Perspective - November 2017

NOVEMBER 2017

OKLAHOMA COUNCIL OF PUBLIC AFFAIRS

Profitable Nonprofits Many Oklahoma hospitals are raking in the cash–and they continue to lobby for more government spending

In Case You Missed It Former OCPA distinguished fellow J. Rufus Fears was inducted into the Oklahoma Higher Education Hall of Fame. ocpa.co/DrFears

Liberals at the Tulsa World are teaming up with liberals at PolitiFact to do “independent fact-checking.” ocpa.co/TWFactCheck

FOX 25 reported that Gov. Mary Fallin’s Office of Management and Enterprise Services either cannot or will not find requested records about budget decisions.

Universities sometimes undermine our political freedom. ocpa.co/UniversityCulture

Oklahoma public school revenues are higher than ever. ocpa.co/OKRevenues

The latest news on Oklahoma’s student-achievement woes should move taxpayers beyond disappointment to outrage. ocpa.co/ChildrenPaying

Focusing on children, the married homemaker is an economic powerhouse. bit.ly/FamilyIsKey

ocpa.co/OMESrecords

PERSPECTIVE

When progressives argue that 529 plans are a “giveaway to the rich,” it’s hard to argue with them. ocpa.co/AEIstudentloans

OCPA and other conservative organizations recently urged policymakers to protect taxpayers. ocpa.co/LetterToLawmakers

Tom Coburn, Frank Keating, and Larry Parman urged policymakers to craft a state budget which respects their constituents’ family budgets. ocpa.co/CoburnKeatingParman

Brandon Dutcher, Editor

OCPA Trustees

OCPA Researchers

Glenn Ashmore • Oklahoma City

Melissa Sandefer • Norman

Robert D. Avery • Pawhuska

Thomas Schroedter • Tulsa

Lee J. Baxter • Lawton

Greg Slavonic • Oklahoma City

Douglas Beall, M.D. • Oklahoma City

Charles M. Sublett • Tulsa

Inc., an independent public policy

Susan Bergen • Norman

Robert Sullivan • Tulsa

organization. OCPA formulates and

John A. Brock • Tulsa

William E. Warnock, Jr. • Tulsa

David Burrage • Atoka

Dana Weber • Tulsa

Michael Carnuccio • Yukon

Molly Wehrenberg • Edmond

analysis consistent with the principles

William Flanagan • Claremore

Daryl Woodard • Tulsa

of free enterprise and limited

Josephine Freede • Oklahoma City

Perspective is published monthly by the Oklahoma Council of Public Affairs,

promotes public policy research and

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.

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PERSPECTIVE // November 2017

Ann Felton Gilliland • Oklahoma City John A. Henry III • Oklahoma City Robert Kane • Tulsa Frank Keating • Oklahoma City Gene Love • Lawton

EMERITUS BOARD

Tom H. McCasland III • Duncan

Blake Arnold • Oklahoma City

David McLaughlin • Enid

Steve W. Beebe • Duncan

J. Larry Nichols • Oklahoma City

David R. Brown, M.D. • Oklahoma City

Lloyd Noble II • Tulsa

Paul A. Cox • Oklahoma City

Mike O’Neal • Edmond

John T. Hanes • Oklahoma City

Andrew Oster • Edmond

Henry F. Kane • Bartlesville

Larry Parman • Oklahoma City

Lew Meibergen • Enid

Bill Price • Oklahoma City

Ronald L. Mercer • Bethany

Patrick T. Rooney • Oklahoma City

Daniel J. Zaloudek • Tulsa

Tina Dzurisin Research Associate Trent England, J.D. Dr. David and Ann Brown Distinguished Fellow for the Advancement of Liberty J. Scott Moody, M.A. Research Fellow Andrew C. Spiropoulos, J.D. Milton Friedman Distinguished Fellow Wendy P. Warcholik, Ph.D. Research Fellow

Oklahoma’s Highly Profitable Nonprofit Hospitals Many “nonprofit� hospitals are highly profitable entities with vast amounts of net revenue, large cash balances, profligate capital spending, and generous executive compensation. Yet they constantly plead poverty and demand ever more government spending.

By Baylee Butler and Byron Schlomach

Every legislative session, in every legislature in the country, the health care industry advocates that more taxpayer resources be devoted to Medicaid, Medicare, and a host of other healthrelated programs. The claim, along with those of other social-spending advocates, is that more money will help people who cannot otherwise afford care. In addition, the constant cry from the industry, especially hospitals, is that they are financially strapped as they struggle to meet the health demands of the indigent.

These claims, usually uncritically accepted by policymakers, do not stand up to scrutiny.

Nonprofit hospitals receive preferential tax-exempt status from the government by claiming to provide some type of charity, either free health care or some other service of public benefit, usually related to education. However, nonprofit status does not necessarily keep nonprofit hospitals from generating

massive revenues, nor does it require a minimum provision of charity. In fact, the criteria for obtaining status as a nonprofit are surprisingly simple: (1) be established for an exempt purpose, such as charity or as an educational institution (hospitals generally fall in the latter); (2) earnings cannot be transferred to private shareholders or individuals; and (3) restrict political activity. These generous guidelines allow nonprofit hospitals to balloon into massive wealth creators.

Health care spending reached $3.2 trillion in 2015, a startling 17.8 percent of Gross Domestic Product, or well over one-sixth of the economy. While the health care debate has centered on statistics comparing the number insured versus uninsured, few understand why health care has become such a large portion of the economy. A major cause is that it has become increasingly expensive, substantially artificially so.

We have a government-inspired/

incentivized/created health care payment system (private insurance, Medicare, and Medicaid) that pumps money into the health care sector through a non-market, irrational pricing system. As a result, many nonprofit hospitals, especially metropolitan ones, are highly profitable entities with vast amounts of net revenue and new facilities regularly under construction, such as the $150 million Mercy hospital coming to Oklahoma City.

Nonprofit hospitals’ publicly available tax submissions serve as a window into the money-bloated health sector, one that constantly cries poverty and demands ever more taxpayer resources. A better understanding of the health care sector’s financial picture will aid policymakers deliberating how best to reform the way we pay for health care.

Nonprofit Hospitals: Raking in the Cash Seven of the top ten most profitable hospitals in the United States are registered nonprofits. Nonprofits clearly have a financial edge in the medical industry since at least some of their profitability is directly attributable to their tax-preferred status. The New England Journal of Medicine reports that nonprofit hospitals take advantage of approximately $13 billion annually in federal tax breaks. This is in keeping with data gleaned from examining IRS financial reports of Oklahoma’s nonprofit hospitals. Four of Oklahoma’s top 10 largest public charities are nonprofit hospitals. The largest overall, St. Francis Hospital Inc., has just under $1 billion in total revenue and more than $165 million in net revenue, or profit.

Nonprofit hospitals’ reported profits (net revenues, in the Form 990 terminology) should be viewed with a healthy level of skepticism, not for being reported too high, as you might expect a corporation to do in order to

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PERSPECTIVE // November 2017

maximize its stock value, but for being reported too low. While there are no regulations on the amount of profit a nonprofit can make, by virtue of being nonprofit organizations, they have an incentive to distribute their profits as costs. Unlike private organizations, nonprofits cannot distribute excess profits to investors/shareholders. Instead, some of the profit is distributed as cost through profligate capital spending and generous compensation. In addition, the optics of high profits are mitigated by claims of bad debt, or uncompensated care. These are amounts not originally intended as charitable contributions to the community or individuals but rather are billings or accounts receivable the hospital does not anticipate it will ever recoup.

Charitable care and uncompensated care help diminish what otherwise might be offensive profits. The ideal would see nonprofit hospitals fulfilling their mission by using excess revenue for public benefit by providing care at low cost to those with low incomes. However, not only do nonprofit hospitals report higher average profit margins than for-profit hospitals, the amount of charitable care reported is wanting. In fact, the difference in charitable care between nonprofit and for-profit hospitals is negligible, with nonprofits reporting approximately 4.7 percent of expenses in charitable care compared to 4.4 percent by for-profit hospitals.

Large profits for nonprofit hospitals exist despite massive amounts claimed

TABLE 1

Oklahoma Nonprofit Hospitals’ Profits PROFIT MARGIN IGNORING BAD DEBT

TOTAL REVENUE

6,682,056

179.5%

3,721,944

-15.0%

2,853,819

23.9%

11,961,070

-1,433,289

-8.8%

4,126,641

25.3%

16,296,318

2,780,728

3.3%

17,611,369

21.0%

83,923,228

Mercy Hospital Watonga

676,329

10.8%

1,716,292

27.4%

6,262,652

McCurtain Memorial Medical

-393,745

-1.8%

2,990,765

13.6%

21,947,162

Newman Memorial Hospital

-794,763

-8.5%

445,151

4.8%

9,310,990

-2,693,495

-5.5%

3,589,894

7.3%

48,948,986

254,929

3.1%

1,231,744

14.9%

8,292,986

25,189,800

25.4%

36,779,624

37.1%

99,274,250

PROFIT (NET REVENUE)

PROFIT MARGIN

Pushmataha Family Medical

2,034,587

54.7%

Purcell Municipal Hospital

-1,793,650

Mercy Hospital El Reno

HOSPITAL

Mercy Hospital Ada

Farmers Union Hospital Mercy Hospital Kingfisher Saint Francis Hospital South

PROFIT PLUS REPORTED BAD DEBT

783,668

11.6%

1,575,668

23.2%

6,786,225

-32,522,065

-14.9%

-7,788,108

-3.6%

217,657,086

5,641,251

5.1%

18,264,724

16.3%

111,776,747

467,118

7.8%

1,076,512

18.0%

5,986,643

-1,123,643

-7.1%

346,389

2.2%

15,944,897

701,532

3.3%

2,633,078

12.3%

21,487,245

165,259,360

17.5%

237,705,650

25.2%

942,853,731

Mercy Hospital Ardmore

6,391,370

4.6%

16,940,164

12.2%

139,084,023

St. Anthony Shawnee Hospital*

5,022,467

7.1%

9,669,936

13.7%

70,460,157

23,128

0.2%

812,877

6.2%

13,076,920

1,078,493

18.2%

1,421,840

24.0%

5,936,441

-306,113

-0.9%

1,419,552

4.3%

32,970,672

197,598

4.9%

396,461

9.9%

3,997,433

17,068,662

14.6%

22,762,349

19.5%

117,059,080

Integris Health Edmond

998,277

2.7%

2,590,835

7.1%

36,490,851

Stigler Health & Wellness

920,208

6.8%

1,504,823

11.1%

13,586,796

20.4%

34,934,582

Mercy Hospital Tishomingo Integris Health Inc. Duncan Regional Pawhuska Hospital Inc. Kingfisher Regional Hospital Mercy Hospital Logan County St. Francis Hospital

Cleveland Area Hospital Coal County General Hospital Adair County Health Center Jane Phillips Nowata Hospital Jane Phillips Memorial Medical

Owasso Medical Facility

5,841,005

16.7%

7,133,939

Integris South OKC

5,691,537

2.4%

12,703,205

5.3%

241,573,764

Integris Rural Health

17,950,725

6.4%

24,637,151

8.7%

282,050,247

Mercy Hospital OKC

59,003,860

14.0%

66,105,685

15.7%

421,908,739

St. John Medical Center

66,842,452

12.3%

75,174,124

13.8%

544,580,960

73,149,103

10.2%

82,188,337

11.5%

716,157,981

66,564

0.3%

161,265

0.7%

22,657,981

$422,973,988

9.8%

$657,463,811

Integris Baptist St. John Sapulpa

TOTAL/AVERAGE PERCENTAGES

15.2% $4,328,958,787

Source: National Center for Charitable Statistics, Forms 990 data, http://nccs.urban.org/ Note: Profit Margin equals (Revenue – Costs)/Total Revenue *A separate form 990 for St. Anthony Oklahoma City could not be found

www.ocpathink.org

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TABLE 2

Cash and Cash Equivalents of Oklahoma’s Nonprofit Hospitals PROFIT (NON-INTEREST BEARING)

SAVINGS & TEMP CASH INVESTMENTS

TOTAL

375,683

204,495,758

204,871,441

Integris Baptist

74,931,390

80,960,065

155,891,455

St. John Medical

--

12,879,580

12,879,580

93,321,094

--

93,321,094

101,505,716

380,000

101,885,716

66,435,135

40,473,963

106,909,098

3,119,699

--

3,119,699

--

89,878,106

89,878,106

Stillwater Medical

20,407,362

46,136,650

66,544,012

Jane Phillips Memorial

10,262,622

--

10,262,622

Duncan Regional

7,123,454

2,194,823

9,318,277

St. Francis South

984,339

213,806

1,198,145

1,443,159

--

1,443,159

--

558,782

558,782

3,918,932

18,161,825

22,080,757

Owasso Medical

909,571

--

909,571

Adair County

668,826

2,123,871

2,792,697

1,731

--

1,731

McCurtain Memorial

--

45,445

45,445

Mercy Logan County

1,572

--

1,572

Kingfisher Regional

3,183,824

981,687

4,165,511

Stigler Health

2,634,512

2,626,853

5,261,365

472,920

--

472,920

27,105

95,000

122,105

1,016,678

408,912

1,425,590

142,872

--

142,872

HOSPITAL St. Francis

Mercy OKC Integris Rural Health Integris South OKC St. John Health Integris Health Inc.

Mercy Ada St. Anthony Shawnee Farmers Union

St. John Sapulpa

Cleveland Area Purcell Municipal Newman Memorial Mercy Watonga

--

1,471,797

1,471,797

Coal County

154,063

1,711,260

1,865,323

Jane Phillips Nowata

250,394

--

250,394

Pushmataha

389,066

--

389,066

East Central Oklahoma

180,571

--

180,571

3,492

--

3,492

$493,865,782

$505,798,183

$999,663,965

$15,433,305

$15,806,193

$31,239,498

Pawhuska

Care Dynamics

TOTAL AVERAGE

Source: National Center for Charitable Statistics, Forms 990 data, http://nccs.urban.org/

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PERSPECTIVE // November 2017

as bad debt. According to Steven Brill, “$39.3 billion in charity care cost the hospitals less than $3 billion to provide. That’s less than half of 1% of U.S. hospitals’ annual revenue and includes bad debt that the hospitals did not give away willingly in any event.” Because of this, it is helpful to look at nonprofits’ profit margins, both for profits calculated without subtracting bad debt and profits reported as net revenue, which does account for bad debt. These amounts for 32 nonprofit hospitals in Oklahoma can be found in Table 1.

Even net of bad debt, nonprofit hospitals in Oklahoma are generally operating with positive net revenues (9.8 percent profit margin). Not accounting for bad debt, nonprofits average a very healthy 15.2 percent profit margin. To put this in perspective, for the fiscal year ending in 2017, Macy’s reported a profit margin of 5.1 percent, and Verizon reported a margin of 21.5 percent. In 2013 the pharmaceutical industry, often cast as a villain in the health care industry by pundits and politicians, averaged a profit margin of approximately 18 percent.

Some would argue that a measure for profit not accounting for bad debt as a cost should not be used as a means of comparison. However, it is well established that hospital pricing practices do not reflect any kind of rational market-based pattern due to the prevalence of third-party payers.

Those patients who must pay all or a substantial portion of their bills often balk at the outrageous sums in the bills and refuse to pay. Very often, when hospitals are paid only a portion of a bill, they write off the balance as bad debt, even though they find the payment they received sufficiently profitable and do not harass the debtor any further.

Ninety percent of health care costs are not paid directly by patients, but by insurance companies (with employers paying most of the premiums) and the government.

Hospitals use highly artificial pricing that is also highly inflated compared to their costs. Consumers are unable

TABLE 3

Oklahoma Nonprofit Hospitals’ Assets

HOSPITAL

LAND, BUILDINGS, EQUIPMENT

1,642,835,285

882,567,449

642,892,665

523,300,390

74,276,847

223,188,315

Mercy Hospital OKC

330,680,152

380,800,492

Integris Rural Health

224,268,998

299,898,836

Integris South OKC

236,035,665

239,671,464

St. John Health System

784,261,255

4,484,473

1,222,661,019

277,113,647

129,234,033

200,944,328

66,141,398

52,522,519

St. Francis Hospital Integris Baptist St. John Medical Center

Integris Health Inc. Mercy Hospital Ardmore Jane Phillips Memorial Medical

to shop around for affordable, quality care due to the mind-bogglingly opaque and illogical pricing system.

Every hospital has a price-list called a chargemaster, a highly overstated and inflated price list of all of the items and services a hospital bills to patients. The prices are continuously changing, not remotely based on cost, and unavailable to anyone wanting to know the prices of common items prior to receiving care. In fact, only 35 percent of physicians self-report that they regularly discuss costs with patients.

The truth of hospitals’ profit margins likely lies somewhere between the margins reported here, but it is important to note that the larger profit measure results in only one hospital suffering a net loss while the net revenue measure, which nets out bad debt, results in 8 hospitals suffering losses. The true financial picture of hospitals is often far from the dire picture bad debt helps them to paint for the general public and policymakers.

Moreover, with their sizable profit margins, nonprofit hospitals in Oklahoma are able to maintain large cash and cash-equivalent balances.

These amounts show up on IRS reports as either cash, savings and temporary investments, or both. These are shown in Table 2. The 32 nonprofit

NET ASSETS

Duncan Regional Hospital

143,227,317

147,439,063

St. Francis Hospital South

62,358,395

120,492,213

2,779,766

47,034,200

St. Anthony Shawnee

28,321,695

59,756,683

Farmers Union Hospital

46,433,694

84,750,229

Integris Health Edmond

-11,058,687

104,893,700

Owasso Medical Facility

11,382,717

47,936,828

Adair County Health Center

13,232,792

16,727,523

St. John Sapulpa

-6,392,017

8,930,961

McCurtain Memorial Medical

1,287,161

16,983,160

Mercy Hospital Logan County

9,481,339

7,984,863

-560,298

2,385,651

189,063

31,243,982

Stigler Health & Wellness

6,604,703

8,005,298

Cleveland Area Hospital

-268,739

806,499

Mercy Hospital Ada

Mercy Hospital El Reno Kingfisher Regional Hospital

3,962,792

13,954,924

5,556,777

23,044,666

254,929

711,136

-462,198

649,157

676,310

415,428

Pawhuska Hospital Inc.

3,372,396

4,738,418

Coal County General Hospital

3,056,552

2,953,110

Jane Phillips Nowata Hospital

2,984,440

2,121,132

Pushmataha Family Medical

4,925,821

9,618,430

677,522

3,572,532

-19,751

180,011

$5,685,291,808

$3,851,821,710

$157,924,772

$106,995,047

Purcell Municipal Hospital Newman Memorial Hospital Mercy Hospital Kingfisher Mercy Hospital Tishomingo Mercy Hospital Watonga

East Central Oklahoma Care Dynamics TOTAL AVERAGE

Source: National Center for Charitable Statistics, Forms 990 data, http://nccs.urban.org/

www.ocpathink.org

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TABLE 4

Top Oklahoma Nonprofit Hospital Executive Salaries

HOSPITAL

TOP EARNING EMPLOYEE

SALARY

HOURS WORKED PER WEEK

St. Anthony Shawnee Hospital

William Thompson Director & Vice-Chair

5,504,981

56

1,966.06

Jake Henry Jr President/CEO/Director

1,673,100

40

836.55

Dr. James W Long Physician

1,281,530

40

640.77

Dr. David W Vanhooser Physician

1,182,402

40

591.20

David J Pynn President & CEO

1,089,926

46.2

471.83

Integris South OKC

C. Bruce Lawrence Ex-Officio

1,001,023

40

500.51

Mercy Hospital OKC

Diana Smalley President

915,722

60

305.24

Dr. Wojciech Dulowski Physician

896,338

60

298.78

John Migliaccio Vice President/Chief of Staff

663,423

41

323.62

Lex Anderson Treasurer/Sr VP & CFO

643,261

46.2

278.47

Jay Johnson CEO

467,270

40

233.64

Farmers Union Hospital

Francis Abraham Vice Chief of Staff/Physician

380,237

40

190.12

Cleveland Area Hospital

Jason Sims Physician

316,532

40

158.27

Kingfisher Regional Hospital

John Parigi CFO

282,600

40

141.30

Eric Broadway MD Psychiatrist

266,291

40

133.15

Gary Lovell Physician

240,385

40

120.19

Jeffrey Shelton CEO

201,962

40

100.98

Sean Orlino Chief of Staff

187,095

40

93.55

John Ham PA-C Emergency Room

175,317

48

73.05

Dr. Edwin F. Ellis Medical Director

173,891

40

86.95

Billy Johnson CEO

103,919

41

50.69

Samson Jerimiah President

77,726

40

38.86

$805,678

43.56

St. Francis Hospital

Integris Baptist

Integris Rural Health

St. John Health System

Adair County Health Center

McCurtain Memorial Medical

St. John Medical Center

Duncan Regional Hospital

Stigler Health & Wellness

East Central Oklahoma Family

Newman Memorial Hospital

Purcell Municipal Hospital

Pawhuska Hospital Inc.

Pushmataha Family Medical

Coal County General Hospital

Care Dynamics

AVERAGE TOTAL

$17,724,931

Source: National Center for Charitable Statistics, Forms 990 data, http://nccs.urban.org/ Note: In some instances, the top-earning employee at a hospital is in fact a physician who provides care, but most often this is not the case.

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PERSPECTIVE // November 2017

DOLLARS PER HOUR

$346.99

hospitals reporting such balances have a total of a billion dollars of liquid funds, an average of more than $31 million per hospital. These are not amounts one would expect to see if nonprofit hospitals in Oklahoma were under financial distress.

Cash does not constitute all the assets of hospitals. Most of their assets are in fixed investments, including buildings and equipment.

Spending generously on these assets, as it happens, helps to reduce the appearance of profitability. As can be seen in Table 3, total net assets of the 36 Oklahoma nonprofits included in this study amount to more than $5.6 billion, an average of $158 million per hospital.

As previously noted, another way nonprofit hospitals can spend down their profits is by paying their managers eye-popping salaries and other compensation. An examination of the highest executive salary at 22 nonprofit hospitals reveals that these individuals were paid a combined total of nearly $18 million, an average of more than $800,000 each. The top executive salaries were examined at

Getting rich is not the problem; the problem is citing financial distress under false pretenses as a basis for forcibly taking more money from taxpayers to distribute it to an industry covered up with millionaires.

22 separate institutions so as to avoid double-counting executives who are part of a larger chain and show up on multiple form 990s.

The bottom line: nonprofit hospitals are moneymaking businesses whose philanthropic activity is negligible, but who pay their top executives generously.

Why Nonprofit Profits Are an Issue Profit and high levels of compensation in nonprofit hospitals are the focus of this article only to correct an impression so often promoted during budget-writing time that hospitals are constantly on the precipice of bankruptcy. In a free enterprise system, profit is a crucial component of the price system that signals where and how resources should flow to create the greatest possible amount of prosperity. Compensation for talent plays the same part. However, as already pointed out, the health care system is not subject to the free enterprise price system. Once the federal tax system encouraged employers to provide

health benefits after World War II and the federal government began to cover so much of the nation’s health bill after 1965, a true price system largely ceased to operate in health care.

Today, the health care industry is a highly profitable industry that spends billions of dollars lobbying the government for an ever-increasing share of federal and state budgets. It seems that a sixth of the economy is just not enough.

Nonprofit hospitals play an active role in advocating for the expansion of government-provided healthcare through programs like Medicaid. These nonprofits claim that unpaid debts and heavy use of emergency facilities have nearly bankrupted them—problems they say can be solved by increasing government involvement. These claims hardly seem to match with the reality reported by these institutions in their federal financial documents, as cleverly constructed with bad debt and inflated salaries as these reports may be.

Providing care to those who need it is both a noble and valuable service for which people should be well compensated. Getting rich is not the problem; the problem is citing financial

distress under false pretenses as a basis for forcibly taking more money from taxpayers to distribute it to an industry covered up with millionaires.

It is obvious that nonprofit hospitals and those owning and/or operating them are getting wealthy partly at taxpayers’ expense. The third-party payer system in place has given hospitals both the incentive and the ability to do so by distancing health care providers from the people who matter most—the patients.

Until the American public is once again trusted to make decisions regarding their own care and the care of their loved ones, the issues present in the current system are not going to go away.

Baylee Butler (M.A. in political science, Oklahoma State University) is a research associate for the 1889 Institute, an independent education and research organization.

Byron Schlomach (Ph.D. in economics, Texas A&M University) is director of the 1889 Institute.

This article is adapted from their study, “The Profitability of Nonprofit Hospitals: Do They Really Need More Money?” (1889 Institute, September 2017, www.1889institute.org).

www.ocpathink.org

9

By Trent England

TSET Promotes Alcohol Consumption, Other Risky Behaviors

Why does a state agency award grants for “alcohol use prevention” while promoting bars? And why would any state agency spend money to promote “drag shows” and other raunchy programs at nightclubs?

OCPA’s Center for Investigative Journalism recently reported that Oklahoma’s Tobacco Settlement Endowment Trust (TSET) “is so focused on opposition to smoking that it promotes bars and nightclubs as long as the venues promise to be smoke free.”

TSET, created in the Oklahoma Constitution in 2000, is insulated from control by voters or legislators.

Its mandates include “research and treatment [of] cancer and other tobacco-related diseases” and “tobacco prevention and cessation programs,” but also catchalls like “Programs… designed to maintain or improve the health of Oklahomans” and “Programs and services for the benefit of the children of Oklahoma.” Its bank account has grown to more than $1.1 billion.

A few years ago, TSET hired a California consulting firm that labels itself “the behavior change agency” to create Free The Night. In the last two years, TSET spent $653,150 on this program to offer “promotional opportunities to smokefree bars and clubs.”

On its own website and social media pages, Free The Night promotes 35 “partners” that are “smokefree bars and clubs.”

The Center for Investigative Journalism report points out that,

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PERSPECTIVE // November 2017

“Many are traditional bars, sports bars, or dance clubs, but some of these TSET-promoted businesses offer racier fare.”

One Tulsa club specializes in scantily clad women performing burlesque shows, another recently featured male strippers, and a third is advertising “torture acts” and a “spanking booth” as part of an upcoming event.

A fourth Tulsa venue specializes in programs featuring men dressed as women and hosts watch parties for “Ru Paul’s Drag Race.”

Perhaps most startling is the Oklahoma City club that TSET’s Free The Night website calls “a safe, supervised, and smoke-free place to hang out” and “an exciting, different place for youth to spend their weekends.”

The Free The Night site links to the club’s Facebook page, which shows that most of the programs involve men dressed, but often barely dressed, as women. With TSET’s help, the club targets teenagers, inviting people as young as 15 to attend programs like “drag 101” and making show times earlier “so our younger crowd can actually stay and see the show.” There is no upper age limit at the club.

Beyond the hypocrisy of spending state dollars to promote shots, cocktails, and vodka infusions, consider what else those funds could buy. The state share of nursing home costs is 51.45 per day. That means TSET’s Free The Night spending could have covered the state’s share of 12,694 days of nursing home care.

According to a presentation last year by the Oklahoma Department of Mental Health and Substance Abuse Services, “excessive alcohol use cost $3.08 billion [in Oklahoma] in 2010 as a result of lost workplace productivity, healthcare expenses, and crime.” Part of the Department’s mission is to provide services to the 251,000 Oklahomans who are dependent on or otherwise abusing alcohol. But while one state agency tries to combat alcohol abuse, TSET is spending state money to promote drinking.

Here are just a few quotes from TSET’s Free The Night website.

• Boosting a Tulsa bar: “Don’t forget about happy hour… you can buy a shot and get a free domestic beer.”

• About an Oklahoma City club, TSET encourages Oklahomans to enjoy “both cold and hot cocktails” and “friendly female staff.”

• TSET promotes a Tulsa club that “specializes in vodkas (boasting the largest selection in Oklahoma!) and housemade drink infusions – but also offers a wide range of beer and wine.”

Beyond the hypocrisy of spending state dollars to promote shots, cocktails, and vodka infusions, consider what else those funds could buy. The state share of nursing home costs is $51.45 per day. That means TSET’s Free The Night spending could have

covered the state’s share of 12,694 days of nursing home care.

Many Oklahomans are still struggling with the results of collapsed oil prices. Over the last decade, the national recession and then our local recession have caused families and businesses to make hard choices, to cut costs, to do more with less. At the same time, the growth of state government has slowed and some have insisted the only answer is higher taxes. There is simply nothing left, they tell us, to cut and reallocate money to higher priorities.

With government spending at an all-time high, and examples like TSET, Oklahomans are right to push back. Money-saving reforms abound, along with other ways to balance the books without damaging tax hikes.

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 to 9 a.m. every weekday on Oklahoma’s AM 1640, “The Eagle.”

www.ocpathink.org

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By Jonathan Small

Oklahoma Bar Association, Far Left Attack Scott Pruitt A liberal U.S. senator investigates a member of the Trump administration.

The storyline is uninteresting, except that the target is Environmental Protection Agency (EPA) Administrator Scott Pruitt, and the senator’s strategy involves filing a complaint with the Oklahoma Bar Association (OBA). Add in an Oklahoma higher education employee and you’ve got one intriguing story.

The senator is Rhode Island’s Sheldon Whitehouse, whose liberal record is solid and whose relationship with the truth is shaky. Even the liberal PolitiFact website notes him making false statements about everything from entitlement reforms to budget policy and environmental regulation. He once defended crony capitalism for companies like now-bankrupt Solyndra, claiming it would end reliance on foreign oil, even though oil is used to generate about a whopping one percent of our nation’s electricity.

Sen. Whitehouse claims Pruitt did not answer enough questions during his confirmation process. This is absurd. Pruitt answered more than 1,000 written questions and another 206 oral questions during his hearing. For comparison, the last EPA Administrator nominee faced just 133 written questions and only 69 more at her confirmation hearing. In fact, no nominee for this position has ever faced anything like the volume of questions that Pruitt was asked—and answered—earlier this year.

Despite all this, Whitehouse claims Pruitt was “evasive,” that he was “stonewalling,” and that some of the answers were insufficiently clear.

The Oklahoma higher education employee in this tale is law professor Kristen van de Biezenbos of the University of Oklahoma, who has a past association with Whitehouse and donated to Hillary Clinton’s presidential campaign. Joining her is a group called the Center for Biological Diversity, a Tucsonbased radical environmental group that seems to exist primarily to file lawsuits. Kristen van de Biezenbos and company have now filed an ethics complaint with the Oklahoma Bar Association

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PERSPECTIVE // November 2017

demanding that Pruitt be disbarred or otherwise punished.

Why would these liberals look to a private state lawyers’ group to go after a member of the President’s cabinet? Two reasons: the Oklahoma Bar Association is a private group that possesses government power, and it has a track record of taking far-left political stances.

In Oklahoma, old state laws give the bar association real power. It gets to license lawyers and to manage part of the process of lawyer discipline. It also gets a guaranteed say in who does and does not get to be an Oklahoma appellate judge. This is a lot of power for a private group that takes political positions.

What kind of positions? Just last December, Oklahoma Bar Association president Garvin Isaacs was interviewed by The New Yorker about the incoming Trump Administration. His measured opinion: “We are in danger. The whole country is in danger. Our kids are in danger.”

Actually, Isaacs was not talking just about the Trump Administration, but about … Scott Pruitt’s nomination to be Administrator of the EPA. Isaacs, of course, is entitled to his opinion, but it’s no wonder a group of liberals believe the Oklahoma Bar Association will do their dirty work. The OBA is even publicly commenting to the far-left Huffington Post and legitimizing Whitehouse’s attack.

Hopefully, the OBA will do the right thing and not be used as a tool of the far left. But either way, the episode is a reminder to Oklahomans that we let a private political group have government power at our peril.

Jonathan Small is the president of the Oklahoma Council of Public Affairs. A Certified Public Accountant, he previously 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. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden.

Private-School Choice Boosts College Enrollment, Graduation

By Mike Brake

The best test of any school choice program is this simple one: Does it help kids learn more? New research into the nation’s largest school choice program, Florida’s Tax Credit Scholarship Program (FTC), shows that it clearly does.

“Although several studies have documented the effects of statewide private school choice programs on student test scores, this report is the first to examine the effects of one of these programs on college enrollment and graduation,” write Matthew Chingos and Daniel Kuehn of The Urban Institute (hardly a bastion of conservative thought).

“Using data from the Florida Tax Credit (FTC) Scholarship program, we find that low-income Florida students who attended private schools using an FTC scholarship enrolled in and graduated from Florida colleges at a higher rate than their public school counterparts.”

The FTC was created in 2001. It grants tax credits to individuals and businesses that donate to a scholarship fund that in turn allows low-income students to attend private schools.

Chingos and Kuehn examined post-graduation experiences of more than 10,000 FTC students who were enrolled in the program from 2004 through 2010, and compared them to a peer group that remained in public schools.

Overall, FTC participation boosted college enrollment by 15 percent. But the longer students were in the program, the better the outcomes.

Three years in FTC resulted in a college enrollment advantage of from 19 to 25 percent, while students who spent four or more years in FTC were almost twice (43 percent) as likely to go on to college as their public school peers.

Best of all, students who entered the FTC program in grades 3 through 7 also showed increased improvements in completing associate degrees. Overall the study is very clear: kids who took advantage of the FTC program were more likely to attend college and improve their lives.

“We are incredibly pleased to see the results of this study,” said Greg Brock, executive director of the American Federation for Children, “as it confirms what we have known to be true for years: private school choice programs provide families, especially disadvantaged families, greater opportunities to achieve academic success. And given that the Florida program serves students that have average family incomes of $25,000 per year, with 68 percent of the 100,000 enrolled students being Black or Hispanic, it shows that private school choice programs can close the academic achievement gap for minorities and low-income families.”

What do these results mean for students? A fuller understanding “will require continuing to track their outcomes as more progress through their education and into the workforce,” Chingos and Kuehn write. “As policymakers consider the design, expansion, or reform of private school choice programs, they should carefully examine not just a program’s likely impact on short-term metrics such as test scores, but also how it might shape long-term outcomes, including college enrollment and graduation.”

School Choice Saves the State Money, Too Not only does Florida’s tax-credit scholarship program boost college attendance and graduation, it also saves the state money.

The nonpartisan Florida Office of Program Policy Analysis and Government Accountability found in 2008 that the state saves $1.49 for every $1 lost in revenue.

So it is in Oklahoma. In a new report (“Fiscal Impact Analysis of the Oklahoma Equal Opportunity Scholarship Tax Credit”), Oklahoma City University economists Jacob Dearmon and Russell Evans found that Oklahoma’s tax-credit scholarship program provides a “fiscal savings to the state, as expenditures avoided more than offset the foregone tax streams from the tax credits. A careful review of the donations and scholarships provided through the state’s three largest scholarship granting organizations suggests a fiscal saving of $2.58 for every $1 in claimed income tax credits when all funding sources are included.

Fiscal savings solely to the state budget are estimated at $1.24 for every $1.00 of tax credit issued.”

—Editor

www.ocpathink.org

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By J.E. McReynolds

Teacher Absenteeism Is a Problem in Oklahoma’s Public Schools In Oklahoma, the chronic teacher absenteeism rate for charter schools is around 5 percent. In traditional public schools, it’s 20 percent.

Students learn more when their regular teachers are in the classroom. They learn less when those teachers are absent.

Charter schools have much lower rates of chronic absenteeism among teachers than do traditional public schools.

Ergo, charter school students have a better shot of getting the most exposure to teachers who aren’t taking sick leave or personal leave.

The above conclusion isn’t an opinion. It’s based on a statistical examination of teacher absenteeism rates across the United States. The findings support the contention that charter school teachers have a better attendance rate than traditional public school teachers. Also, the greater the presence of unions in schools, the higher the chronic absentee rate.

In a study released in September by the Thomas B. Fordham Institute (“Teacher Absenteeism in Charter and Traditional Public Schools”), Fordham senior research and policy associate David Griffith concludes that teachers in traditional public schools are nearly three times as likely to be chronically absent as teachers in charter schools.

In eight states, including Oklahoma, absentee rates are at least four times higher.

Teachers in traditional schools are absent more often than charter school teachers in all but one of the 35 states that have a significant charter school presence.

Chronic absenteeism is defined as being greater than 10 days taken for sick leave or personal leave during the school year.

In Oklahoma, the chronic teacher absenteeism rate for charter schools is around 5 percent. In traditional public schools, it’s 20 percent.

Since no union presence is extant in Oklahoma’s charter schools, the union factor is not significant.

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Griffith also found that teachers in general have a higher absenteeism rate than other workers. On average, teachers miss about eight school days a year (not counting school breaks and holidays), while the average U.S. worker takes about 3.5 sick days per year. Chronic absenteeism among a subset of teachers compounds the problem for many U.S. students.

While taking roll is a routine part of a teacher’s daily duties, students don’t get to measure teacher attendance. Griffith says his findings suggest that chronic absenteeism rates in traditional public schools are at least partly attributable to the “generous leave policies enshrined in state and local collective bargaining agreements.” In other words, the more leave a worker has a right to take, the more he or she is likely to take.

“Why would we hold schools accountable for the attendance of their students but not of their teachers?” Griffith asks. “How can anyone expect students to learn when their teachers are absent?”

None of the 50 states uses teacher chronic absenteeism rates as an indicator of school quality, the study notes, “despite the fact that most schools already report a version of such data to the federal Office for Civil Rights.”

Just one of the nation’s leading charter school networks (California’s Green Dot system) is fully unionized. In that network, the chronic teacher absenteeism rate is three times higher than the five largest Charter Management Organizations.

KIPP, which has two schools in Oklahoma City, is among the largest CMOs used in the comparison.

Griffith concludes that improving teacher attendance nationwide would be the equivalent of extending the school year or hiring thousands of more teachers—all at no additional cost to taxpayers.

A former managing editor of The Journal Record, J. E. McReynolds has served as a general assignment reporter, business editor, and opinion editor of The Oklahoman.

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OCPA president Jonathan Small discusses the economic impact of Oklahoma energy companies at a September 27 press conference at the state Capitol. Pictured in the background is state Rep. Mark McBride, vice chairman of the House Energy Committee.

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OCPA's Trent England (right) discusses the special legislative session with Jess Bruno of KFOR, the NBC affiliate in Oklahoma City.

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During the recent "Tax Cuts Now" event in the OCPA parking lot, OCPA board chairman Larry Parman (right) tells FOX 25 that tax cuts will boost economic growth.

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Trent England (holding microphone) broadcasts live from the OCPA parking lot during the recent "Tax Cuts Now" bus tour. The tour began at OCPA and ended at the Internal Revenue Service building in Washington, D.C. Be sure to listen to The Trent England Show weekday mornings from 7:00 to 9:00 on AM 1640 The Eagle, with the TuneIn app on your phone, or at KZLSAM.com.

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OCPA's Dave Bond (left) tells reporter Sarah Stewart of KFOR, the NBC affiliate in Oklahoma City, that policymakers should reject any efforts to tax capital gains.

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QUOTE UNQUOTE “62%”

“Government health-care programs are among the biggest suppliers of prescription painkillers. The attorneys general

The percentage of coverage about the early days of the Trump presidency that was negative, according to a content analysis by the Pew Research Center.

Five percent of the coverage was positive.

ought to be investigating how Medicaid may help promote opiate abuse and addiction.”

Wall Street Journal editorial writer Allysia Finley

“[University] classrooms have become propaganda vehicles

“Now more than ever, policymakers must

where captive audiences of students are told not how to think

deliver on their campaign promises to right-size

but what to think, particularly about sensitive issues like the

government and adjust it to the current tax burden

Middle East, the Arab-Israeli conflict, gay rights, Black Lives

borne by Oklahomans.”

Matter. And they are graded on what they think, rather than how they think.”

Harvard Law Professor Emeritus Alan Dershowitz, a longtime liberal Democrat

Tom Coburn, Frank Keating, and Larry Parman in an October 3 open letter to Oklahoma state policymakers

“I think it's going to attract people who don’t have the right to be part of the conversation.”

“We’re used to having plenty of options, and we distrust institutions.”

Tommy Schultz, national communications director at the American Federation for Children, explaining why two recent national surveys have shown incredibly strong support for school choice among Millennials

Oklahoma City school board member Carrie Coppernoll Jacobs, discussing why she opposed inviting the public to give input on whether to change the names of certain schools. Some people “don’t get a platform in a real conversation about the future names of those schools,” she said.