Perspective - January 2017 by OCPA

JANUARY 2017

OKLAHOMA COUNCIL OF PUBLIC AFFAIRS

2017 FREEDOM AGENDA

EXPAND EDUCATIONAL CHOICE

STOP CRONYISM RESIST MEDICAID EXPANSION

REFORM HIGHER EDUCATION

PERSPECTIVE

BREAK THE CYCLE OF INCARCERATION

OCPA Researchers David McLaughlin • Enid

Perspective is published monthly by the

Glenn Ashmore • Oklahoma City

Lew Meibergen • Enid

Oklahoma Council of Public Affairs,

Robert D. Avery • Pawhuska

Ronald L. Mercer • Bethany

Lee J. Baxter • Lawton

J. Larry Nichols • Oklahoma City

Douglas Beall, M.D. • Oklahoma City

Lloyd Noble II • Tulsa

Inc., an independent public policy organization. OCPA formulates and

Steve W. Beebe • Duncan

Mike O’Neal • Edmond

promotes public policy research and

John A. Brock • Tulsa

Larry Parman • Oklahoma City

analysis consistent with the principles

David Burrage • Atoka

Bill Price • Oklahoma City

Michael Carnuccio • Yukon

Patrick T. Rooney • Oklahoma City

Tom Coburn, M.D. • Tulsa

Melissa Sandefer • Norman

Paul A. Cox • Oklahoma City

Thomas Schroedter • Tulsa

in Perspective are those of the author,

William Flanagan • Claremore

Greg Slavonic • Oklahoma City

and should not be construed as

Josephine Freede • Oklahoma City

Charles M. Sublett • Tulsa

Ann Felton Gilliland • Oklahoma City

Robert Sullivan • Tulsa

John T. Hanes • Oklahoma City

William E. Warnock, Jr. • Tulsa

John A. Henry III • Oklahoma City

Dana Weber • Tulsa

Henry F. Kane • Bartlesville

Daryl Woodard • Tulsa

Robert Kane • Tulsa

Daniel J. Zaloudek • Tulsa

of free enterprise and limited government. The views expressed

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

Gene Love • Lawton

PERSPECTIVE // January 2017

EMPOWER TEACHERS

Alex Jones , Art Director

Blake Arnold • Oklahoma City

BOOST LABOR FORCE PARTICIPATION

Brandon Dutcher, Editor

OCPA Trustees

employees.

REFORM JUDICIAL SELECTION

David Madigan • Lawton

CHAIRMAN EMERITUS

Tom H. McCasland III • Duncan

David R. Brown, M.D. • Oklahoma City

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

GOVERNMENT

STOP CRONYISM

It’s Time to Repeal Wind-Energy Tax Incentives By Byron Schlomach

Oklahoma lawmakers have failed to consider what Frederic Bastiat explained 200 years ago: the seen and the unseen.

Due to the issue of global warming, or climate change, or catastrophic weather— that is, the claim this real-or-not phenomenon has resulted from mankind’s production of carbon dioxide and the resultant increase in that trace gas’s concentration in the atmosphere—the federal government and many states have encouraged investment in wind-powered electricity generation. Even in states like Oklahoma, where less than half of the population is worried about global warming and even fewer believe it is being caused by man, the state has passed measures to encourage investment in zero-emission power generation. The wind power sales pitch for Oklahoma includes the following: (1) much of Oklahoma has lots of wind, making it ideal for wind generation; (2) federal and state tax credits for this type of generation allow Oklahoma to develop a lucrative zero-emission generation system that will benefit the state environmentally and economically; and (3) this technology is the way of the future and electricity generated by wind can be sold and exported to other states on the U.S. electrical grids, especially the eastern one, of which Oklahoma is a part.

www.ocpathink.org

The Problems with Wind

Zero Emission Tax Credits With a national average electricity price of around 10 to 12 cents per kilowatt hour, the federal government offers a large tax credit of 2.3 cents per kilowatt hour for 10 years for producers of wind generation. Begun in 1992, the credit has been allowed to lapse several times, only to be renewed again. Wind credits are estimated to cost the federal government about $1 billion in lost revenue each year. The federal credit was up for renewal again in 2015 when Senator James Lankford of Oklahoma proposed a bill to completely strip the credit from federal code so that it could not easily be renewed in the future. Oklahoma has its own income tax credit for zero-emission electricity generation for which those who produce electricity with wind generation qualify. That credit also lasts 10 years for a given facility and is one half of one cent per kilowatt hour for any new facilities—essentially eliminating income tax on new wind-generation revenues. The Oklahoma credit is set to expire January 1, 2021, which means facilities put into operation prior to that date will continue to receive a credit until their 10 years is up. These credits result in a revenue loss for the state, estimated at $88 million for the current fiscal year and $123 million in 2017. The loss will rise as new projects are brought online. Oklahoma currently ranks only behind Texas, California, and Iowa in wind generation capacity. Oklahoma’s tax credit has benefited a number of corporations around the world such as Denmark-based Vestas Wind Systems, with production facilities in Colorado. A project near Kingfisher, developed by Apex Clean Energy, was sold to a consortium based in Connecticut, Houston, London, and Hong Kong. EDP Renewables of Madrid, Spain, has bought a number of wind projects in the state, as has Edison Mission Group from California. Competitive Power Ventures, based in Maryland, has also enjoyed Oklahoma tax subsidies, as has Oklahoma’s own OG&E, among others.

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The biggest problem with wind-generated electricity, and the problem at the root of all others, is that the wind does not always blow, even in Oklahoma. In addition, electricity cannot be stored on a mass scale. When we turn on our electrical appliances, lights, and computers, the electricity needed to run them is generated in real time. Generators which are already working work a little harder to provide the power for slightly increased demands. If demand for electricity increases enough, standby generators are started and brought online to fill that demand. Suppose that an electrical grid’s maximum demanded load is 10 megawatts (MW) and wind generation can provide 1 MW. This would imply that only 9 MW would have to be supplied by coal, natural gas, and other sources. However, because of wind’s lack of reliability, that investment in 1 MW of potential power generation has to be duplicated with 1 MW of potential generation from a source like natural gas for the inevitable windless, hot day. So, in a grid with a maximum load of 10 MW and 1 MW of windgenerated power, 11 MW of generation must exist. In addition to having duplicate investment, wind power increases costs by: (1) requiring personnel to be available to manage and repair fossil-fuel-powered generators that are often idle, standing by for the inevitable windless day or hour they will be needed; (2) requiring more, relatively expensively operated generators that can be brought online with short notice; (3) requiring the construction of transmission lines, often to relatively remote areas where wind is prevalent; and (4) requiring more wind generation than would otherwise be required due to long transmission lines and resultant voltage drop. If investment in duplicate conventional generation is not made, and often despite such investment, the result is a less-reliable electric grid. Ireland and Germany, both with ambitious goals for wind energy to become a large share of their electric generation and usage, have felt impacts from a less reliable grid, with voltage fluctuations that have negatively impacted industry. In fact, locally installed battery and generator backup equipment have become a big business in Germany as industry seeks to shield itself from the unreliability of the grid. Finally, wind energy is its own source of environmental degradation. While many seek to limit the number of billboards along highways because they mar scenic vistas, windmills have become artificial forests, marring views from vantage points for a dozen miles. Windmills also kill birds, chopping them out of the skies like scythes, and making no allowance for whether a bird is part of an endangered or plentiful species.

Cronyism Is at the Root of Wind Power Suppose someone proposes a contract that 10 percent of your electricity needs be met with cheap, abundant wind power. This sounds like a good deal, but then you notice in the fine print that you will have to pay for equipment that will separately meet that 10 percent of your needs by using other quite expensive sources of power for windless days, pushing up the average cost of electricity by 25 percent and more, to more than 15 cents per

STOP CRONYISM kilowatt hour. In addition, wind gusts and direction changes will cause voltage fluctuations that shorten the life of your appliances and occasionally cause temporary blackouts. This now sounds like a bad deal, one that no one would make voluntarily, but it’s the very deal wind tax credits are making for us. Some might say that wind power in Oklahoma is an economic boon. After all, wind-generated power has been sold to Tennessee. But in fact, the eastern grid, of which Oklahoma and Tennessee are a part, is not so integrated that as wind power fluctuates Tennessee will ever feel the effects. In fact, Oklahoma will feel the brunt of wind’s inconsistency and unreliability even if 100 percent of its wind-generated power is sold out of state. The fact is, there is no guarantee that even one wind-generated electron from Oklahoma will ever reach Tennessee. What’s more, the sale to Tennessee only means that Oklahomans are subsidizing the electricity use of Tennesseeans. 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 the job constantly rebuilding the same sidewalk, is not pointing to an economic benefit. Rather, it points to pure, unadulterated economic waste. 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 tax-subsidizing 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.

Renewable Energy and Other Energy Tax Incentives Should Be Repealed Wind energy tax incentives in Oklahoma should be repealed immediately. During a time of economic turmoil for the state and large revenue shortfalls, tax incentives for wind are clearly not the best use of Oklahomans’ tax dollars. Repeal of the credit, allowing currently credited projects to continue, but not allowing credits for future projects, would minimize the incentives’ future impacts on the state’s revenues. It would also put wind on the equal market footing that it should have had all along. Byron Schlomach (Ph.D. in economics, Texas A&M University) is director of the 1889 Institute, a subsidiary of the TEL Foundation. He is a scholar-in-residence at the Institute for the Study of Free Enterprise at Oklahoma State University. He previously served as director of the Center for Economic Prosperity at the Goldwater Institute, and prior to that was chief economist for the Texas Public Policy Foundation. A previous version of this article was published by the 1889 Institute and is available at http://www.1889institute.org/corporate-welfare.html.

Aerospace Engineering/Employees Incentives

The aerospace industry in Oklahoma is being specifically targeted for favorable treatment. This activity tends to retard economic activity that might otherwise occur in other industries that would arise and grow more organically and, thus, with more lasting effects, without distorting the economy overall. This occurs because talent is drained from other industries. These incentives should be eliminated immediately except for what is already promised.

Five-Year Ad Valorem Property Tax Exemption

This exemption is highly distorting. One reason for tax equity is economic. By treating all economic activity the same as much as possible, resources are free to flow most closely to what a true market ideal would dictate. This is desirable because actual (not artificial) costs are fully taken into account in making economic decisions, including investment decisions. This makes it possible for true costs to be weighed with benefits reflected in people’s willingness to pay that cost as transmitted through prices. Programs like this seem to inevitably favor large businesses and businesses that have made a practice of being politically connected. In other words, some businesses are favored over others even though they are competing with each other. Government picking winners and losers not only violates sound economic principles but also offends basic notions of fairness and justice. This exemption should be eliminated immediately while honoring agreements already made.

Historic Rehabilitation Tax Credit

People who highly value historic properties should financially support their interests with their own money, especially when these assets are privately owned. Also, any benefit that might result from this credit is highly localized. Thus, it is improper to force everyone in the state to support any given project. This incentive should be eliminated immediately.

Oklahoma Capital Investment Board

Policymakers should allow the OCIB to sunset, giving it time to wrap up its operations and obligations.

Film Enhancement Rebate Program

This incentive should be eliminated immediately.

Quality Events Incentive

Why should dollars collected from Altus be used to support an event in Broken Arrow? The statewide economic spillover effects of events held in any particular part of the state are extremely limited. For some whose taxes are used to promote an event there is nothing but a negative return. There is no traditional role here for state government. Economists have investigated claims regarding the economic benefits of various entertainment venues that are subsidized in some way and find those claims wanting. The economic impacts are localized and are often scavenged from other areas. The only exceptions are when outside tourism is greatly enhanced, but even this has resulted in a type of trade war among states. This incentive should be eliminated immediately. —Byron Schlomach

www.ocpathink.org

JUDICIAL

REFORM JUDICIAL SELECTION

Shift Power from the Elites to the People: Reform the Judicial Nominating Commission By Trent England

No federal judges were on the ballot in 2016. Of course, federal judges are never on the ballot, and yet they are routinely an important subject in campaigns for President and U.S. Senate. On the other hand, Oklahoma Supreme Court justices and other state judges were on the ballot. Most voters knew little or nothing about these judges, and all won their retention votes. In fact, no Oklahoma judge has ever lost a retention election. How can this be? The Oklahoma Supreme Court lately has struck down limits on abortion, deconstructed workers’ compensation reforms, and evicted the Ten Commandments from the Capitol grounds. It allowed State Question 779 on the ballot even though the measure was a textbook example of the kind of “log rolling” prohibited by the Oklahoma Constitution’s singlesubject rule. Academic studies confirm the obvious: Oklahoma is a conservative state with a liberal Supreme Court. The U.S. Constitution protects judicial independence while empowering the people to steer the course of the judiciary over time. Voters in presidential and senatorial campaigns argue about judicial philosophy because the Constitution gives voters power to elect the officials that control who will sit on the federal bench. The Oklahoma Constitution is a failure in this regard. While the Governor technically appoints justices and appellate judges, she is forced to choose from among three candidates selected by the unaccountable Judicial Nominating Commission (JNC). The Oklahoma Constitution establishes the JNC, which is made up of nine political appointees and six lawyers selected by the Oklahoma Bar Association. In other words, no voter has any power over the JNC, but a tiny group of elites has a guaranteed say. No wonder Oklahoma voters spend more time talking about federal judges than state judges—even those state judges who appear on the ballot. After all, voters can fire a judge in a retention election, but have no say in whether the new judge will be any better. Liberals, of course, delight in the inability of the majority of Oklahomans to steer the courts toward a more conservative judicial philosophy. Constitutional reform is necessary to shift power back to the people. One reform would be to limit the JNC’s power to excluding only candidates who do not meet the requirements to be a judge, and perhaps allowing it to offer advice to the Governor. This could allow the JNC to continue and even allow the Oklahoma Bar Association to have a say, without allowing elites to control the outcome. Of course, it would be wise to give elected legislators, most likely the state Senate, confirmation power (with a requirement that they vote within a definite

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amount of time). This would make judges and judicial philosophy a part of gubernatorial and state Senate campaigns. It would also give voters a reason to take retention elections seriously, since they might have some assurance that new judges would not be more of the same. Another simple judicial reform can be accomplished without changing the state Constitution. The current Oklahoma Supreme Court districts are based on Oklahoma’s 1960s congressional districts. These 50-year-old districts are so out of step with population changes that they make it harder than it needs to be to find qualified candidates for judicial positions. This is a simple, common-sense reform that the legislature can make on its own. Judicial independence does not mean judicial supremacy, nor does it suggest that a small group of legal elites should control who can become a judge. The U.S. Constitution strikes the proper balance, and offers a model the legislature should use to reform judicial selection in Oklahoma. Trent England serves as Vice President for Strategic Initiatives at the Oklahoma Council of Public Affairs, where he also is the David and Ann Brown Distinguished Fellow for the Advancement of Liberty and directs the Center for the Constitution & Freedom and the Save Our States project. He also hosts a radio program, The Trent England Show, from 7-9 a.m. every weekday on Oklahoma’s AM 1640, “The Eagle.”

Reform Asset Forfeiture Oklahoma’s civil asset forfeiture law allows a district attorney to seize and keep property—cash, cars, even houses—based on the suspicion that the owner committed a crime. No criminal conviction is necessary. In fact, criminal charges are not even required, just a simple civil court process. Last year, the legislature made it possible for a person who wins back property to also recover attorney fees. This year, the legislature should take further action to protect Oklahomans’ property rights, including raising the legal standard for forfeiture actions and requiring uniform recordkeeping and transparency. —Trent England

JUSTICE

BREAK THE CYCLE OF INCARCERATION

Next Steps for Criminal Justice Reform By Trent England

In 2016, Oklahoma legislators and voters supported some key criminal justice reforms. More work remains, however, to break the cycle of criminality and incarceration. The legislature should take action in 2017 to improve opportunities for offenders and their families. At the same time, district attorneys and other law enforcement leaders should come to the table to help make the reforms work. In the 2016 legislative session, the legislature made it easier for Oklahomans coming out of prison to get a job by reducing some restrictions on employment and driver’s licenses. Together, measures passed by the legislature and State Questions 780 and 781 passed by voters reclassified many nonviolent offenses from felonies to misdemeanor crimes. These changes should direct fewer people to state prisons, leave fewer people with the scarlet letter of a felony conviction, and make it easier for people coming out of prison or jail to find productive work. One of the remaining problems with Oklahoma’s criminal justice system is the high level of fees and interest charged to many offenders. The idea of a “user pays” justice system has superficial appeal, but it makes no sense to drive indigent people with poor prospects into crippling debt. In the end, taxpayers still pay, but get less for their trouble when those returning to society are unable to support themselves and their families. The legislature needs to reduce the burden of fees on indigent defendants. Politicians should be honest with constituents about who really pays for the criminal justice system. No one should be incarcerated because he or she is unable to pay debts imposed by the court system. Instead, the objective should be to maximize the potential for tax-consuming convicts to become tax-paying

citizens. This is the real way people who impose costs on the justice system can pay it back. The cycle of criminality and incarceration is not just personal, it is also intergenerational. According to a university study, children who have a parent in prison are three times more likely to wind up in the criminal justice system themselves. Another study found that a child whose father is in prison is nearly six times more likely than other children to be expelled from school. Legislators can act in 2017 to improve the prospects for children with a parent in prison, based on previous successful legislation. In early 2016, the Oklahoma Supreme Court upheld the popular Lindsey Nicole Henry Scholarship Act. This program is open to any Oklahoma parent with a school-age child who has a disability and is on an Individualized Education Program (IEP). These parents can redirect the state’s educational expenditures to a private school. This opens up a much more diverse set of options to meet these students’ unique educational needs. The legislature should create a new program, modeled on the Lindsey Nicole Henry Scholarships, for children who have a parent in prison, in jail, or on probation. These children are at a unique disadvantage. Breaking the cycle of criminality and incarceration is key to reducing the long-term costs of the criminal justice system and to reducing future crimes. It makes sense to open every door that might provide a pathway for their future success. When voters passed State Questions 780 and 781, they spoke loudly and clearly to legislators, district attorneys, and other policymakers. Warehousing people with drug addiction or mental illness is not the purpose of the criminal justice system or a good use of tax dollars. Bankrupting people with court fees is no way to return people to a productive life. Oklahomans are tough on crime, but also believe in redemption and common sense public policy.

www.ocpathink.org

JOBS & GROWTH

BOOST LABOR FORCE PARTICIPATION

How to Increase Labor Force Participation in Oklahoma

By William Freeland

Oklahoma’s labor force participation rate sits at 60.5 percent as of August 2016. By way of comparison, the overall U.S. labor force participation rate is 62.9 percent, while the median labor force participation rate among states is 63.5 percent. Both in Oklahoma and nationally, the labor force participation rate has modestly improved since a steep decline caused by the Great Recession, but that recovery from a cyclical decline has likely peaked. That leaves a much larger, persistent decade-anda-half structural decline—structural defined as economic effects driven by deep economic fundamentals and not those driven by temporary, business-cycle factors. This is a grave problem necessitating public policy reform on multiple fronts. The labor force participation (LFP) rate measures the percent of the adult, civilian, non-institutional population that is either employed or is unemployed and actively looking for work. Thus,

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those in college, those retired, and those otherwise not looking for work—those perhaps discouraged from a fruitless job search or those on social assistance, for example—comprise the cohort not in the labor force. LFP has a crucial bearing on economic health. This understanding can be traced all the way back to Adam Smith, who noted that “specialization is limited to the extent of the market,” i.e., to the number of workers contributing to the capitalist engine of production, which is a key driver of growing production. A society can only consume what it produces; thus more citizens contributing to productive endeavors allows us all to consume more products, better products, and lower-priced products. Looking at annual LFP in Oklahoma over time, we can see in the nearby graphic a precipitous decline over the last decade and a half, with LFP dropping from 64.6 percent in 2002 to 61.9

percent in 2015. Returning to an LFP of 64.0 percent would mean adding 105,341 individuals to the labor force.

Fixing Structural Issues: Taxes, Regulation, Welfare, Criminal Justice Observers of downward-trending LFP should not necessarily ascribe laziness to Americans exiting the labor force. A stagnant, slow-growth economy exhibiting low dynamism tends to lead to lower LFP. Crucially, economic damage from misguided public policy—such as high and inefficient taxes, or complex and burdensome regulation—depresses economic opportunity and discourages potential workers from engaging in the economy productively. Looking at the magnitude of these public policy problems, consider first taxes. Researchers at the nonpartisan Tax Foundation compare what Americans pay in consumer essentials—housing, clothing, and food—with the the $4.9 trillion they pay in federal, state, and local taxes. They conclude that America will spend more on taxes in 2016 than it will on food, clothing, and housing combined. Though taxes are the clear and explicit cost of government, regulatory policy also has real economic costs that impact the U.S. economy. On the federal level, two recent studies have attempted to quantify the cost of regulatory policy. The Competitive Enterprise Institute finds cumulative costs of federal regulatory policy totaling $1.89 trillion, which is $14,842 per household. The Mercatus Center’s federal regulatory cost study found that regulatory growth since 1980 has made the economy $4 trillion smaller in aggregate. And these figures do not include the costs of state and local regulatory policy. When considering declining LFP, one must also look at the incentives created by other public policies. Most notable to LFP, it’s worth considering the impact of transfer payments, such as social assistance. At the highest level, studies have analyzed the economic impact of transfer payments and have established

Oklahoma Labor Force Participation, 1976-2015 68

a research consensus that they depress economic growth by disincentivizing production by providing individuals the opportunity to consume absent work. Additionally, social assistance programs entail “implicit marginal tax rates” and “welfare cliff” effects that incentivize individuals’ leaving the labor force and avoiding employment advancement opportunities. Consider the Affordable Care Act, which, according to the Congressional Budget Office, may lead to as many as 2.5 million fewer Americans employed, largely by allowing individuals to receive healthcare without working. Again, individuals responding to these welfare cliffs are behaving rationally (from an economic perspective) in response to the incentives created by public policy. Consider also criminal justice. In his new book Men Without Work, Nicholas Eberstadt writes: “A single variable—having a criminal record—is a key missing piece in explaining why work rates and LFPRs [labor-force participation rates] have collapsed much more dramatically in America than other affluent Western societies over the past two generations. This single variable also helps explain why the collapse has been so much greater for American men than women and why it has been so much more dramatic for African-American men and men with low educational attainment than for other prime-age men in the United States.” Getting work with a criminal record is exceedingly difficult. Those individuals are likely to become discouraged by a difficult job search and exit the labor market, perhaps permanently. Moreover, communities strongly affected by mass incarceration likely see the effect compound, as family conditions affect children, norms of achievement and belief in the American Dream decay, and business formations and success in these communities are deeply damaged. In sum, policymakers in Oklahoma and nationally should target LFP as a top priority. Though policymakers can’t control demographics or global economic trends, they can provide an enormous improvement to LFP by reforming public policy. 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

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Oklahoma’s LFP rate peaks in early 2000 above 64%, declines to 61%, and recovers to nearly 62%. This represents a recovery from recession and the remaining gap between 62% and 64% is the result of economic fundamentals.

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.

www.ocpathink.org

EDUCATION

EMPOWER TEACHERS

RAISE TEACHER PAY WITHOUT RAISING TAXES With SQ 779’s defeat, teacher pay raises didn’t fail. A massive tax increase failed.

By Dave Bond

On November 8, more than 59 percent of Oklahoma voters opted not to approve State Question 779, the so-called “penny tax for education.” First proposed more than a year ago by University of Oklahoma President David Boren, SQ 779 would have increased the permanent sales tax burden on working Oklahoma families to the highest of any state in the nation. The SQ 779 tax money would have been used to fund a $5,000 teacher pay raise and lots of additional spending. Some interpret SQ 779’s defeat to mean Oklahomans don’t value quality teachers. This certainly isn’t the case. Let’s be clear: With SQ 779’s defeat, teacher pay raises didn’t fail. A massive tax increase failed. During the statewide discussion on SQ 779, three strikes against the proposal took shape in the minds of voters. To many, the first strike was obvious from the beginning: A tax increase is unnecessary. Most Oklahomans know they’re already paying enough state and local taxes to fund core priorities, including classroom education. A tax increase lets government bureaucrats off the hook from having to be as efficient with existing resources as Oklahoma families must be. The second strike took hold as voters realized that SQ 779 truly

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would have forced all Oklahomans, regardless of income, to pay the highest permanent, combined state-and-local sales tax rate in the U.S. In many communities, sales taxes would have reached double digits. The third strike, however, was the most shocking: Less than half of the SQ 779 tax money would have been guaranteed to go toward salary increases or other compensation for classroom teachers. Still, SQ 779’s defeat represents only a partial victory. Working families have been shielded from higher taxes, but the need for a classroom teacher pay raise remains. Teachers will receive a pay raise in the relatively near future. Either the state Legislature will fund it by shifting resources away from inefficient or nonessential areas of state government spending, or the funds will come from a tax increase on working Oklahomans. If the Legislature fails, Oklahomans could face another SQ 779-style ballot question. Next time, though, proponents won’t repeat the mistakes of rolling up teacher pay raises with other, less desirable spending, or raising anyone’s tax rate to the highest in the country. The Legislature’s objective must be to provide a substantial teacher salary increase without raising taxes. This is very achievable.

EMPOWER TEACHERS Give School Districts Flexibility to Raise Teacher Pay Oklahoma’s education system had $8.7 billion in total revenue last year, the most in state history. Unfortunately, as OCPA’s education data tool makes clear (www.ocpathink.org/ education-data), too much of the money is cordoned off in silos. Thus we end up with unfortunate scenarios like what’s going on in Catoosa Public Schools. Citing a lack of funding, Catoosa has gone to a four-day school week. Yet at the same time the district bought MacBook computers for all middleschool and high-school students and is building a $1.5 million press box at the high-school football field. Removing the chains that keep some of the billions of taxpayer dollars locked in various accounts could open the door for a significant boost in teacher pay. —Brandon Dutcher

Make Labor Unions More Accountable to Workers Thanks to Oklahoma’s Right-to-Work law, no Oklahoma worker can be fired for opting out of a union. But some workers still face a difficult choice, because of a legal quirk that protects established unions from democratic accountability. For state and local government employees, the state legislature can update the law to make sure unions represent workers’ interests.

The most obvious route is twofold. First, eliminate state taxpayer subsidies for mostly foreign and out-of-state wind energy companies, expected to exceed $200 million next year. Second, utilize the savings, estimated at more than $100 million annually, via the recent, market-based efficiency reforms at HealthChoice, the health benefits provider for state government employees. Considering that a $5,000 pay raise for every public school classroom teacher statewide costs $245 million, you have a blueprint with relatively few moving parts. Oklahoma can’t afford to lose more homegrown talent to other states, whether in teaching or other professions. With SQ 779’s defeat, Oklahomans have given the Legislature the opportunity to address this urgency without further burdening working Oklahomans. Dave Bond is CEO of OCPA Impact. Before joining OCPA Impact, Bond served as director of external relations for the Oklahoma Council of Public Affairs. He is a past executive director of the Republican State House Committee, the political arm of the Republican caucus of the Oklahoma House of Representatives. He also worked with the campaign consulting firm A.H. Strategies and with Corporation Commissioner Jeff Cloud. Additionally, Bond served in the media and communications divisions of the Oklahoma House of Representatives.

For a union to become “the exclusive representative” of a group of workers, state law requires a vote. Once in place, however, current law never requires another such vote, and the process to eliminate a union is cumbersome. State law should require periodic recertification of a union. This would make it easier for employees to switch from one union organization to another, creating competition among union organizations. It would give workers a way to keep unions accountable. An annual vote of all the workers in a bargaining unit would create a powerful incentive for the union to put workers’ interests first. —Trent England

Prevent Taxpayer Subsidies for Labor Unions A change in the law in 2015 made it unlawful for government agencies to act as the dues collector for organizations that collectively bargain. Unfortunately, with no penalties included in that law, some government agencies have simply ignored it. This year, the legislature should attach penalties and end the subsidy once and for all. —Trent England

Provide Tax Relief for Teachers Given Oklahoma’s direct competition with no-incometax Texas, Oklahoma must continue to explore a 20-year phaseout of our state income tax. A good first step would be to eliminate the personal income tax for teachers in public schools and in accredited private schools. The state already does this for aerospace engineers; surely it can do so for teachers. —Jonathan Small

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EDUCATION

EXPAND EDUCATIONAL CHOICE

ESAs Are a Much-Needed Refinement of the Public Education Model By Lindsey Burke

Should Oklahomans care that proposals designed to create education savings accounts (ESAs) didn’t advance in the Legislature in 2016? Ask Susan Agel. Agel is president of Positive Tomorrows, Oklahoma’s only private school for homeless children. Because her school relies on the generosity of donors to remain tuition-free for students, she is able to enroll only about 58 students each year due to limited resources. Agel says she is “forced to turn away children constantly.” With an ESA option, however, she could enroll many additional children and better serve the needs of the poor. ESAs are a critically needed refinement of the public education model. Instead of allocating taxpayer funding directly to school districts based on student counts and with little concern for school performance, ESAs enable funding to go directly to parents, who can then choose options—whether private schooling, individual public school courses, tutors, or other options—that best match their children’s unique learning needs. ESAs would strengthen Oklahoma’s commitment to the public financing of K-12 education by moving away from state-run schools being the sole provider of that education. By separating the financing of education from the delivery of services, ESAs gives parents the power to customize the best possible education for their children. Had Oklahoma moved on ESAs in 2016, the state would have created accounts without adding a single penny to existing spending on K-12 education. The accounts are funded with the state per-pupil revenue that would have already been spent on a given child in his or her public school. The accounts would

have been open to eligible kindergarteners, students with special needs currently or having ever participated in the Lindsey Nicole Henry Scholarship Program, students enrolled in a public school, new Oklahoma residents, or children of military families new to Oklahoma. Children from low-income families would have received 90 percent of what would have been spent on them by the state in the public school system, with those from families earning over the poverty line receiving lower per-pupil allocations. Martin Lueken of the organization EdChoice estimates that about 88 percent of Oklahoma school-age children would have been eligible for an ESA. Eligible students could then use their ESA to pay for private school tuition, online learning, special education services and therapies, curricula, tutoring, and a host of other education-related services and products. Families would even be able to roll over unused funds from year to year and could save unused ESA funds for future education-related expenses such as college. ESAs are gaining popularity because they bring two important features to K-12 education that it often lacks: customization for children and accountability for taxpayers. Although Oklahoma may have suffered an ESA setback in 2016, the fight is far from over. Many other states are considering ESAs, seeing them as one of the most promising ways forward for education choice. Here’s hoping the Sooner State follows in 2017.

ESAs would strengthen Oklahoma’s commitment to the public financing of K-12 education by moving away from state-run schools being the sole provider of that education.

Securing Liberty: Rebuilding American Education in an Era of Illiberal Learning

PERSPECTIVE // January 2017

Lindsey Burke is the Will Skillman Fellow in Education Policy at The Heritage Foundation.

Saturday, January 21, 2017 | 9:00 AM to 8:30 PM Advance Center for Free Enterprise (OCPA campus) For more information, visit bit.ly/NASconference.

EDUCATION

EXPAND EDUCATIONAL CHOICE

Ed Choice Policies Will Help Revitalize Cities By Bartley R. Danielsen and Kirk Humphreys

A lot of children seem to be missing in Oklahoma City. Given the number of zero-to-four year olds, the most recent census suggests that there are 3,700 fewer five-to-nine year olds than we should expect in the area served by the Oklahoma City Public Schools. Of course, there is no mystery about where they have gone: the suburbs. Edmond Public Schools alone had almost 500 extra elementary-age children. Middle-class families move to Edmond and other better suburban school districts when children start to school. And they keep coming. Tenth grade is the highest enrollment grade in Edmond. In the OKCPS district, there are fewer than half as many 10th graders as kindergarteners. It is tempting to blame OKCPS administrators for this outmigration, but the story is repeated in every large American city. Families who can afford to move get the schools that they want. Poor people are left behind in areas of concentrating poverty. Eventually, neighborhoods and metropolitan areas are divided on the basis of wealth, income, and often race. In the end, not only are the poor consigned to bad schools (of which OKCPS has many), but this spatial sorting produces neighborhoods afflicted with all the social ills associated with concentrated poverty. Parents can’t find jobs, families deteriorate, crime rises, and social mobility declines. Many middle-class Edmond families pay a price too—caught in traffic on I-35 or the Broadway Extension. Long commutes are a risk factor for diabetes, cardiovascular disease, and hypertension. Much of the traffic is due to suburban residents commuting to and from work downtown. All of that traffic is an environmental tragedy for the metropolitan area. Fortunately, once we realize that assigning children to schools based on where they live creates concentrated poverty, we

can consider the social benefits of systems that bypass school assignments. Several academic studies show that property values are higher in areas where parents are allowed to choose their children’s schools. The National Endowment for the Arts funded a white paper in which Dr. Danielsen and two colleagues examine an arts-focused charter school in Santa Ana, California. The school received public funding as an infrastructure project in a blighted neighborhood. Middle-class parents who enrolled a child in the school tended to move closer to the area, and the renewed economic activity led to a revitalization of the neighborhood. In the decade before the school’s arrival, gang-related killings topped 40 per year. After the school arrived, murders and overall crime dropped so dramatically that in 2011 Forbes magazine rated the city as the fourth-safest in the country. Oklahoma City needs to recognize that good leadership can’t stop school assignments from concentrating poverty. Concentrated poverty is an unwelcome feature of the system. Alternative parental choice systems need to be designed for cities so that young families can stay if they choose—not just to reduce traffic and carbon emissions on clogged roads, but because middle-class neighbors improve the lives of poor people too. Of course, middle-class families can’t help if they can’t stay. Let’s help them stay. Dr. Bartley R. Danielsen is Associate Professor of Finance and Real Estate at North Carolina State University and president of Environmentalists for Effective Education. Kirk Humphreys is chairman of The Humphreys Company. He was twice elected as Mayor of Oklahoma City, serving from 1998 through 2003.

www.ocpathink.org

EDUCATION

EXPAND EDUCATIONAL CHOICE

Ed Choice Mythbusting Never Ends By Greg Forster

Keeping up with the myths people throw around in Oklahoma and elsewhere about school choice is a full time job. It can be tedious; sometimes I wish the defenders of the status quo were more creative, just to keep my work interesting. On the bright side, since they can’t use sound facts and logic to defend their position, at least I’ll never be out of work! Last time I wrote about school choice myths in this space, I looked at how the Oklahoma Education Coalition and Oklahoma edu-blogger Rob Miller were trying to fight the state’s embrace of the school choice revolution with some of the most common myths: that school choice is costly for taxpayers (the research consistently shows it saves money) and that it doesn’t improve educational outcomes (the research consistently finds it does). Sadly, Miller also indulged the all-too-common myth that poor parents are lazy and shiftless, and can’t be trusted to make good choices for their kids. Alas, that doesn’t exhaust the school choice myths in Oklahoma. Writing in Community Spirit magazine in August, publisher Tom McCloud manages to hit the golden oldies (costly to taxpayers, no better results) as well as a bunch of others. Let’s look at the two arguments he stresses most. McCloud claims school choice drains money from public schools, causing them to fail. “Public schools, already in financial peril, could not support their current infrastructure or the standards we have placed upon them if many of their dollars are siphoned off to fund private schools.” There are so many errors packed into this single sentence, it’s hard to unpack them all. Let’s start with “already in financial peril.” The U.S. Department of Education says Oklahoma spends $8,851 per student in public schools. Given the state’s low cost of living and comparatively low incidence of the major social problems that complicate education, that should be plenty of funding. If the schools can’t teach kids for that much, something is wrong and it isn’t lack of funding. Note, too, the idea that imposing any kind of educational

PERSPECTIVE // January 2017

MYTHS S T C FA

standard raises costs. The argument here is that schools have a right to demand more money from us if we ask them to actually teach their students, i.e., perform the only function for which they exist. Apparently McCloud regards the first $8,851 per student as the cost of babysitting services. Teaching costs extra. McCloud’s central error, however, is that school choice has a negative fiscal impact on public schools. The logic here is flawed. If you decide to get your appendix taken out at St. Jude’s Hospital instead of St. Paul’s, did you “siphon money” from St. Paul’s? No; you didn’t pay them, but you didn’t impose any costs on them, either. However, public schools have it better than hospitals. When a student leaves a public school through a school choice program, the school loses all the costs associated with teaching that student—but only some of the revenues, not all of them. The school will lose state funds, which are tied to student headcount; but not local funds, which are raised by property taxes and disbursed to schools regardless of student headcount. McCloud’s gestures toward “infrastructure” are meant to answer this. The idea is that schools have some costs that aren’t variable per student—they have to keep the lights on, etc. But Benjamin Scafidi did a national study and found that 64 percent of school costs are variable per student; in Oklahoma he found 69 percent are variable. Since the revenue lost to choice programs is typically well below that, choice programs are a net fiscal gain for public schools. This windfall may be one reason why, contrary to McCloud’s scaremongering, public schools perform better when exposed to school choice. Of the 34 empirical studies that have been conducted, 32 find that public schools have better academic outcomes because of school choice. One reason is the competitive pressure to improve, but another may be improved budgets. McCloud also claims that private schools typically don’t participate in choice programs, so the programs don’t actually provide access to choices: “The typical private school historically

FACT Of the 34 empirical studies that have been conducted, 32 find that public schools have better academic outcomes because of school choice.

hasn’t wanted to ‘participate.’ They don’t want the ties to the state or federal governments, which could potentially demand that they change such things as their admission policies, curriculum, and religious activity requirements.” I’ve seen a lot of versions of this myth. Usually the claim is that private schools are highly selective and only want to take the “good” kids. At one point in the article, McCloud reverts to this more typical form of the myth: “Since private schools can set their own entrance requirements, they would conceivably take only the top students.” This is false. A typical American private school is an urban religious school that was founded for the purpose of serving an ethnically, economically, and academically diverse population. They love school choice precisely because it empowers poorer and lower-performing children to access the education that they want to provide those students. They welcome all these kids with open arms. Experience bears this out. Analyses of choice programs typically find no evidence of any “upward” academic or demographic selection effect, and occasionally find evidence in the other direction. Choice programs are there to serve the poorest and most struggling students when public schools fail them. McCloud’s main claim, however, is even more false—and easier to refute with numbers. Private schools flock to school choice programs! In Oklahoma, 85 schools participate in the state’s tax-credit scholarship program. Choice programs from Arizona (338 schools) to Florida (1,678) to Indiana (318) have consistently high rates of participation from private schools. You can look up how many private schools are participating in all 61 U.S. school choice programs at http://bit.ly/ChoiceSchools. In fact, it was a shock to the education world when Louisiana created a choice program a few years ago and fewer than one-third of eligible private schools participated. We had never seen that happen before. Poor program design and hostile signals from state and federal regulators made this program a uniquely

bad deal for private schools. So they didn’t take it, in sharp contrast to every other program in the country. The real agenda behind this myth is to scare private schools away from choice programs with the boogeyman of state control. In fact, modern school choice programs have been around since 1990, and while it’s true that some programs have requirements they shouldn’t have, interference with school autonomy has been relatively limited. In fact, school choice programs create a powerful new public constituency supporting private school autonomy. The funniest thing in the article is where McCloud mocks the emergence of Education Savings Accounts (ESAs) and then complains about precisely the problem ESAs solve. After making fun of the choice movement for switching from vouchers to ESAs—because apparently it’s a bad sign if you’re willing to move from a good idea to a better one—McCloud asserts that “vouchers would inflate the cost of private education.” Indeed, vouchers do inadvertently raise private school tuition. That is one reason the movement is switching from vouchers to ESAs, which allow parents to buy education services without creating an artificial tuition floor for schools. It’s also true that even ESAs raise economic demand for education services in general—but that’s just another way of saying they empower parents to pay for those services! McCloud’s article provides a public service in one respect: It collects almost all the school choice myths in one place. Maybe I don’t mind so much if the defenders of the status quo make my job easy after all. Greg Forster (Ph.D., Yale University) is a senior 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.

www.ocpathink.org

EDUCATION

REFORM HIGHER EDUCATION

Common-Sense Higher Ed Reforms

By Jonathan Small and Brandon Dutcher

“Tuition and fees increases over the past five years at Oklahoma’s public higher education system are among the country’s highest, according to The College Board,” education researcher Vicki Alger wrote in The Oklahoman on August 16, 2016. “The State Regents for Higher Education blame ‘underfunding,’ but that excuse doesn’t hold water. “From 2008-09 through 2015-16, state funding dropped 17 percent, but tuition and fees jumped 38 percent, according to the Regents’ own data,” Dr. Alger wrote. To help bring discipline to the higher education system and to make college more affordable for students, we offer the following recommendations: •

•

State lawmakers should enact a moratorium on tuition and fee increases for the next three years, after which time the regents would be given the authority to increase tuition to keep pace with inflation only. The FY-2018 state appropriation for the State Regents for Higher Education should be the same as the FY-2017 appropriation. State lawmakers should remove any effects of the “peerfactor multiplier,” which over-reimburses colleges and universities for courses. The Oklahoma State Regents for Higher Education should create and run a program to provide 40 hours of low-tuition general education. An “Oklahoma Freshman

PERSPECTIVE // January 2017

•

Academy” would provide Oklahoma residents low-cost general education courses that can be transferred and count towards a degree offered by an Oklahoma public college or university. The academy could operate as a web-based portal to approved low-cost online providers and provide tuition reimbursement from existing highereducation funds to students who pass these courses. Provider tuition less reimbursement would be lower than in-state tuition at public universities and in many cases may be zero. Indeed, this academy will likely provide Oklahoma residents with the ability to earn more than one year of college free. Moreover, the state saves money because tuition reimbursement is set lower than the subsidy payments the state makes to public colleges and universities. State lawmakers should enact ALEC (American Legislative Exchange Council) model legislation aimed at college affordability: “To aid students and their parents in their efforts at pursuing a college degree, the Affordable Baccalaureate Degree Act would require all public fouryear universities to offer bachelor’s degrees costing no more than $10,000, total, for four years of tuition, fees, and books. The Act would require that 10 percent of all public, four-year university degrees awarded reach this price-point within four years of passage of this act. To

•

• •

achieve this price-point, universities would be instructed to capitalize on the opportunities and efficiencies provided by (1) web-based technology and (2) competency-based programs.” Higher education officials should reduce non-teaching overhead. We know from Census data that the non-instructional workforce in Oklahoma’s higher education system (as a percent of the private-sector workforce) is 61 percent higher than the national average. It is the 4th highest level in the country. What’s worse, the rate of growth is higher than the national average. To get back to the national average, Oklahoma’s higher education system would have to shed 12,033 non-instructional workers—to 19,701 workers from the current level of 31,734 workers. This would result in total annual savings, on average, of $328,226,106 in wages and salaries—in addition to the millions of dollars in supplemental benefits that would be saved. The state’s two flagship universities should require professors to teach more. SoonerPoll survey data tell us that 82% of Oklahomans believe that “public colleges and universities in Oklahoma could be run more efficiently.” A full 79% believe that “professors should be paid based on how much they teach and not based on writing articles and other non-teaching activities.” Economist Richard Vedder, who helps compile the annual college rankings for Forbes, concluded in 2014 that a small proportion of the teaching faculty at OU and OSU seems to do most of the work: “Large numbers of faculty carry modest teaching loads, yet also have modest research accomplishments. If the bottom 80 percent of the faculty taught as much as the top 20 percent, universities could operate with demonstrably fewer faculty members.” The annual savings to taxpayers would be $181 million. The state regents should create a “Degree Requirements Council,” consisting of employers only, who over a period of two years will evaluate general education requirements, recommending elimination of certain courses. The state regents should create a “Research Review Council,” consisting of employers only, to review research activities and make recommendations concerning usefulness and resource allocation. Higher education officials should create a “teaching only” tenure track for professors. State policymakers should make use of the opportunities available with Western Governors University (WGU). WGU was created 20 years ago by governors in the western United States, including Frank Keating of Oklahoma. WGU does not receive any state government subsidy. It is totally dependent on student tuition. Yet at as little as $6,000 per year, WGU’s tuition is substantially lower than in-state tuition at Oklahoma’s public regional colleges. Indeed, WGU is so much cheaper that the state could pay a student’s full tuition and still save thousands

•

• •

•

of dollars annually. Following the lead of Indiana, Texas, and other states, Oklahoma policymakers should partner with WGU. State lawmakers should enact ALEC model legislation aimed at capital-spending transparency: “The Higher Education Capital Projects Transparency Act requires a public institution of higher education to develop and promulgate procedures for maximum utilization of existing facilities, to make data on the average weekly usage of classrooms and laboratories available on its website in a format clearly comprehensible to the public, and to hold public discussion of each proposed capital construction project exceeding $10,000,000 in total cost, including, but not limited to, evaluation of utilization of existing campus instructional buildings for a period not less than the three years preceding the construction proposal.” State lawmakers should require that faculty workloads and costs be made available to the public. State lawmakers should require that higher education and college and university lobbying costs be made available to the public, including the individual names of persons handling those duties. State lawmakers should require that higher education and college and university “government affairs” or “legislative liaison” costs be made available to the public. State lawmakers should enact ALEC model legislation aimed at helping employers make informed hiring decisions: “The Honest Transcript Act looks to correct grade inflation by requiring all public colleges and universities to include on student transcripts—alongside the individual grade the student received for each class— the average grade given by the professor for the entire class. This would help potential employers learn whether a given high grade-point average signifies superlative talent or merely that the student completed undemanding courses. The bill does not seek to make universities do anything differently; it only asks them to make transparent for students, parents, and taxpayers what it is they are doing.”

Jonathan Small, CPA, serves as OCPA’s 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. Brandon Dutcher is OCPA’s senior vice president. He is editor of the book Oklahoma Policy Blueprint, which was praised by Nobel Prize-winning economist Milton Friedman as “thorough, well-informed, and highly sophisticated.” His articles have appeared in Investor’s Business Daily, WORLD magazine, Forbes. com, Mises.org, The Oklahoman, the Tulsa World, and 200 newspapers throughout Oklahoma and the U.S.

www.ocpathink.org

EDUCATION

REFORM HIGHER EDUCATION

Higher Ed Efficiency Questioned Taxpayers and their elected state lawmakers have every right to ask higher-education officials: If you’re so broke, why are you spending money on this stuff? By Brandon Dutcher

Is higher education in Oklahoma “underfunded”? You may be surprised to learn that states spend an average of about 1.6 percent of their GSP on higher education, according to economist Byron Schlomach, a scholar-in-residence at the Institute for the Study of Free Enterprise at Oklahoma State University. Oklahoma spends 1.9 percent of its GSP on higher education. Getting to the national average would free up more than $500 million for lawmakers to spend on other things (K-12 teacher pay raises, for example). But aren’t further subsidies necessary to help prevent tuition hikes? Last month in these pages, Manhattan Institute economist Preston Cooper pointed out that Oklahoma’s recent budget cuts “are not the primary cause of tuition increases. Not even close.” Indeed, he says, the main culprit is the availability of taxpayer subsidies through student loan and grant programs. We could learn a lot from Purdue University president Mitch Daniels, a former governor who is earning national plaudits for cutting costs and freezing tuition. The former OMB director, a budget hawk extraordinaire, realizes higher education is inefficient. “You’re not going to find many places where you just take a cleaver and hack off a big piece of fat,” he says. “Just like a cow, it’s marbled through the whole enterprise.” Oklahomans understand this. A SoonerPoll survey in February 2016 found that 82 percent of likely voters think higher education could be operated more efficiently. Fully 80 percent think the $411,000 annual compensation for Oklahoma’s chancellor of higher education is excessive. Professor Richard Vedder, who helps compile the annual college rankings for Forbes, found that enhanced teaching loads for most OU and OSU professors would boost efficiency, resulting in $181 million in annual savings. I don’t think most taxpayers realize the extent to which higher education is a lucrative jobs program for former state legislators and legislative staff. Or that UCO donated $10,000 to an international gender and sexuality conference it hosted last semester. Or that OU hosts a conference on “how to promote reproductive justice in red states.” In October my alma mater paid $150,000 to bring hip-hop artists to Norman for homecoming. In 2015, inexplicably, OU agreed to pay $40,000 to a vile, misogynistic rapper with a history

PERSPECTIVE // January 2017

of hostile, racist, threatening chants. And this was six months after the SAE fraternity incident. OU even has its own diversity czar. He is paid $220,000 annually to, among other things, oversee mandatory “diversity training” for new students, covering things like sexual identity, unconscious bias, and privilege. OU recently spent $12,800 for a “bias hotline.” Now microaggressed crybullies can call 844-428-6531 and anonymously inform on their neighbors. (For some real-world examples of where this is heading, type “bias response Orwell” in your search engine.) In some cases higher-education spending comes courtesy of private donations or other sources. But money is fungible. This is money that’s not being used to freeze tuition. Taxpayers and their elected state lawmakers have every right to ask higher-education officials: If you’re so broke, why are you spending money on this stuff?

HEALTH CARE

RESIST MEDICAID EXPANSION

Obamacare Medicaid Expansion Enrollment Is Shattering Projections By Jonathan Ingram and Nicholas Horton

In April 2015, the Foundation for Government Accountability released a study highlighting Obamacare expansion’s enrollment explosion, using data from the first year of expansion. Now, new research finds the situation has only gotten worse. Enrollment in previously reviewed states has blasted further past projected maximums, and new data from additional expansion states indicate the problem is even worse than previously known. Altogether, 24 states that accepted Obamacare’s expansion released enrollment projections in advance and have since reported at least one year of enrollment data. In total, these 24 states promised that “only” 5.5 million adults would ever sign up for Obamacare expansion. However, actual sign-ups have surpassed these projections—and not just by a little bit. Newly obtained data from these 24 states show that at least 11.5 million able-bodied adults have now enrolled in Obamacare expansion—an overrun of 110 percent, or more than double projections. Some states have signed up more than four times as many able-bodied adults as they said would ever enroll. This enrollment explosion will soon unleash a fiscal crisis. Unlike the federal government, states cannot print their own money, and, starting in January 2017, states’ share of Medicaid expansion costs will increase to five percent. Assuming the federal government keeps its funding promises—which is in question—state costs will gradually rise to 10 percent by 2020. With expansion enrollment and per-enrollee costs rising higher and faster than Obamacare advocates promised, those costs will rapidly swamp state budgets. Medicaid expansion already makes welfare for able-bodied adults a higher priority than services for the nearly 600,000 seniors, children with developmental disabilities, individuals with brain injuries, and other vulnerable individuals currently languishing on waiting lists for needed Medicaid services. Mounting overruns will soon exacerbate pressure on policymakers to shift even more money away from the truly needy and towards Obamacare’s able-bodied adults. Obamacare expansion’s enrollment explosion, combined with higher-than-expected costs for able-bodied adults, will spell disaster for Obamacare expansion states, taking limited taxpayer resources away from the truly needy and from other core priorities, including education, public safety, and infrastructure.

Improve (Don’t Expand) Medicaid Instead of expanding Medicaid to a new class of able-bodied adults, policymakers should refocus their efforts on improving the program for those it was meant to serve: the truly needy. Lawmakers have a number of policy tools at their disposal to improve the program, and none of them require implementing Obamacare’s Medicaid expansion. For example, lawmakers could: •

Decouple and adjust the various provider rates based on need, so that critical services like nursing home care, rural primary care, rural hospital care, and other critical services with limited revenue streams can be prioritized for funding. Given that it took just $10 million to protect nursing homes from harmful cuts last session, thorough analysis reveals affordable statebased solutions can be effective.

•

Implement the Medicaid reform pilot program which was passed by the legislature in 2015 and which special interests tried to repeal during the 2016 legislative session.

•

Restructure OHCA into a cabinet-level agency with the CEO and Medicaid director appointed by the governor and reorganize the OHCA board into an advisory board. This will allow operational decisions to be made unclouded by the pressure that special interests currently wield on OHCA and will improve the overall effectiveness of the agency, just as lawmakers improved the Oklahoma Department of Human Services.

•

Utilize 21st-century tools to protect program integrity and ensure that only those actually eligible are enrolled in the program. Illinois saved an estimated $350 million per year by implementing such a program. Oklahoma’s Medicaid program could save an estimated $20 million per year by implementing a similar program.

•

Encourage local communities to increase local support and local financing for health providers that are struggling.

•

Reform TSET by creating a new rural healthcare infrastructure fund—paid for by capping any future payments to the current TSET endowment (TSET would continue to operate off a portion of annual earnings) and creating a new revenue stream for rural health care needs funded by future annual settlement payments and a portion of current earnings from the current TSET endowment. —Jonathan Small

Policymakers in non-expansion states like Oklahoma should take notice of the disasters unfolding in states that have embraced Obamacare and be glad that they have protected their own states from the same fate. Jonathan Ingram is vice president of research at the Foundation for Government Accountability, a nonprofit think tank which equips policymakers with principled strategies to replace failed health and welfare programs. He is co-author, with OCPA president Jonathan Small, of the April 2016 report, “Out of Balance: Oklahoma Health Care Authority’s Latest Plan Is Simply Obamacare Medicaid Expansion by Another Name.” Nicholas Horton is a senior research fellow at the Foundation for Government Accountability.

www.ocpathink.org

QUOTE UNQUOTE “[T]he values of our country and the ability of people to

“Based on the evidence, Oklahoma does not

“Much of the mainstream, legacy

overcome hate (are) much larger and much bigger than

have a teacher shortage problem. ... In fact,

media continues its self-disgrace.

whatever happened in those election results last night.”

there may be a surplus.”

Having failed to kill Donald

1889 Institute researchers Baylee Butler and Byron Schlomach, in an October 2016 report (bit.ly/1889Report)

Trump’s candidacy they will now

University of Oklahoma vice president Jabar Shumate, quoted by the student newspaper in a November 9 news story headlined “OU students, faculty protest president-elect Donald Trump”

“I’m of the opinion that it was Boren’s effort to mislead voters that ultimately led to the defeat of

aim at his transition. Soon they will try to kill his presidency.” Peggy Noonan, writing Nov. 16 in The Wall Street Journal

this state question. Once voters were educated about the issue, and the fact that essentially $400

“Medicaid has wasted billions

million of the estimated $615 million in tax revenue would not be going to teacher pay raises, there

annually on improper payments, with

was an obvious revolt at the ballot box.”

$142.7 billion lost just since 2009.”

Steven C. Agee, dean of the Meinders School of Business at Oklahoma City University, discussing the results of SQ 779. He says we should be wary of people “who seek to feather their own nest by riding the coattails of our public school teachers.”

U.S. Sen. James Lankford (R-Okla.), in his latest “Federal Fumbles” report on government waste