OK: House Speaker on taxes, ‘right-sizing’ spending, and budget challenges in the 2013 session

OKLAHOMA CITY — Rep. T.W. Shannon, speaker of the Oklahoma House of Representatives, will press for reductions in business franchise fees and personal income taxes during the 2013 legislative session.

In an interview with CapitolBeatOK, the Lawton Republican outlined priorities for this year’s work – including, on the one hand, tension between hopes for tax cuts, fiscal discipline or “right-sizing” of state government, and, on the other hand, pressure from agencies to boost spending.

The Legislature will have about $170 million more to appropriate this year than last – but agencies have requested more than $1 billion in increases.

Shannon said the latest analysis he has studied put total agency spending increase requests at $1.4 billion: “We are not going to meet that, I assure you.”

Shannon listed his top three goals for the session, which begins Monday, Feb. 4 with Gov. Mary Fallin’s State of the State address: reforming management of state assets, including possible sale of some assets, tax reform and workers compensation reform. 

He said, “we need to take better care of the property and other assets we intend to keep as a state. My idea is for a pay-as-you-go approach on infrastructure improvements. 

“In terms of management, we need to either liquidate assets or sell them off, and then make improvements on what we know we’re going to keep.

“If we’re going to keep some things, we want to make responsibility clearer and more focused. We have  identified six agencies or boards that have a role in management of resources. Some of that makes sense, but we’re looking to involve private industry experts in how we might do that better.

“In some ways, it’s like — for most of government resources and assets — we’re doing business like we did with roads and bridges 25 years ago; there’s some politics or other factors that keep us from really evaluating needs. There are differing priorities that might not make sense if you don’t look at things broadly.

“Second, on tax reform, our ideas are not limited to the income tax. We will be working on the franchise tax as well.

 I want to send a message to business that we want to them to stay here or come here. I think it would be a very positive message along those lines to eliminate one tax-funding source.

“Third, of course, workers comp we’ve talked about for many years. To be honest, we’ve reformed it, reformed it and reformed it, but we don’t have lower [comp insurance] rates yet. So, I think we’ve not yet had real workers comp reform. There is some debate about administrative reforms, and we’re looking closely at NCCI [National Council on Compensation Insurance] data to see if the projected savings from an administrative system are quantifiable. “

Shannon believes state government is too big. As for reducing spending or “right-sizing” government, he commented, “I would l like to cap agency fees. Over the last four or six years, if I remember right, we’ve had some fees for some government programs or licenses go up 46 percent. That’s money that is coming out of the taxpayers’ pockets. I’m not really sure that, in all of those cases, those decisions should be made by unnamed bureaucrats. 

“My Appropriations & Budget chairman (Scott Martin, a Norman Republican) is in the process of identifying specifics we can undertake, to toe the line in spending.”

Pressed specifically on tax reduction, Speaker Shannon said, “I am being cautious not to make a decision based on, or tied to, just to this year’s budget. So, on the franchise fee cuts we’re looking for Fiscal Year 2015 implementation. 

Getting tied in with the current year is where things went south last year. 

“I think that to make progress on an income tax cut, David Dank’s work is critical. We don’t get rid of all the credits or incentives, but there’s room for reform.” Rep. Dank proposed a mix of factors to consider in deciding on possible elimination of business incentives and exemptions.

That framework or “rubric” would mandate audits or other means to assess the effectiveness of credit/exemptions in provoking economic growth that would not otherwise have occurred, make future credits subject to sunset provisions and allow robust audits by the office of the auditor and inspector.
In the end, a mix of statutory and constitutional proposals to put Dank’s “rubric” into effect did not make it through the 2012 session. 

Dank also pressed to end transferability of tax credits from one taxpayer to another, but that provision died last March. Speaker Shannon said the Dank “rubric” is a good start for identifying “low-hanging fruit” for possible changes that will allow personal income tax reductions.

He said, “Dank’s approach is absolutely a great start. We had no resolution of that last year, but this year I hope we can move ahead. We’ll be talking to both the tax commission and the private sector to get their input.”

Concerning corrections reforms, Speaker Shannon supports implementation of “justice reinvestment” legislation enacted over the past two years, but he raised concerns about the process of putting new policies into place. 

He observed, “The big problem I am worried about is there is no official implementation, no one really in charge. I hear that may not be going well. What I’m wondering is who is watching the hen house. 

“So, I’m kind of obsessing over implementation. I’ve talked to David Prater [OK County district attorney], and I think we need to work on that. Obviously the priority is to keep people safe and assure Corrections is effective.

You may contact Patrick B. McGuigan at Patrick@capitolbeatok.com and follow us on Twitter: @capitolbeatok.