Unconstitutional Tax Increase

You may recall two updates which I wrote shortly after the conclusion of this year’s legislative session. I explained my opposition to fee and tax increases and talked about how the increases would hurt Oklahoma’s economy by punishing and disincentivizing Oklahoma small business owners.

One of the more egregious increases was the 300% increase on vending machine operators. This new law will have a devastating impact on Oklahoma’s vending machine operators, at least one of whom lives in House District 31. He has since informed me that he has already pulled his first machine out of service and may very well go out of business.

Small business owners are not the only ones affected. Legislators have been informed by Coca-Cola that the change will also impact their business. They may be forced to pull marginally producing machines and lay off employees as a result.

This reduction in the number of machines will reduce the revenue which the fee generates to the state. Ironically, legislators will be in part thwarted in the effort to generate revenue because there will probably be fewer machines to tax. And, as a result of this short-sighted policy, any number of Oklahomans may become unemployed.

Probably the most egregious increase of the year was a 1% tax increase on private health insurance premiums. This was an item which appeared to have been negotiated for by legislative Democrats and agreed to by Republican leaders. It is inconceivable to me that Republicans would agree to this plan in an era when private health insurance is subject to coming under attack as never before.

It was also clearly an unconstitutional action, because legislators do not have the ability to enact a tax increase without either a vote of the people or a 75% vote of the Legislature.

This was why it was an extremely important occurrence when a number of Republican legislators refused to support the increase and voted against it. In doing so, we denied the proponents of the tax increase the 75% majority they needed to meet constitutional requirements.

The failure of the legislation to receive 75% of the vote did not stop the Legislature from attempting to bypass the State Constitution and implement this tax.

Fortunately, State Insurance Commissioner Kim Holland who was charged with being the custodian of some of the funds generated by the tax refused to participate and sought a statement from the State Supreme Court to declare the tax unconstitutional.

The Court honored Holland’s request and as a result the tax increase has been stopped.

This is not the first time that the court has very properly declared legislative action unconstitutional. I feel it is extremely difficult for the Oklahoma Legislature to expect the people of Oklahoma and other government entities to respect the Constitution and state laws when the Legislature itself ignores the Constitution.

Open Books 2.0

During the most recent legislative session I was privileged to work on two major initiatives designed to open up Oklahoma government to the purview of taxpayers as has never before been possible.

One of these initiatives was Senate Bill SB 1759 which is commonly known as the Government 2.0 proposal. I authored this legislation with State Senator Anthony Sykes. This bill contained a series of transparency initiatives, including the codification of what I believe is the first comprehensive state-level Government 2.0 plan in the nation. In the future I intend to write articles about this bill that will describe the implications of the changes and ways this will allow you to hold state government responsible.

The other initiative was House Bill 3422 which was authored by Representative Ken Miller and Senator Clark Jolley. The plan is known as the Open Books 2.0 proposal and was requested by Miller and the Oklahomans for Responsible Government (OFRG) group. OFRG routinely utilizes web based reporting to conduct studies which help document how accountable various government entities are. The individuals at OFGR are becoming experienced in using web based transparency platforms and noticed that Oklahoma's open books policies (the policy by which state government must place expenses online) was falling behind that of other states.

Current Oklahoma law does not require all state expenditures to be placed online and the expenditures are not easily searchable. This makes it difficult for those who want to find out where state government is spending money.

I was honored to work with OFRG, Miller and Senate author Clark Jolley and help develop the transparency criteria which were eventually placed into the new law. HB 3422 will require not only that all state government purchases be placed online, but will also ensure that those expenditures are searachable by name.

No longer will taxpayers be forced to scroll through page after page of expenditures in order to find the name of an individual or company who is receiving a government check. Now, taxpayers will be able to search by name and can quickly find out how much that entity is receiving.

The spend data will also be available for export in standardized formats so that the data can be downloaded and analyzed. This will enable third party organizations representing taxpayers to perform complex analysis of government spending. In addition, the data will be archived and kept on file so that not only will documentation of the expenditures remain open to the public, but long term spending trends can be analyzed as well.

I very much enjoyed being able to help with this legislation and believe the implications of these reforms will be extremely far reaching in deterring inappropriate government spending. In a future update I will write about some of the exciting tax-credit transparency language which will also go into law as a result of House Bill 3422.

More Great News About Legislative Process Reforms

When I first started to campaign for State Representative in 2004, I did so on a platform of creating a revolution in state government. My idea was that a new generation of legislators would dismantle the legislative process framework which had proven to be so conducive to corruption.

By the time I took office in 2007, it became obvious to me that this revolution had not occurred. The new generation of Republican legislative leaders in the House had taken significant steps towards making the legislative process more open and transparent, but had in no way dismantled the closed system which had been in place for many years.

On a positive note, House committee votes are now being recorded and placed online so you can see how your legislator voted in committee. The text of bills and proposed amendments are posted online for public review. Certain waiting periods have been established before bills can be put to a vote of the House. Gone are the days when legislators submitted amendments on scraps of paper.

One of the biggest reforms occurred in January 2010 when House Speaker Chris Benge made the very courageous decision to broadcast House proceedings online. You may now see and hear all the debate over the issues considered by the House during session by visiting the www.okhouse.gov web site.

The general theme is that the new majority in the House has consistently advanced a series of reforms. Over time these reforms have made considerable progress in opening up the purview of the legislative process to the taxpayer. This naturally takes some of the influence away from special interests who have used the closed process to their advantage for many years.

While I am excited to be a part of these process reforms, I must also say that this is not the revolution I envisioned: one which completely dismantled the closed legislative process and rebuilt it in a manner that made it hard for the corrupt practices of the past to re-emerge. Each year that goes by without a complete overhaul of the system makes it more likely that the new Republican majority will become co-opted by the process and become defenders of the status quo.

This is why it was especially noteworthy when incoming House Speaker Kris Steele announced that he will seek to incorporate some far-ranging reforms which could put an end to the most irresponsible practices which occur in the last days of each legislative session.

Steele has stated his intent to end the House practice of allowing votes on bills without a 24 hour waiting period in the last two days of session. He also wants to consider forcing House conference committees to actually meet in public prior to signing off on legislation. Steele states that he hopes these reforms will continue to be built on in future legislative sessions.

During the last four years I have observed the current system closely. I believe these observations allow me to speak credibly to the fact that Steele’s proposals are significant and will have a far reaching impact.

In fact, it is my belief that this is a major crack in the Berlin Wall of legislative secrecy which will significantly accelerate the pace towards true transparency and openness.

Liberalization of School Bond Requirements

The recent debate over a proposed bond issuance by the Guthrie School District has reminded me of my observations of ever-ongoing legislative efforts to liberalize the protocols and quality controls which govern the bond issuance process.

I believe these all-too-often successful efforts have been driven by special interests representing not just Oklahoma’s education establishment but the financial interests who derive significant short-term benefit from the issuance of massive amounts of debt without regard to long-term consequences.

Certain items in the Guthrie proposal bring to mind the concerns I have had about either the liberalization or the outright avoidance of these safeguards.

For example, one of these efforts has been to water down the capital-intensive requirements of the laws governing the issuance of bonds. These laws were designed to ensure that bond issuance (debt) only occurred for capital items such as brick and mortar structures which would last for many years and would still have value beyond the time when the debt was paid off. I do not believe it is wise to incur millions of dollars of debt for items which will be long liquidated while the taxpayer is still paying the debt and interest for those items. I believe that most people would never allow their personal budget to deteriorate to the point that they take out a bank loan to purchase groceries. It is certainly not right for government officials to do the same thing using other people’s money. I believe Oklahoma’s statutory guidelines provide an important policy of prudent financial governance and I have always voted against proposals which would reduce these requirements.

I am also very disturbed about the growing trend of Oklahoma school districts circumventing the requirements of the Oklahoma Constitution through a sort of legal shell game. The Oklahoma Constitution mandates that schools cannot take on an amount of debt in excess of 10 percent of the value of assessed property value of the residents of their districts. This important safeguard keeps schools from taking on more debt than is fiscally prudent.

However, Oklahoma schools are simply bypassing this important safeguard by setting up third party entities which can take on much more debt than fiscally prudent. The debt is essentially being laundered through these third party shell groups. Because the debt is likely to be secured by a riskier standard, the taxpayers are forced to pay significantly higher rates of interest.

Legislators attempted to give this practice the veneer of legal credibility with the passage of House Bil 1592 in 2009 (I was one of 19 Representatives to vote against it) but in all reality, only the people of Oklahoma can change the constitutional requirement.

If Oklahoma school districts want to take on additional debt, they should have the courage to ask voters to change the Constitution instead of using a third party for a bond issuance. In my view this is a dangerous shell game which will encumber the taxpayers with far too much debt. I believe that unless this trend is stopped, there will be a painful day of reckoning.

I am also opposed to the practice of logrolling expenditures for multiple public and private entities into one proposal. This practice has become infamous for incurring millions of dollars of spending in order to build a large enough political coalition to support a proposal. I very much dislike the unconstitutional legislative logrolling which occurs in the Legislature and fail to see how this issue is much different.

As a legislator, I am committed to voting against the ongoing attempts to change Oklahoma laws to enable these types of fiscally imprudent spending practices.

I also believe it is very important for school officials to limit bond proposals to capital items costing no more than the amount allowed by the Constitution where the sole beneficiary is the school district.