State Panel Advises Keeping 10 Business Breaks; Repeals Off Table for Now

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The Oklahoma Incentive Evaluation Commission endorses its consultants’ recommendations to retain 10 state business incentives that are reducing state revenues.

Warren Vieth / Oklahoma Watch

The Oklahoma Incentive Evaluation Commission endorses its consultants’ recommendations to retain 10 state business incentives that are reducing state revenues.

A state oversight panel voted Tuesday to retain 10 business incentives after its consultants rescinded a recommendation to repeal one of them and the state commerce secretary intervened to rescue another.

The panel’s actions provided an immediate reprieve to the Oklahoma Film Enhancement Rebate Program and the state’s Industrial Access Road Program. But they could provide more momentum to efforts to rein in a fast-growing wind-power tax credit. All of the proposals would require legislative approval.

The votes by the new Oklahoma Incentive Evaluation Commission came after members argued over their authority to deviate from the consultants’ recommendations or to offer their own suggestions to the Legislature and governor.

In the end, they decided to approve their consultants’ advice without modifications.

At least one commissioner, Vice Chairman Carlos Johnson, was not pleased.

“I don’t like being handcuffed by those recommendations. I don’t think that was David Dank’s intention,” said Johnson, referring to the late state Rep. David Dank, who authored the legislation that created the commission review process.

“Had I known we were going to do it like we’ve done it, I would have been a whole lot more vocal,” said Johnson, a certified public accountant. “We’ve had no input.”

The panel’s consultants, the PFM Group of Philadelphia, originally recommended that the Legislature consider repealing the film rebate program, which pays out up to $5 million a year to film and television producers for filming done in Oklahoma.

In recent days, though, the consultants revised their recommendation to eliminate the repeal suggestion. The evaluation report approved Tuesday calls for keeping the program in place at least until its scheduled “sunset” date of 2024.

“It was a mistake,” PFM Group Director Randall Bauer said after the session. “The recommendation is to retain it with the existing sunset date.”

Bauer is a former state budget director of Iowa. The state is paying his consulting group about $240,000 a year for its analyses of Oklahoma business incentives. Besides the 11 incentives studied this year, it is scheduled to review another 40 over the next three years.

The film rebate reprieve was hailed by Tava Maloy Sofsky, director of the Oklahoma Film and Music Office.

“We get to keep the program,” Sofsky said. “There’s no change.”

The commission tabled action on the industrial road access program, which pays for public road improvements at the sites of new or expanded manufacturing plants. Spending on the program has fluctuated in recent years, from as much as $2 million in 2014 to zero in 2015. The PFM Group recommended eliminating the program, saying it did not appear to play a significant role in company decision-making.

The tabling action came after Oklahoma Commerce Secretary Deby Snodgrass told the commission it had no authority to review the program because it was created by administrative action, not by legislation. “It’s outside the domain of this body to review it,” Snodgrass said.

Several commission members appeared to agree with Snodgrass that it should be removed from the commission’s review roster. The commission scheduled a Nov. 29 meeting to consider its authority to review the program, only a day ahead of its statutory deadline for voting on the consultants’ evaluations.

The 11 incentives reviewed by the commission this year have been reducing state revenues by at least $150 million annually, contributing to the budget shortfalls that have caused cuts in core programs such as health, education and public safety.

The commission’s votes appear unlikely to boost revenue collections significantly, with one notable exception.

PFM Group recommended curtailing the wind-power tax credit, which cost the state $113 million in fiscal year 2014. It suggested ending eligibility for new wind plants in 2018, three years ahead of schedule, or imposing a hard cap to reduce annual outlays to an amount considered more acceptable to the state.

The wind power credits, which were designed to help a new renewable energy industry get on its feet, have become increasingly contentious as their cost escalated far beyond initial projections. The legislature already has voted to end a related property tax exemption, and a coalition of oil and gas producers has urged lawmakers to take further action to curtail the subsidies.

At the beginning of Tuesday’s session, several members expressed a desire for the commission to forward its own recommendations to the governor and Legislature, along with the consultants’ reports. But their ability to do so was questioned by Tax Commission Vice Chairman Dawn Cash, who said legislators only authorized the panel to vote to approve or reject each evaluation report, not to make changes.

The commission appeared to go along with that interpretation, although it decided to write a cover letter noting any objections or suggestions made by individual members.

“Because this was a brand-new commission, there was no road map to work from,” Chairman Lyle Roggow said.

Many of the consultants’ reports were approved without discussion. All but two were approved unanimously.

The panel said it intends to forward its final report for the year to Gov. Mary Fallin and state lawmakers by Dec. 15 for possible legislative action in 2017.