice,” some education policymakers say, “but we need to make sure parents choose good schools!” In order for parents to choose good schools, of course, they need good information. Not information from government bureaucracies—which have a long track record of measuring the wrong things and deceiving parents—but from emerging resources such as Great Schools, Global Report Card, School Grades, and more. Better information, not tighter regulation, is the best way to let parents improve school quality.

By Greg Forster

Are parents capable of choosing good schools? Although that’s the root question behind school choice in one way, in another way it’s the wrong question to ask. If we want school choice to succeed, and if we want to fend off political challenges to school choice policy, we should instead be asking: What do parents need in order to choose good schools? The answer is not just “school choice.” But it also is not “school choice with tons of super-helpful government interference.” It’s school choice with something else— something government can’t provide, but others can. This worry that parents can’t choose good schools used to be confined to defenders of the government school monopoly. Give parents a choice, they would say, and they’ll send their students to worse schools. Meanwhile, education reformers of all stripes, even if they weren’t particularly friendly to school

PERSPECTIVE • December 2015

choice policy, at least understood themselves to be pro-parent. They didn’t want to take a stand that would imply parental incompetence. Those days are over. Now, we’re far more likely to hear this complaint from people who call themselves reformers— not only those whose reform of choice is tightened federal control, but even some of those who support school choice, like the Fordham Institute. “I support school choice, but…” has become a more common phrase. And what comes after the “but” is some variation of “we need to make sure parents choose good schools!” The teacher and staff unions, by contrast, have started positioning themselves with much more pro-parent rhetoric than they used to. Their arguments against choice these days turn on other myths. They talk about how choice

Existing school-choice programs are badly limited and hindered by many unreasonable regulations. This has made it difficult to attract educational entrepreneurs. “drains money” from public schools (it doesn’t), it increases segregation (it actually decreases segregation), and it will allow fringe groups to create “hate schools” (in 25 years this hasn’t happened; choice increases students’ levels of respect for the rights of others). The one thing you rarely hear from them these days is that ordinary parents can’t be trusted. There are several reasons for these changes. One is the collapse of the school monopoly’s credibility. As opportunities for reform increase, reformers find themselves more and more in situations where they disagree with each other and have to fight each other to see whose idea of reform (top-down or bottom-up) will win the day. Meanwhile, the unions are forced to retreat and seek new allies. They can’t scorn parents any longer; they need the votes. A more important reason is the greatly increased political success and attractiveness of school choice itself. For at least a generation, education reform has moved in cycles. It will be very hot, and lots of new legislation will pass; then public attention will pass to other issues for a while, until the next cycle begins. And during each high point over the past 20 years, school choice has gained more political strength. There are now 59 private school choice programs in 28 states plus Washington, D.C., serving hundreds of thousands of students. This has brought school choice new allies—allies who aren’t yet completely comfortable with the idea. They see that other reform strategies fail while choice succeeds, and they see that parents and voters are increasingly supportive of the idea. They see that the unions’ predictions of doom and catastrophe have not come true. But they still worry. Is it really safe to take our hands off the wheel and let parents be in charge? It has also meant that the limitations of school choice in its current form are becoming more visible. Existing programs

GreatSchools.org Features profiles of public, public charter, and private schools nationwide, along with reviews from parents, teachers, and students.

GlobalReportCard.org Compares student achievement in U.S. public school districts against the performance of students in a group of 25 developed countries.

SchoolGrades.org Compares schools across the U.S., adjusting for differences in academic standards across states and accounting for each school’s economic profile.

are badly limited and hindered by many unreasonable regulations. This has made it difficult to attract educational entrepreneurs who create radically reformed schools; unfortunately, the programs we have now mostly just transfer students from public schools to existing private schools, which are marginally but not radically better. The correct response is to push on towards universal choice in order to attract more entrepreneurial schools, but many people see the moderate results and think that more controls are needed to improve quality. But the most important reason we are hearing more concerns about parental ability to make good choices is something economists call “the information problem.” This is a problem people encounter when they have the opportunity to make a choice. As more and more parents are getting the opportunity to choose schools, they are encountering the information problem, and something is needed— something that public policy, including school choice policy, can’t provide—to help them. The information problem works like this: Suppose you want to buy a car. You want to make an informed choice, right? So you go out and get information—you read reviews, you talk to knowledgeable people. But at what point do you have enough information? How do you make an informed and rational choice about when to stop gathering information and make your purchase? Well, apparently you need to go gather information about how much information you need to gather. You might go to some wise people and ask how much information they typically gather before making a purchase like this. And then you realize you have a new problem—at what point do you stop gathering information about how much information you need to gather? So you have to go get a third layer of information. And then …

www.ocpathink.org

Attempts to ‘solve’ the information problem through government control are bound to fail. Human beings do not make decisions the way computers do. We can fully explain how computers make decisions—because, of course, we built them. We cannot fully explain how human beings make decisions. Individual consciousness and will, moral agency and responsibility, the interdependence of personal identities, the intangible reality of community—so many permanent mysteries. Attempts to “solve” the information problem through government control— such as requiring schools to take state tests or submit to government grading schemes—are bound to fail. State tests don’t actually measure the outcomes most parents (rightly) care about most; in fact, it’s becoming increasingly clear that no standardized test does. Counterintuitive as it seems, schools with higher achievement test score gains often have worse dropout rates and delinquency. And of course we know that even if the tools for measurement did do what we want them to do, the bureaucrats who do the measuring would still have their own agendas. Just this summer, the editorial board of The Oklahoman called out Oklahoma’s public schools on their dishonest graduation rate reporting. That’s not a new phenomenon; public school systems have always bent over backward to manipulate data and keep parents in the dark. Why would that change now? The information problem can’t be “solved,” least of all by technocratic

PERSPECTIVE • December 2015

state control; it is inherent to the mystery of human decision-making. But that doesn’t mean we can simply ignore it. In fact, parents do need information to make good choices. And two centuries of government monopoly have prevented the emergence of the normal processes for getting people information. When people buy a car, do they just give up on getting well informed because of the information problem? No, they make decisions in community. A lot of that is informal—talking to your uncle who is a car guy—but a lot of it isn’t. A vast array of individuals and non-governmental institutions invest their time in helping people make good car purchases, partly because car buyers value that information and are willing to pay for it, and partly because a lot of people just enjoy talking about cars. Similar systems are just starting to emerge for school choice. By now, most parents have heard of Great Schools. They ought to have heard of the Global Report Card and School Grades. But these tools are very limited; we need more. The best system—which philanthropists could catalyze fairly easily if they wanted, and for a lot less money than they’re now wasting on federal education strategies—would work on a more local basis. In each major metro area, start bringing together education data experts and community leaders like pastors,

activists, and businesspeople. The data experts help the community leaders understand how measurements work (and their limitations), and the community leaders identify the most important school characteristics to measure. Over time, privately run evaluation systems could emerge— similar to existing systems like Great Schools, but drawing on local knowledge and with multifaceted tools for measuring school quality. Parents could trust these systems to give them good information, unlike the government bureaucracy, which has such a long track record of measuring the wrong things and deceiving them. And school choice would ensure that the final decision rested in the parents’ hands. Tighter regulation does a lot more to force good schools out of school choice programs than it does to force out bad schools. Better information, not tighter regulation, is the best way to let parents improve school quality. Greg Forster (Ph.D., Yale University) is a senior fellow with the Friedman Foundation for Educational Choice. He is the author of six books, including John Locke’s Politics of Moral Consensus (Cambridge University Press, 2005) and Joy for the World: How Christianity Lost Its Cultural Influence and Can Begin Rebuilding It (Crossway Books, 2014). He has written numerous articles in peerreviewed academic journals as well as in popular publications such as the Washington Post and the Chronicle of Higher Education.

Boren Tax Hike Is Not the Answer By Michael Carnuccio

Declaring education is in “crisis,” University of Oklahoma President David Boren wants to increase the state sales tax by 22 percent. The Boren tax increase is designed to grow government spending on common education and higher education. Ironically, according to the state Department of Education, available revenues for Oklahoma’s public schools have consistently reached all-time record annual highs—per pupil—in the past few years. Calls around the state for teacher pay raises suggest too much of this record high funding isn’t making it into classrooms. Many Oklahoma teachers no doubt deserve six-figure salaries. But of course, as many teachers themselves will acknowledge, some of their colleagues deserve pay cuts or should find other lines of work altogether. Across-the-board pay increases cheat those who truly deserve more. Yes, there are teacher shortages in some geographic areas and academic subjects. Some jobs are always harder to fill than others—a problem exacerbated in a government-run monopoly where mismatching of supply and demand is all but guaranteed. However, this doesn’t mean a crisis mentality is warranted. Oklahoma already has the sixthhighest state and local sales tax in the country. And as OCPA economists Scott Moody and Wendy Warcholik have pointed out, “increasing the sales tax would not only put a pinch on consumers, it would also hurt small businesses, which are the backbone of the economy. According to a recent study from the Council on State Taxation, 47 percent of the current sales tax is paid by businesses when they

invest. By taxing investment, Oklahoma would create fewer job opportunities for future graduates.” A tax increase isn’t the answer. Instead, we should reduce administrative bloat and redirect money to teachers. You may be surprised to learn only half of Oklahoma’s public education employees are teachers. According to economist Benjamin Scafidi, citing the data Oklahoma reports to the U.S. Department of Education, “using the time period available, 1998 to 2011, Oklahoma public schools increased employment in school district administration by 49 percent, while the number of students in Oklahoma public schools increased by only 6 percent.” As for higher education, economist Richard Vedder, who helps Forbes compile its annual college rankings, found last year that staffing per student declined about 10 percent nationally from 1999 to 2011—while in Oklahoma it rose about 5 percent. Moody and Warcholik, using the latest U.S. Census Bureau data to determine the number of non-instructional higher education workers (per 100 private-sector

workers), found that Oklahoma ranks a disturbing third-highest in the country—82 percent higher than the national average. Moreover, Oklahoma’s rate of growth in non-instructional workers is above the national average. Apparently, administrators in common education and higher education in Oklahoma have trouble ensuring tax dollars reach classrooms. Education officials should explain this bloat before asking hardworking Oklahoma taxpayers to give up more of their finite resources. If we address this problem, we can afford to recruit and pay teachers and faculty in those areas where we’re out of balance and falling behind—without raising taxes. Michael Carnuccio (M.A. in political science, Oklahoma State University) is president of OCPA. He also serves as president and CEO of the Liberty Foundation of America. His work has been published in the Korean Journal of Public Policy, The Oklahoman, Tulsa World, and The Journal Record.

www.ocpathink.org

Oklahoma’s Shrinking Private Sector By J. Scott Moody, Wendy P. Warcholik, and Jonathan Small

When it comes to government spending in Oklahoma, the 800-pound gorilla in the room that many people ignore is this simple question: Should government grow faster than the private sector’s ability to pay? To answer that question, a little history needs to be explored. There are two major components of government spending in Oklahoma—state and local government worker compensation (SLGWC) and personal current transfer receipts (Social Security, Medicare, Medicaid, and welfare). Chart 1 illustrates the growth differentials between Oklahoma’s state and local government worker compensation and private-sector income. The data are for calendar years 1929 (the earliest year of available data) to 2014 (the latest year of available data). During the Great Depression in the 1930s, SLGWC grew faster than privatesector income, but by 1944 SLGWC and private-sector income were virtually identical. However, after 1944 the situation is very different as the growth in SLGWC begins to pull away from the growth in Oklahomans’ private-sector

PERSPECTIVE • December 2015

income. Between 1944 and 2010, the gap between the two reaches its furthest point. Since 2010, however, growth in SLGWC has plateaued while the oil and gas boom at the time reinvigorated private-sector growth. Nevertheless, much more needs to be done to close the chasm. Chart 2 illustrates the growth differentials between personal current transfer receipts (PCTR)—which mostly

Sources: U.S. Department of Commerce: Bureau of Economic Analysis; Oklahoma Council of Public Affairs. The comparative growth indices were created by setting the base year (1960) equal to one and then multiplying each successive year by the growth rate. This makes it easier to visualize the relative growth differentials without worrying about the differences in starting values.

consist of Social Security, Medicare, Medicaid, and welfare—and privatesector income. As bad as SLGWC has been, the growth in PCTR has been meteoric in comparison. The growth in PCTR outstripped private-sector income right out of the gate in 1929 and has not looked back. Fortunately, since 2010, growth in PCTR has also plateaued. What can Oklahoma policymakers do to prevent the further crowd-out of

private-sector income? SLGWC is most under the control of state policymakers; both employment levels and compensation levels must be critically examined. At a minimum, a hiring and pay freeze would be welcome relief to the private sector, especially if the savings were invested into a complete overhaul of the income tax system (such as a flat tax) or as a down payment to eliminating the income tax altogether. However, PCTR is a much bigger problem. Ordinarily, Medicaid reform would help reduce private sector crowd-out, but Obamacare’s maintenance of effort provisions block many sensible state-based reforms. Finally, policymakers at the state and local levels must refrain from imposing unnecessary regulations on businesses. Such regulations only make it harder for the private sector to do its job—creating new jobs and income. Oklahoma’s Private Sector Economy by County Personal income is an important economic measure of a state’s wellbeing. Higher levels of personal income mean that a state’s residents are able to purchase more goods and services such as homes, cars, education, and health care. Fundamentally, personal income comes from two sources: the private sector and the public sector. The distinction between these two sectors is important because only the private sector creates new income. The public sector can only redistribute income through taxes and spending. In 2014, Oklahoma’s private-sector share of personal income was 69.4 percent and ranked as the 29th largest in the country. However, the size of the private sector varies greatly by county. As shown in Chart 3 and Table 1, the county with the largest private sector in 2013 (the latest data available at the county level) was Logan County at 81.1 percent. At the other end of the spectrum, Cherokee, Jackson, and Comanche counties had the smallest private sectors at 45.2 percent, 42 percent, and 41.5 percent, respectively. However, a note of caution must be observed when interpreting Comanche

and Jackson counties because each hosts a major U.S. military installation—Fort Sill in Comanche County and Altus Air Force Base in Jackson County. Military installations, generally speaking, are located far from dense population centers. As a result, they tend to dominate the local economy, which creates a distorted economic picture. Nonetheless, military installations are paid for by taxpayers and are not part of the private sector. If we exclude Comanche and Jackson counties as unique cases, that leaves Cherokee County with the dubious distinction of having Oklahoma’s smallest private sector (45.2 percent), with nearly no military component. More disturbingly, Cherokee County is joined by 6 additional counties whose private-sector share also falls below 50 percent: Okfuskee (48.7 percent), Ottawa (48.4 percent), Choctaw (47.9

percent), Muskogee (47.2 percent), Love (46.5 percent), and Adair (46 percent). Over the 1969 to 2013 time period, 13 counties saw increases in their privatesector shares: Washita (52 percent), Comanche (23 percent), Latimer (19 percent), Dewey (9 percent), Pittsburg (8 percent), Beckham (8 percent), Ellis (6 percent), Woodward (5 percent), Oklahoma (5 percent), Logan (5 percent), Johnston (4 percent), Custer (2 percent), and Canadian (2 percent). The remaining counties mirrored the state average with declining private-sector shares. The steepest drop belongs to Ottawa County, falling 36 percent—to 48.4 percent in 2013 from 76.1 percent in 1969. The Private-Sector Battle: Oklahoma vs. Texas In terms of sheer economic size, there is no more important neighbor to Oklahoma than Texas. So it is a

www.ocpathink.org

Harper Haskell Hughes Jackson Jefferson Johnston Kay Kingfisher Kiowa Latimer Le FloreStates (a) United Lincoln (a) Oklahoma Logan Love Adair McClain Alfalfa McCurtain Atoka McIntosh Beaver Major Beckham Marshall Blaine Mayes Bryan Murray Caddo Muskogee Canadian Noble Carter Nowata Cherokee Okfuskee Choctaw Oklahoma Cimarron Okmulgee Cleveland Osage Coal Ottawa Comanche Pawnee Cotton Payne Craig Pittsburg Creek Pontotoc Custer Pottawatomie Delaware Pushmataha Dewey Roger Mills Ellis Rogers Garfield Seminole Garvin Sequoyah Grady Stephens Grant Texas Greer Tillman Harmon Tulsa Harper Wagoner Haskell Washington Hughes Washita Jackson Woods Jefferson Woodward Johnston

80.3% 12 75.6% 29 73.3% 27 72.6% 20 63.0% 30 68.1% 31 67.2% 54 67.0% 52 64.1% 53 62.5% 51 59.1% 39 62.6% 41 68.0% 52 62.1% 63 56.7% 69 58.8% 62 53.4% 50 59.0% 49 40.3% 76 42.3% 77 44.2% 77 46.0% 77 37.6% 77 42.0% 76 70.6% 43 70.9% 41 64.7% 51 60.1% 58 50.8% 57 55.4% 54 57.3% 70 60.5% 66 58.9% 64 58.7% 63 51.3% 56 54.3% 59 81.8% 6 82.4% 11 Table 77.9% 1 11 72.5% 23 62.5% 31 66.3% 35 Personal 80.5%Private 10 Sector 83.1% Share 9 of 78.6% 9 Income 77.2%by County 11 73.8% 8 79.0% 8 Calendar45Years 72.6% 40 67.5%Selected 49 66.7% 61.9% 54 54.2% 47 58.7% 50 49.4% 75 45.8% 75 53.5% 72 53.8% 74 52.3% 53 55.7% 53 1970 Rank 1980 Rank 1990 Rank 2000 Rank 2010 Rank 2013 Rank Table 1 66.0% 55 67.1% 35 75.6% -- 66.4% 74.0% 53 -- 66.0% 74.3% 46 -- 75.4% -- 50.7% 67.7% 58 -- 51.2% 70.4% 66 -Private Sector Share of Personal Income by County 77.1% 23 76.1% 17 70.1% -- 80.4% 73.9% 15 -- 70.3% -- 75.6% 70.9% 15 -- 66.5% 64.1% 24 -- 69.9% 68.8% 28 -Selected Calendar Years 77.1% 24 80.0% 19 75.8% 18 78.8% 8 76.2% 5 81.1% 1 1970 Rank 1980 Rank 1990 Rank 2000 Rank 2010 Rank 2013 Rank 72.5% 41 77.2% 65 25 64.1% 74.4% 19 73.2% 19 60.2% 67 61.6% 54 64.9% 46 44.2% 45.5% 73 70 46.5% 46.0% 73 74 United States (a) 75.6% -- 74.0% -- 74.3% -- 75.4% -- 67.7% -- 70.4% -80.6% 9 69.8% 80.2% 43 16 72.8% 77.4% 28 13 74.5% 78.2% 19 69.7% 18 31 71.5% 61.7% 12 33 77.0% 73.2% 14 19 Oklahoma (a) 70.1% -- 73.9% -- 70.3% -- 70.9% -- 64.1% -- 68.8% -64.4% 64 58 68.8% 65.1% 45 61.9% 57.4% 46 70 65.8% 52.8% 47 73 59.2% 60 58.2% 50.5% 42 59 62.8% 54.9% 40 56 73.6% 37 73.8% 35 71.6% 15 31 71.1% 85.8% 2 83.9% 6 76.6% 77.1% 28 12 58.9% 74.2% 40 6 60.5% 78.9% 45 9 Adair 60.2% 67 61.6% 65 64.1% 54 64.9% 46 45.5% 70 46.0% 74 80.4% 11 78.0% 81.7% 14 78.8% 32 8 78.9% 7 77.5% 11 1 80.5% 79.3% 54 73.4% 38 23 71.4% 70.5% 29 72.4% Alfalfa 78.2% 19 69.8% 43 72.8% 28 69.7% 31 61.7% 33 73.2% 19 64.0% 60 65.9% 54 69.3% 63.2% 39 57 65.4% 73.7% 36 73.1% 36 67.2% 44 34 51.4% 60.4% 55 36 54.6% 66.5% 58 33 Atoka 61.9% 64 57.4% 70 52.8% 73 59.2% 60 50.5% 59 54.9% 56 61.8% 56 65 63.6% 62.5% 59 62 63.0% 65.6% 63.8% 58 55 64.2% 60.2% 47 57 53.2% 48.9% 52 64 54.7% 52.8% 57 62 Beaver 85.8% 2 83.9% 6 76.6% 15 77.1% 12 74.2% 6 78.9% 9 62.5% 48 63 64.1% 65.4% 55 68.5% 57 59.6% 67.0% 62 43 60.9% 63.4% 55 48 49.7% 53.9% 61 48 51.7% 56.9% 65 51 Beckham 73.4% 38 78.0% 23 71.4% 32 70.5% 29 72.4% 11 80.5% 4 64.0% 59 84.0% 63.3% 60 57.9% 65 79.1% 15 5 61.1% 82.3% 61 3 82.0% 3 45.0% 77.3% 71 2 47.2% 80.5% 72 3 Blaine 73.7% 36 73.1% 36 69.3% 39 67.2% 34 60.4% 36 66.5% 33 73.1% 31 39 76.6% 78.4% 21 27 56.6% 74.8% 27 70.6% 73.9% 35 24 71.4% 72.3% 24 67.2% 43 21 62.9% 70.4% 39 26 Bryan 65.6% 56 63.6% 59 63.8% 55 60.2% 57 48.9% 64 52.8% 62 74.8% 32 71.2% 34 57.2% 71 80.0% 56.5% 18 71 61.4% 60 68.4% 50.4% 33 75 61.0% 43.7% 35 74 64.6% 45.2% 37 75 Caddo 68.5% 48 64.1% 57 67.0% 43 63.4% 48 53.9% 48 56.9% 51 61.7% 68 66 63.3% 63.8% 61 58 59.5% 57.6% 63 67 54.1% 72 42.8% 60.1% 56.4% 68 45.0% 75 72 48.7% 47.9% 69 71 Canadian 79.1% 15 84.0% 5 82.3% 3 82.0% 3 77.3% 2 80.5% 3 63.1% 62 80.6% 8 68.6% 67.3% 48 50 63.5% 78.6% 56 10 66.0% 69.8% 42 30 61.6% 65.2% 34 26 66.9% 68.8% 32 29 Carter 74.8% 31 76.6% 27 73.9% 24 72.3% 24 67.2% 21 70.4% 26 68.2% 64.8% 56 77.8% 49 21 80.2% 17 64.3% 76.4% 52 16 62.1% 77.6% 53 10 51.6% 69.6% 54 18 54.2% 71.3% 60 24 Cherokee 57.2% 71 56.5% 71 61.4% 60 50.4% 75 43.7% 74 45.2% 75 81.3% 57 7 58.6% 84.7% 69 3 56.4% 79.1% 70 6 59.6% 78.8% 59 9 72.5% 64.7% 55.7% 10 46 74.0% 59.2% 18 47 Choctaw 60.1% 68 63.3% 61 59.5% 63 56.4% 68 45.0% 72 47.9% 71 75.2% 29 70.3% 42 35.3% 77 44.7% 76 65.0% 44.9% 50 76 63.3% 48.7% 49 76 48.3% 38.1% 65 76 48.4% 41.5% 70 77 Cimarron 80.6% 8 67.3% 50 78.6% 10 69.8% 30 65.2% 26 68.8% 29 27 74.2% 77.6% 24 76.3% 28 34 74.4% 74.3% 20 21 71.5% 72.6% 26 21 58.6% 56.5% 41 44 62.2% 61.5% 42 44 Cleveland 77.8% 21 80.2% 17 76.4% 16 77.6% 10 69.6% 18 71.3% 24 57.2% 61 72 60.3% 67 54.4% 63.2% 61.7% 64 50.7% 71 75 56.2% 54.8% 69 70 50.4% 47.2% 60 69 55.9% 53.3% 52 61 Coal 64.7% 57 58.6% 69 56.4% 70 59.6% 59 55.7% 46 59.2% 47 51.9% 73 81.8% 56.5% 13 72 58.8% 78.8% 16 78.8% 65 7 57.0% 76.1% 67 13 49.2% 67.0% 63 22 52.6% 68.6% 63 30 Comanche 35.3% 77 44.7% 76 44.9% 76 48.7% 76 38.1% 76 41.5% 77 68.1% 44 50 72.4% 68.7% 47 70.5% 37 65.0% 68.0% 49 42 58.3% 66.5% 64 38 47.2% 64.2% 68 28 50.4% 72.8% 68 21 Cotton 76.3% 28 74.2% 34 74.3% 21 72.6% 21 56.5% 44 61.5% 44 79.3% 46 14 69.5% 78.4% 22 69.6% 45 74.2% 72.4% 22 29 75.5% 75.7% 16 14 64.6% 62.1% 27 32 66.4% 63.9% 34 38 Craig 63.2% 61 61.7% 64 50.7% 75 54.8% 70 47.2% 69 53.3% 61 51.6% 74 55.9% 73 51.0% 74 54.2% 71 48.1% 76.5% 26 74.9% 32 73.3% 26 66.1% 40 69.8% 66 16 50.9% 79.1% 67 7 Creek 78.8% 16 81.8% 13 78.8% 7 76.1% 13 67.0% 22 68.6% 30 77.8% 20 74.8% 75.5% 30 71.2% 33 77.7% 22 33 69.8% 37 66.5% 66.0% 39 41 66.9% 69.8% 23 17 74.2% 78.9% 17 10 Custer 70.5% 44 72.4% 37 68.0% 42 66.5% 38 64.2% 28 72.8% 21 78.4% 17 83.6% 8 68.2% 81.8% 41 4 81.0% 5 70.6% 71.7% 42 75.6% 28 67.0% 36 64.1% 15 29 73.1% 70.2% 20 27 Delaware 69.6% 46 69.5% 45 72.4% 29 75.7% 14 62.1% 32 63.9% 38 67.5% 45 53 71.2% 71.7% 38 70.2% 40 61.8% 57.2% 59 68 58.9% 60.8% 61 56 55.9% 59.2% 45 38 59.2% 65.5% 48 36 Dewey 76.5% 26 74.9% 32 73.3% 26 66.1% 40 69.8% 16 79.1% 7 68.0% 51 69.5% 74.6% 33 79.8% 44 20 69.5% 74.1% 38 23 68.8% 75.2% 32 17 53.5% 68.2% 49 20 55.3% 72.3% 55 22 Ellis 77.7% 22 74.8% 33 69.8% 37 66.0% 41 69.8% 17 78.9% 10 80.0% 71.5% 13 82.5% 13 5 81.8% 76.8% 12 26 73.4% 77.7% 25 12 72.2% 72.5% 25 22 69.4% 19 76.3% 77.2% 16 13 Garfield 71.7% 42 75.6% 28 68.2% 41 67.0% 36 64.1% 29 70.2% 27 86.7% 69 1 55.0% 82.7% 10 76.8% 14 2 73.6% 9 77.3% 12 58.5% 74 58.0% 66 82.6% 54.0% 73 47.5% 67 52.2% 64 Garvin 70.2% 45 71.2% 40 57.2% 68 60.8% 56 59.2% 38 65.5% 36 75.0% 30 51 68.8% 68.6% 47 67.1% 58.7% 68 65.7% 40 48 62.4% 57.4% 52 66 53.4% 49.6% 51 62 61.6% 60.4% 43 46 Grady 74.6% 33 79.8% 20 74.1% 23 75.2% 17 68.2% 20 72.3% 22 83.4% 12 4 75.6% 84.1% 29 4 81.0% 5 81.2% 4 63.0% 76.8% 30 4 80.7% 2 80.3% 73.3% 27 72.6% 20 68.1% 31 Grant 82.5% 5 76.8% 26 77.7% 12 72.5% 22 69.4% 19 77.2% 13 78.2% 54 18 86.8% 2 64.1% 85.0% 53 1 62.5% 83.9% 51 1 59.1% 77.0% 39 3 62.6% 77.5% 11 67.2% 67.0% 52 41 Greer 58.5% 69 55.0% 74 58.0% 66 54.0% 73 47.5% 67 52.2% 64 85.7% 52 3 62.1% 87.1% 63 1 83.5% 2 58.8% 79.5% 62 6 53.4% 73.8% 50 7 76.8% 68.0% 56.7% 69 59.0% 15 49 Harmon 68.6% 47 58.7% 68 65.7% 48 57.4% 66 49.6% 62 60.4% 46 73.9% 35 75.4% 31 71.8% 30 40.3% 76 42.3% 77 44.2% 77 65.9% 46.0% 43 77 65.5% 37.6% 25 77 70.5% 42.0% 25 76 Harper 80.3% 12 75.6% 29 73.3% 27 72.6% 20 63.0% 30 68.1% 31 74.4% 43 34 70.9% 71.6% 41 39 66.9% 62.7% 50 71.7% 23 70.6% 64.7% 44 51 60.1% 58 60.3% 50.8% 37 57 55.4% 54 Haskell 67.2% 54 67.0% 52 64.1% 53 62.5% 51 59.1% 39 62.6% 41 77.0% 25 83.7% 66 7 58.9% 70.1% 36 37 51.3% 70.7% 14 6 57.3% 70 60.5% 64 67.0% 58.7% 63 56 79.3% 54.3% 59 Hughes 68.0% 52 62.1% 63 56.7% 69 58.8% 62 53.4% 50 59.0% 49 (a) National and state data incorporate the latest revisions. county level revisions31 have 66.3% not yet been Kay 81.8% 6 82.4% 11 data 77.9% 11The 72.5% 23data62.5% 35 Jackson 40.3% 76 42.3% 77 44.2% 77 46.0% 77 37.6% 77 42.0% 76 Kingfisher released. 80.5% 10 83.1% 9 78.6% 9 77.2% 11 73.8% 8 79.0% 8 Jefferson 70.6% 43 70.9% 41 64.7% 51 60.1% 58 50.8% 57 55.4% 54 Kiowa 72.6% 40 67.5% 49 66.7% 45 61.9% 54 54.2% 47 58.7% 50 Sources: U.S. Department of Commerce: Bureau of Economic Analysis; Oklahoma Council of Public Affairs. The Johnston 57.3% 70 60.5% 66 58.9% 64 58.7% 63 51.3% 56 54.3% 59 Latimer 49.4% 75 45.8% 75 53.5% 72 53.8% 74 52.3% 53 55.7% 53 comparative growth indices were created by setting the base year (1960) equal to one and then multiplying each Kay 81.8% 6 82.4% 11 77.9% 11 72.5% 23 62.5% 31 66.3% 35 Le Flore 66.0% 55 66.4% 53 66.0% 46 67.1% 35 50.7% 58 51.2% 66 successive year by the growth rate. This makes it easier to visualize the relative growth differentials without Kingfisher 80.5% 10 83.1% 9 78.6% 9 77.2% 11 73.8% 8 79.0% 8 Lincoln 77.1% 23 80.4% 15 76.1% 17 75.6% 15 66.5% 24 69.9% 28 Kiowa worrying about the differences in starting values. 72.6% 40 67.5% 49 66.7% 45 61.9% 54 54.2% 47 58.7% 50 Logan 77.1% 24 80.0% 19 75.8% 18 78.8% 8 76.2% 5 81.1% 1 Latimer 49.4% 75 45.8% 75 53.5% 72 53.8% 74 52.3% 53 55.7% 53 Love 72.5% 41 77.2% 25 74.4% 19 73.2% 19 44.2% 73 46.5% 73 Le Flore 66.0% 55 66.4% 53 66.0% 46 67.1% 35 50.7% 58 51.2% 66 McClain 80.6% 9 80.2% 16 77.4% 13 74.5% 18 71.5% 12 77.0% 14 Lincoln 77.1% 23 80.4% 15 76.1% 17 75.6% 15 66.5% 24 69.9% 28 McCurtain 64.4% 58 68.8% 46 65.8% 47 65.1% 45 58.2% 42 62.8% 40 Logan 77.1% 24 80.0% 19 75.8% 18 78.8% 8 76.2% 5 81.1% 1 McIntosh 73.6% 37 73.8% 35 71.6% 31 71.1% 28 58.9% 40 60.5% 45 Love 72.5% 41 77.2% 25 74.4% 19 73.2% 19 44.2% 73 46.5% 73 Major 80.4% 11 81.7% 14 tax 78.8%in 81915 78.9% 1 79.3% 5 income and7the77.5% corporate very useful80.6% exercise to compare and of personal income (hereafter “private McClain 9 80.2% 16 77.4% 13 74.5% 18 71.5% 12 77.0% 14 Marshall 64.0% 60 65.9% 54 63.2% 57 65.4% 44 51.4% 55 54.6% 58 income tax in 1931. The additional contrast the two58states see65.8% what47 65.1% 45sector McCurtain 64.4% 68.8%to46 58.2% income”) 42 62.8% is 40 defined as total Mayes 61.8% 65 62.5% 62 63.0% 58 64.2% 47 53.2% 52 54.7% 57 McIntosh 37 73.8% 35 31 Of 71.1% 28personal 58.9% 40income 60.5% 45 revenue from 62these taxes Oklahoma73.6% policymakers can71.6% learn. minusMurray personal current 62.5% 63 65.4% 55 59.6% 60.9% 55 fueled 49.7% 61the 51.7% 65 Major 80.4% 11 81.7% 14 78.8% 8 78.9% 7 77.5% 1 79.3% 5 Muskogee 64.0% 59 63.3% 60 61.1% 61 57.9% 65 45.0% 71 47.2% 72 expansion of government spending course, it is well known that, unlike transfer receipts (Social Security, Marshall 64.0% 60 65.9% 54 63.2% 57 65.4% 44 51.4% 55 54.6% 58 Noble 70.6% 35 71.4% 27 56.6% 43 62.9% 39 Mayes 65 does 62.5%not 62 levy 63.0%a broad58 64.2% 47Medicare, 53.2% 52 Medicaid, 54.7% 57 and, 21 consequently, the crowd-out of the Oklahoma,61.8% Texas and welfare) 73.1% and 39 78.4% Nowata 74.8% 32 80.0% 18 71.2% 34 68.4% 33 61.0% 35 64.6% 37 Murray 62.5% 63 65.4% 55 59.6% 62 60.9% 55 49.7% 61 51.7% 65 private after World War II. based individual or corporate income government compensation (federal, Okfuskee 61.7% 66 63.8% 58 sector 57.6% 67 54.1% 72 42.8% 75 48.7% 69 Muskogee 64.0% 59 63.3% 60 61.1% 61 57.9% 65 45.0% 71 47.2% 72 Oklahoma 63.1% 62 68.6%The 48 gap 63.5% 56 66.0% 42 sector 61.6% between 34 66.9% 32 in the private tax (though Texas does levy a gross state, and local). Noble 73.1% 39 78.4% 21 70.6% 35 71.4% 27 56.6% 43 62.9% 39 Okmulgee 68.2% 49 64.8% 56 64.3% 52 62.1% 53 51.6% 54 54.2% 60 Nowata 32 80.0%industries). 18 71.2% 34Has 68.4% 33 61.0% 64.6% 37 Oklahoma and Texas has only grown receipts tax74.8% on certain Chart354 shows that inOsage the years of 81.3% 7 84.7% 3 79.1% 6 78.8% 9 72.5% 10 74.0% 18 Okfuskee 61.7% 66 63.8% 58 57.6% 67 54.1% 72 42.8% 75 48.7% 69 wider42 since By 2014, Oklahoma the absence of an income tax made a the Great Depression and World War Ottawa 75.2% 29 70.3% 65.0% then. 50 63.3% 49 48.3% 65 48.4% 70 Oklahoma 63.1% 62 68.6% 48 63.5% 56 66.0% 42 61.6% 34 66.9% 32 24 74.4% 20 71.5% 26 private 58.6% 41 sector 62.2% 42 had only the 29th largest difference 68.2% in the49course Texas Oklahoma and60TexasPawnee had very 76.3% 27 77.6% Okmulgee 64.8% of 56 the 64.3% 52 62.1% 53II, 51.6% 54 54.2% Payne 57.2% 72 60.3% 67 54.4% 71 56.2% 69 50.4% 60 55.9% 52 Osage 7 84.7%is a 3 resounding 79.1% 6 78.8% 9similar 72.5% private-sector 10 74.0% 18 in the country (69.4 percent) while Texas economy? 81.3% The answer shares of personal Pittsburg 51.9% 73 56.5% 72 58.8% 65 57.0% 67 49.2% 63 52.6% 63 Ottawa 75.2% 29 70.3% 42 65.0% 50 63.3% 49 48.3% 65 48.4% 70 had the 7th largest private sector yes. income. Relatedly, real, per-household Pontotoc 68.1% 50 68.7% 47 65.0% 49 58.3% 64 47.2% 68 (75 50.4% 68 Pawnee 76.3% 27 77.6% 24 74.4% 20 71.5% 26 58.6% 41 62.2% 42 Pottawatomie 79.3% 14 78.4% 22 74.2% 75.5% Oklahoma 16 64.6% 27had 66.4% percent). As a22result, the 34 growth difference PayneChart 4 shows 57.2% 72the 60.3% 67 54.4% 71 56.2% 69personal 50.4% 60incomes 55.9% 52were also at similar Pushmataha 51.6% 74 55.9% 73 51.0% 74 54.2% 71 48.1% 66 50.9% 67 Pittsburg 51.9% 73 56.5% 72 58.8% 49.2% 63 52.6% 63 25th highest per-household personal between Oklahoma and Texas for 65 57.0% 67levels. Roger Mills 77.8% 20 75.5% 30 71.2% 33 66.5% 39 66.9% 23 74.2% 17 Pontotoc 68.1% 50 68.7% 47 65.0% 49 58.3% 64 47.2% 68 50.4% 68 income while the 20 two key measures: the private-sector However, at the same time, Rogers 78.4% 17 83.6% 8 ($112,233) 81.8% 4 81.0% 5 Texas 70.6% had 15 73.1% Pottawatomie 79.3% 14 78.4% 22 74.2% 22 75.5% 16 64.6% 27 66.4% 34 Seminole 67.5% 53 71.7% 61.8% per-household 59 58.9% 61 55.9% 45 59.2% 48 13th 38 highest personal share of personal real,74 54.2% 71Oklahoma embarked on a very different Pushmataha 51.6% 74 income 55.9% 73and 51.0% 48.1% 66 50.9% 67 Sequoyah 68.0% 51 69.5% 44 69.5% 38 68.8% 32 53.5% 49 55.3% 55 Roger Mills 77.8% personal 20 75.5% income. 30 71.2% In 33 66.5% 39policy 66.9% path 23 74.2% income per-household from17the one chosen in80.0% 13 81.8% Stephens 12 ($129,113). 73.4% 25 72.2% 25 71.5% 13 76.3% 16 Rogers 78.4% 17 83.6% 8 81.8% 4 81.0% 5 70.6% 15 73.1% 20 Texasthe individual 86.7% 1 82.7%The 10 difference 76.8% 14 82.6% 2 73.6% 9 77.3% in private sectors can’t 12 this analysis, the private-sector share Texas. Oklahoma enacted Seminole 67.5% 53 71.7% 38 61.8% 59 58.9% 61 55.9% 45 59.2% 48 Tillman 75.0% 30 67.1% 51 68.8% 40 62.4% 52 53.4% 51 61.6% 43 Sequoyah 68.0% 51 69.5% 44 69.5% 38 68.8% 32 53.5% 49 55.3% 55 Tulsa 83.4% 4 84.1% 4 81.0% 5 81.2% 4 76.8% 4 80.7% 2 Stephens 80.0% 13 81.8% 12 73.4% 25 72.2% 25 71.5% 13 76.3% 16 Wagoner 78.2% 18 86.8% 2 85.0% 1 83.9% 1 77.0% 3 77.5% 11 Texas 86.7% 1 82.7% 10 76.8% 14 82.6% 2 73.6% 9 77.3% 12 Washington 85.7% 3 87.1% 1 83.5% 2 79.5% 6 73.8% 7 76.8% 15 Tillman 75.0% 30 67.1% 51 68.8% 40 62.4% 52 53.4% 51 61.6% 43 Washita 73.9% 35 75.4% 31 71.8% 30 65.9% 43 65.5% 25 70.5% 25 Tulsa 83.4% 4 84.1% 4 81.0% 5 81.2% 4 76.8% 4 80.7% 2 Woods 74.4% 34 71.6% 39 66.9% 44 62.7% 50 60.3% 37 71.7% 23 Wagoner 78.2% 18 86.8% 2 85.0% 1 83.9% 1 77.0% 3 77.5% 11

PERSPECTIVE • December 2015

be attributed to any one component. In 2014, personal current transfer receipts, as a percent of personal income, were 18.9 percent lower in Texas than Oklahoma (14.5 percent vs. 17.8 percent, respectively). The same situation exists for government compensation, which is 17.6 percent lower in Texas than in Oklahoma (10.5 percent vs. 12.8 percent). Overall, Oklahoma’s policymakers have failed their constituents by not paying enough attention to the economic success story that exists just south of the Red River. Consequently, Oklahoma families have less income with which to raise their children and pursue their dreams. The path forward is clear. Oklahoma must reduce the size of government and use the savings to eliminate Oklahoma’s income tax system. This will put the state back on the path to parity with Texas.

income have trailed the national average for nearly the entire time period, despite starting above the national average in 1929. Since then, only on one occasion (during the oil boom between 1981 and 1982) did private-sector income and per-household personal income exceed the national average. Fortunately, Oklahoma has recently seen another oil and gas boom, thanks in part to the new technique of hydraulic fracturing, and private-sector income has nearly reached parity with the national average. Per-household personal income is also getting closer to parity with the national average. Relative to the other 49 states, Oklahoma has generally been ranked in the bottom third of states. In 2010, Oklahoma had only the 38th largest

private sector in the country with a private sector share of 64.1 percent. Thankfully, the recent oil and gas boom has boosted the private sector share to 69.4 percent and moved Oklahoma up 11 spots to the 29th largest in 2014. But given the sharp declines in oil and gas commodity prices in 2015, and the resultant retraction in private-sector activity in Oklahoma, bold leadership is needed in Oklahoma. Chart 6 illustrates why Oklahoma’s policymakers should be very concerned. This chart illustrates the positive correlation between per capita personal income and the private-sector share of personal income. In other words, the bigger the private-sector share, the bigger the per capita personal income. This should come as no surprise since the private sector is the proverbial “goose that lays the golden eggs.” States with larger private sectors will grow faster over time than states with smaller private sectors. For instance, the state with the largest private-sector share (Connecticut, 77.9 percent) has per-household personal income of $166,790. The state with the smallest private-sector share (New Mexico, 59.2 percent) has a per-household personal income of $92,488. To put it another way, Connecticut’s per capita personal income is 80 percent larger than New Mexico’s. Overall, our analysis shows the

Oklahoma’s Private-Sector Rebound? Chart 5 shows that, nationally, private-sector income has shrunk to its lowest levels ever. In fact, during the “Great Recession,” private-sector income hit an all-time low of 67.7 percent in 2010. Over the entire 1929 to 2014 time period, private-sector income has fallen by nearly 24 percent—to 70.7 percent in 2014 from 92.4 percent in 1929. Additionally, Chart 5 shows that Oklahoma’s private-sector income and, consequently, per-household personal

www.ocpathink.org

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 (with Wendy P. Warcholik) 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. OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) directs the

alarming trend that, nationally and in Oklahoma, the composition of personal income has significantly shifted away from the private sector and toward the public sector. More disturbingly, the long-term trend line points toward an ever smaller private-sector share of personal income, especially with the aging of America and consequent rise in entitlement spending. Unfortunately, there will be an economic price paid as the privatesector share continues to shrink. The transfer of resources from the private sector to the public sector, via taxes and/or regulations, will stifle future entrepreneurial growth. Since only the private sector can create new income, the future may well bring a declining standard of living.

However, the future is not written in stone. Oklahoma’s own entrepreneurial spirit has helped to reinvent the state’s economy many times over the years. Proper public policy that embraces secure property rights, low taxes, and fewer regulations will lead to an environment where entrepreneurship can thrive. Business and policy leaders must work together to ensure that the entrepreneurial spirit lives on so that Oklahomans can rely on the private sector, not the public sector, for their livelihood. If we truly care about empowering the most vulnerable Oklahomans, we will work to build a strong and diverse economy. This provides the best opportunity for all to achieve their full potential.

Family Prosperity Initiative for the American Conservative Union Foundation. 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. Jonathan Small serves as OCPA’s executive vice president. Previously, he served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. He holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.

LEAVE A LASTING MARK Leave your mark on OCPA’s campus. You now have the opportunity to purchase a memorial brick that will be used in the walkway leading to OCPA’s new Advance Center for Free Enterprise. The $250 brick includes an engraving of your choice. For more information, please contact Rachel at 405.602.1667 or rachel@ocpathink.org.

OCPAthink.org/memorial-brick

Oklahoma’s Higher Education Spending Far Outstrips National Average By J. Scott Moody and Wendy Warcholik

As we pointed out in these pages in October, Oklahoma’s higher education system employs far too many noninstructional workers relative to the national average. This bloated workforce drives up the cost of higher education, and a significant share of these costs falls on the shoulders of Oklahoma’s taxpayers. The U.S. Census Bureau keeps track of all types of data on the higher education system. The chart below uses the latest Census data to examine the dramatic size and growth in higher education spending (from all sources—federal funds, state funds, tuition, boarding, etc.) as a percent of the private sector share of personal income between fiscal year (FY) 1992 and FY 2013. There are two major points to be gleaned from this chart. First, average spending over this time period on the Oklahoma university system is a whopping 61 percent higher than the national average (3.2 percent vs. 2 percent, respectively) and averaged the 10th highest level in the country. Second, and even more troubling, is that the linear growth line shows that the rate of higher education spending is higher than the national average—even despite the recent

private-sector energy boom which dramatically drove down the burden of higher education spending in recent years. Overall, this chart shows the consequences of the bloated workforce of Oklahoma’s university system. Rightsizing the workforce by eliminating non-instructional workers will reduce the cost of higher education for aspiring students and reduce the tax burden on Oklahoma’s taxpayers. 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 (with Wendy P. Warcholik) 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. OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) directs the Family Prosperity Initiative for the American Conservative Union Foundation. 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.

www.ocpathink.org

Ideas Have Consequences

2015

In OCPA’s “2015 Freedom Agenda” and in subsequent publications and public forums, OCPA and OCPA Impact made the case for several policy changes—changes which were indeed enacted this year (see below). Be sure to read our “2016 Freedom Agenda” in an upcoming issue of Perspective.

State Employee Health Care Reform

State-employee and education-employee health plans will now allow employees to access cost-saving alternatives, such as free-market-oriented medical providers. Once fully implemented, this reform could save the state more than $78 million annually.

Protection of Doctor/Patient Relationship

An important new law keeps the regulators at bay and protects the ability of patients to make private payment for affordable health care options, such as direct primary-care arrangements and surgeries.

Uniform Regulation for Ridesharing

With local taxi and limousine monopolies often trying to snuff out innovative new competitors such as Uber, a new state law will protect businesses from red tape at the local level.

Tax Relief

In a year when lawmakers had less revenue to appropriate, an upcoming personal income tax cut was maintained, while tax increases on tobacco, telecom services, and other consumer products were prevented.

Paycheck Protection

Oklahoma’s state government and school districts are now prohibited from collecting membership dues for labor unions.

Stopping Local Regulatory Abuses

With environmentalists trying to thwart oil-and-gas activity in Oklahoma, a new law protects property owners, businesses, and workers against violations of their rights.

School Choice

Oklahoma law allows donors to scholarship-granting organizations (which help pay private-school tuition for kids) to receive a 50 percent stateincome-tax credit. A new law locks in the tax credit at 75 percent.

Medicaid Reform

Much-needed reforms to Oklahoma’s broken Medicaid system will spur better-coordinated care and will help transition people from a dependence on Medicaid to self-sufficiency. Once reforms are fully implemented, total savings will exceed $25 million annually.

Corrections Reforms

New laws on licensing, judicial discretion, and more will help reduce the incarceration rate of nonviolent offenders and provide a pathway for them to become personally responsible.

@OCPAthink 1. Father Brian O’Brien, president of Bishop Kelley High School in Tulsa, speaks at a recent meeting of the Oklahoma School Choice Coalition. Coalition meetings are held monthly in OCPA’s Advance Center for Free Enterprise. 2. Pictured here at the grand opening of OCPA’s Advance Center for Free Enterprise are Bill Price, Josephine Freede, John Hanes, Ann Felton Gilliland, Pat Rooney, Paul Allen, Greg Slavonic, Michael Carnuccio, Dave McLaughlin, Lew Meibergen, Dr. David Brown, Ann Brown, and Charles Sublett. 3. Arthur Brooks, president of the American Enterprise Institute, addresses the crowd at OCPA’s Liberty Gala on October 21 in Tulsa. Brooks’ speech was titled, “How I Learned Everything I Know About Capitalism from a Hindu Swami.” 4. Former Vice President Dick Cheney speaks on October 29 at OCPA’s Advance Center for Free Enterprise.

www.ocpathink.org

QUOTE UNQUOTE “$41.08”  The amount spent on Hillary Clinton campaign merchandise using McAlester Public Schools purchasing cards, according to a report in the McAlester News-Capital. The newspaper reports that “a long-running pattern of purchases made with McAlester Public Schools purchasing cards—followed by personal reimbursements to the school district—appear in receipts for MPS Superintendent Dr. Marsha Gore.”

“At many institutions of higher learning, programs are in place to guard students from every possible offense. Some are a result of efforts initiated by students who appear incapable of, or unwilling to, leave their feel-good cocoons.” The Oklahoman, editorializing recently on “trigger warnings” and “microaggressions” and other follies in higher education

“It is the right and responsibility of parents to direct their children’s upbringing and education----whether public, private, charter, or home school—---without interference, regulation, or penalty from the government... W]e support the creation of a free-market education system... We believe all parents should be allowed to use their education tax dollars for the family’s choice of schooling.” Oklahoma Republican Party platform

“This effort poses a serious threat to both conservative governance and the best interests of the state. It’s an attempt to overturn the clear verdict of the six state elections since 2004. If conservatives don’t take this danger seriously, they may find themselves presiding over a government that taxes and spends more than ever.” OCPA distinguished fellow Andrew Spiropoulos, commenting on the proposed Boren tax increase