Look, I get Oklahoma politics. I understand that the oil and gas industry has more economic and political power than any other entity in the state. I understand that no major revenue bill will likely ever make it through the Oklahoma Legislature without the approval of the leaders of our large oil and gas companies.
It is not surprising therefore that it garnered a great deal of attention when the oil and gas industry and their allies announced their “Step Up Oklahoma” plan last week to fund teacher raises and basic state services. Numerous media outlets and state leaders lauded the executives of the oil and gas industry for being willing to compromise and support an increase in the state’s gross production tax from 2% to 4% in the first 36 months of a well’s production (by far the most productive period for the well) and then to have it increase to 7% for the rest of the life of the well.
Such a compromise, such a sacrifice by the oil and gas industry will cost them $133 million a year compared to what they are currently paying, but these leaders of the Oklahoma oil and gas industry are ready to step up and make the sacrifice for the good of the state.
Listening to the news and reading Oklahoma papers, one gets a sense that Oklahoma oil and gas leaders have put their self-interest aside and are taking one for the team, and one gets a sense that “Step Up Oklahoma” is the best and perhaps last chance we have to fund teacher pay raises and basic state services before the state completely falls apart. Indeed, given the economic and political power of the oil and gas companies, Step Up Oklahoma may end up being the way the state moves forward to address its revenue failure and budget crisis.
Given this reality, I understand why the Oklahoma Education Association would support this initiative while continuing to work on other potential solutions to the crisis our state faces. Times are desperate, teachers are fleeing the state, many school districts have gone to four-day school weeks, and students are not getting the quality public education they deserve. Similar crises exist across the state in other sectors such as healthcare and infrastructure. Oklahoma is a failing state on many fronts.
The proposal being put forward by the oil and gas industry is better than their previous unwillingness to entertain any restoration of the gross production tax towards its normal 7% rate, a rate that would put Oklahoma more in line with other oil and gas producing states. 4% is better than 2%, $133 million is better than no restoration at all.
But let’s not fool ourselves into thinking that the oil and gas industry and its leaders who have stepped back for the past decade and enjoyed literally billions of dollars of tax breaks while Oklahoma’s state spending on public education decreased more than any other state in the country are somehow now suddenly becoming selfless and sacrificial leaders to save our state. It is much more likely they are trying to get out ahead of a growing movement in Oklahoma to have oil and gas companies pay their fair share as opposed to enjoying by far the lowest GPT among oil and gas states.
What a coincidence that on the day before oil and gas leaders announced their “Step Up Oklahoma” plan, they lodged a legal challenge to a potential state question that would restore the state’s GPT to 7%. The oil and gas industry likely understands that if they don’t show some compromise on GPT that the people may use the initiative petition process to restore the GPT at a rate much higher than what Step Up Oklahoma is proposing.
$133 million a year sounds like a lot of money, and it is, but it is still much less than what oil and gas companies would be paying each year with a 7% GPT on all wells, a figure much more in line with other states. The oil and gas industry’s Step Up Oklahoma plan still proposes to raise more money through regressive taxes on cigarettes and gas at the pump than it is willing to raise from taxes on oil and gas produced at the well. Far from being a major sacrifice for oil and gas companies, Step Up Oklahoma is a well calculated move on the part of the industry to appear to be stepping up even though it has been stepping down for years while our state failed.
While I agree that we must all step up for Oklahoma, a much better step up for the common good of all Oklahomans would be for us to step up and restore the GPT to 7%, and hopefully Oklahomans will have an option to vote on this restoration in November by passing State Question 795 – if the selfless and sacrificial oil and gas industry is not successful in keeping it off the ballot.