November 30, 2011

Oklahoma Incentive Reviews Resurface

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For six years, a review panel appointed by the Legislature and governor has beenmaking recommendations for cleaning up or eliminating some of the narrowlytargeted tax breaks provided by the state.

Yet it’s hard to find anyone at the Capitol who’s even aware of the Incentive ReviewCommittee or the recommendations it has made every year since 2005.

“Who are they?” said State Auditor and Inspector Gary Jones, when asked if he wasfamiliar with the panel and its work. “This is the first time I’ve ever heard of it.”

Rep. David Dank, who is chairing a legislative task force that began looking atcontroversial tax credits in August, said he knew about the Incentive ReviewCommittee but had deliberatelyrefrained from reading its recommendations.

“I really wanted to form my own judgments and my own opinions on these creditswithout any outside influences,” said Dank, R-Oklahoma City.

Senate Finance Committee Chairman Mike Mazzei, R-Tulsa, said he had readthe IRC’s reports, although he was not certain anyone else did. He said the Incentive ReviewCommittee’srecommendations dovetailed with legislative action to tighten up two widelycriticized venture capital incentives that allowed some early investors to receive taxcredits worth more than their investments.

Two Incentive ReviewCommittee members who have been on the nine-member panel since its first meetingin December 2004, said they could not recall the Legislature taking specific action inresponse to any of the 29 recommendations they have made over the years.

Several of the specific tax breaks the Incentive ReviewCommittee targeted for elimination have alreadygone by the wayside because their original lifespans expired. They include creditsapplying to venture capital investments, space transport vehicles and nonstop airservice from Oklahoma to either coast.

Several other incentives singled out for elimination or reform remain on the booksessentially unchanged, including income tax credits for new manufacturing facilities,hazardous waste recycling operations and commercial space industries.

Many of the Incentive ReviewCommittee’s recommendations call for across-the-board reforms to increasethe transparency and accountability of all state incentive programs designed to spurjob creation and economic growth.

For example, it has repeatedly urged lawmakers to state clearly the specific purposeof each incentive program it creates, the goals it is expected to achieve and themethod to be used to evaluate its success or failure. In many cases, the statutesauthorizing existing programs do none of those things.

Although the Legislature now seems to be moving in the direction of such reforms, itis doing so without much input from the Incentive ReviewCommittee or its members.

“We turned in the reports to the governor’s office and the [House] speaker and[Senate] president pro tem, and I don’t think they went anywhere after that,” saidLarkin Warner, a retired Oklahoma State University economist who has served onthe panel since its creation.

The lack of attention has been a recurring discussion topic at recent Incentive ReviewCommittee sessions,which are held every month in a small Department of Commerce conference roomabout a mile south of the Capitol. During one meeting, members talked openly aboutthe possibility of disbanding the panel.

“We’re all busy,” said Incentive ReviewCommittee member Douglas Branch, an Oklahoma Cityattorney. “We’ve got better things to do if we’re just going to be ignored.”

“Basically, what this group is saying is, ‘Guys, you’re asking us to do this job and notlistening to us, so why have us do this job,’” said former state senator Mark Snyder,who was appointed to the Incentive ReviewCommittee two years ago.

David Blatt, director of the Oklahoma Policy Institute and a former state Senatebudget analyst, said the Incentive ReviewCommittee has operated in “something of a vacuum” over the years.

“There’s been virtually no legislative involvement,” Blatt said. “You’ve had adisconnect between the work the committee has done and the reports that havebeen issued and then what happens up the street at the Capitol.”

Dank said one reason he had not reviewed the panel’s past recommendations wasthat he was under the impression it had been doing little more than monitoringcompliance with tax credit rules rather than evaluating the worth of the incentives.

“If we gave a tax credit for people who jumped off the dome of the Capitol and killedthemselves, then their job is to make sure they’re dead,” Dank said.

“That’s kind of a strange attitude,” observed Robert Dauffenbach, associate businesscollege dean at the University of Oklahoma and another Incentive ReviewCommittee charter member. “Ifsome people have been giving consideration to things, you’d think that would beinformation you’d want to take in.”