In her state of the state address, Gov. Mary Fallin asked Oklahoma lawmakers to send her a bill to regularly evaluate dozens of tax credits and business incentives.
State Auditor Gary Jones knows all about the problems posed by Oklahoma’s 70-plus business incentives.
"We can't estimate corporate income tax because there's so many tax credits. And we can’t tell you who has a tax credit, how much they have and when they’re going to cash that in," Jones said during a panel discussion at Oklahoma Policy Institute's budget summit.
Parry Carter with Pew Charitable Trusts said it comes down to a lack of data.
"You know, this is a challenge in a lot of places, including Oklahoma," Carter said during the same budget summit. "You know, in many cases, lawmakers have had to have made decisions on the basis of anecdotes and not on good information."
Pew worked with state officials over the past year to develop legislation to evaluate the state's incentives.
Despite the confusion they’re causing, Carter said the incentives are important not just in Oklahoma, but in every state.
"Far and away, incentives are states' leading tool to stimulate their economies," Carter said. "And they collectively have a fiscal impact in the billions of dollars a year, and they come with promises of hundreds of thousands of jobs."
That’s why Pew launched its Business Incentives Initiative in 2013. The group worked with several states, including Oklahoma, to figure out the best ways to manage and assess economic development incentives. That work forms the foundation of any legislation that may come from Oklahoma lawmakers this year. Carter says Oklahoma is already doing some things right.
"The state has a very sophisticated interagency data sharing process," Carter said. "The Employment Security Commission, Tax Commission and the Department of Commerce can all share information to verify that job creation figures are where they should be or where they’re reported at."
But Oklahoma still needs a comprehensive evaluation process. That involves who, what and when.
Who should be doing the evaluation? Carter said Nebraska’s Department of Revenue once issued an evaluation report with no recommendations.
"And it wasn't that the department of revenue, you know, was being difficult or they weren't getting along with the legislature," Carter said. "It was simply that, you know, revenue was focused on collecting and administering taxes, not providing policy analysis."
There are approaches other than putting a single state agency in charge of the process.
"Involving a private-sector economist in some way, or a business leader in an advisory role helping to oversee the process, and it could also mean going outside of state agencies to perform the analysis," Carter said. "Like in Mississippi, for example, the university research center has been tasked with evaluating their economic development incentives."
Carter compared several states’ practices to answer what should be evaluated in Oklahoma.
"So, Rhode Island and Mississippi evaluate all of their tax incentives, where Florida evaluates only their economic development incentives, and Oregon evaluates only their tax credits," Carter said. "And in Oklahoma, some key economic development programs aren’t on the tax side. As many of you know, Quality Jobs, the state’s flagship incentive, involves cash rebates.
"So really, a scope like Florida’s seems to work well for the state of Oklahoma, looking at all economic development incentives on both tax and cash sides."
The question of when is a little simpler. A rotating schedule in which every incentive is evaluated within four years is recommended. Carter did, however, offer some caveats.
"For example, a project involves new construction. A company and a government must go through, you know, zoning, you have to break ground, they have to build the site before they can fill it with employees and understand whether or not their investment was worthwhile," Carter said.
However Oklahoma lawmakers decide to answer the who, what and when for evaluating incentives, they’ll join a growing number of states with such laws on the books. Since 2012, eight states have passed such laws, bringing the total number to 17.
