Gross Production Tax

Enemies of Our Enemies

Enemies of Our Enemies - June 23, 2019

State Representative David Perryman

The ancient idea that “The Enemy of My Enemy is My Friend” is widely attributed to the Arabs. But in truth, it is much older. The proverb can actually be traced to the military strategy writings of an Indian named Kautilya who is often referred to as the “Indian Machiavelli.” Kautilya’s 4th century B.C. treatise on warfare and economic policy is named the Arthashastra or the “Science of Politics” but has a much broader scope and actually addresses the collective ethics that hold a society together.

It includes books on the nature of government, law, civil and criminal court systems, economics, markets and trade, theories on war, the nature of peace and the duties and obligations of a king. It addresses public projects and advises that the king, in times and in areas devastated by famine, epidemic and such acts of nature, or by war, infrastructure should be reinforced and tax policy should reflect the needs of those regions.

Interestingly, while Kautilya’s work contains powerful messages regarding the common good, the most enduring concept of the Arthashastra is that, “the enemy of my enemy is my friend,” an idea that fuels the partisan divides in our nation and in our state. Unfortunately, activists on the left and right leave little room for lawmakers to overcome that political chasm.

The most recent case in point involves the couple of dozen Democratic candidates for President. Last week when one of the candidates, a former U.S. Senator, pointed to his ability to work across the aisle, he was chastised for cooperating on legislation with Republican Senators who were known segregationists. It did not matter that the common legislation had nothing to do with segregation.

Another recent article involved elements in the Oklahoma State Democratic Party who had urged party activists to chastise or blacklist current or former elected officials who were known to have endorsed a Republican in a political race. While such bi-partisan endorsements are unusual, the alternative is rigid, unbending partisanship that gives rise to the existence of rules such as the GOP’s 11th Commandment, “Thou Shall Not Speak Ill of Any Republican” that has existed since the 1964 California Republican Gubernatorial Primary when Ronald Reagan was accused by a fellow Republican candidate of having been a “member of several communist front organizations.”

Today, it is not unusual for Republicans who work across the aisle to be called, “RINO’s,” an acronym for “Republicans In Name Only” and Democrats are often called “DINO’s.” However, it is not unusual for members of one party to work with another. In fact, during the hard fought 2017 Oklahoma legislative session, the Democratic House Caucus had one goal and that was to increase state revenue for education and state services that had endured a decade of cuts.

The most obvious source of revenue was to increase the Gross Production Tax on oil and gas. Oklahoma’s rate on horizontal wells at that time was effectively in the 2% range while the rest of the nation ranged from 7 to 12%. With only 26 members in a 101 member body, there was not much that the Democrats could do until Democratic leadership recognized a split in the Republican caucus where one group did not want to increase the GPT at all and the other group had bought into the oil and gas industries plan to cap GPT at 3%.

Democrats took advantage of the GOP schism, siding with a faction of the GOP that refused to increase GPT to the paltry level sought by oil and gas and the state chamber. Then, when negotiations yielded not 3, not 4 but a GPT increase to 5%, Democrats unanimously shifted their votes to complete a bi-partisan bill that provided sufficient revenue to make education funding that year and this year much easier. Frustratingly when the dust cleared, the oil and gas industry chastised Republican legislators for caving to the demands of Democrats and Democratic Legislators caught flak from constituents for not getting the GPT set at 10% or at least the national average.

Sometimes, in the end, it is tough to tell who your enemies are and who your friends are. Thank you for allowing me to serve Oklahoma. For questions or comments call me at 405-557-7401 or email me at David.Perryman@okhouse.gov.

Exes in Texas

Exes in Texas - November 4, 2018

State Representative David Perryman

          George Strait was probably not thinking about the lure of higher wages and the ensuing migration of Oklahoma teachers to Texas when he released the 1987 hit named “All My Exes Live in Texas.” However, that statement could be made by an alarming number of Oklahoma schoolchildren regarding former teachers whose economic reality of low pay pushed them to make the move for the benefit of their families and their personal futures.

The temptation could not have been greater. Huge billboards in Tulsa, OKC, Stillwater and Norman beckoned teachers to find their future in a Fort Worth, Texas classroom. The message promised starting salaries of $52,000 at a time when the AVERAGE teacher pay in Oklahoma was in the low $40,000’s and the hope of a salary in excess of $50,000 was not on the radar, even after a decade or two in the classroom.

The reality of a teacher’s life was that in the decade prior to 2018, Oklahoma’s K-12 Education had been cut by 28%, the deepest of any state in the nation. Low wages, continuing cuts and a lack of professional respect plagued those who had chosen to educate our state’s children.

Thus, it was no surprise that, first border district educators and then those from across the state, took neighboring states up on their offer. It takes a lot to make a person with the heart of an educator, leave their family, their community and their state, but Oklahoma legislators had neglected and cut and isolated our state’s teachers to the point that many educators took the only path to protection that they could find and that involved leaving Oklahoma’s classrooms.

In 2018, pro-public education legislators faced an uphill battle. “Everyone” agreed with them that teachers needed a raise, but few were willing to stand with them to identify and act on a source of revenue to pay for those raises. Repeatedly, teachers were told that the state could not afford to give them a raise, despite the fact that annually hundreds of millions of dollars in tax breaks and credits were being given to the oil and gas industry.

The public pressure intensified and the oil and gas industry saw an organized attempt to increase the Gross Production Tax to 7 to 9 % so that it would be in line with most other energy producing states. In response, the industry gathered a mostly anti-public education group to formulate what they called the StepUp Plan to “resolve Oklahoma’s education crisis.” In reality, it was just a strong arm attempt to set their own tax rate, cap the GPT at an embarrassingly low 4%, throw teachers a bone and relieve public pressure.

Despite that attempt, pro-education legislators were able to push through a 5% GPT bill that for the first time in ten years, not only gave teachers a legitimate raise, but also provided raises to support staff and put an additional $50 Million into textbooks and the classroom.

Teacher morale is improving, but it will take years to reverse the damage. Because a Veto Referendum lawsuit that tried to void the 5% GPT Bill was not dismissed before teachers had to make final plans for this school year, 57% of the state’s superintendents say that the teacher shortage is worse this year than last, and in fact, the state had issued a record 2,153 emergency certifications by the end of September, according to a survey conducted by the Oklahoma State School Board Association.

Because Oklahoma teachers’ salaries have been so low, for so long, I also predict that because of the impact of a belated salary increase, there could be an even greater exodus in three or four years due to retirement benefit computations based on their increased salary. Who can blame them?

Questions or comments, contact David Perryman at 405-557-7401 or David.Perryman@okhouse.gov.

Too Little Too Late?

Too Little Too Late? - November 5, 2017

State Representative David Perryman

One of Aesop’s Fables reminds us of the Grasshopper that spent its summer in the meadow hopping about chirping and singing to its heart’s content. One day, the Grasshopper noticed an Ant passing by bearing along with great toil an ear of corn that he was taking to his nest.

“Why not come and chat with me,” said the Grasshopper, “instead of toiling and moiling in that way?” “I am helping to lay up food for the winter,” said the Ant, “and recommend you to do the same.”

As the Ant went on its way, the Grasshopper called out, “Why bother about winter? There is plenty of food here in the meadow.” Soon the snows came and while the Ants were distributing corn and grain to each other from the stores that they had collected in the summer, the Grasshopper frantically searched everywhere but was able to find only a tiny morsel or two. Not long afterward, as the Grasshopper lay starving, he realized that he would not live through the winter because his efforts at survival were too little, too late.

Too little, too late also characterizes the dire straits that the Oklahoma legislature has imposed on the citizens of Oklahoma. Actions like cutting the oil and gas production tax rate without considering the effects on the ability of Oklahoma to deliver essential services was reckless and irresponsible. The failure to remedy the situation by reversing those cuts is equally reprehensible.

Oil companies and the legislators who are controlled by oil companies have jeopardized Oklahoma’s budget for the past several years and continue to put government services and the people who are served at risk.

One such program that has served Oklahoma well is the Oklahoma Advantage Waiver. It is a program that allows 21,147 fragile Oklahomans who are nursing home qualified and/or developmentally disabled to live in their homes as opposed to being placed in a nursing home or other form of institutionalized care. The average cost of services to an Advantage Waiver patient is approximately $20 per day instead of the $160 per day that a nursing home costs. Oklahoma designed the Advantage Waiver and as a result has saved the state literally millions of dollars.

Much like the grasshopper who refused to acknowledge the coming of winter, legislative leaders last May intentionally, but discreetly, violated the state constitution by appropriating a ten month budget to DHS and calling it a twelve month budget. The intent of those leaders was to revisit the DHS budget during the 2018 legislative session when they would hopefully have additional revenues to make a supplemental appropriation for the final two months of the 2017-2018 fiscal year.

            The deceit resulted in $29.1 Million in DHS Reductions during the current (2017-2018) fiscal year, $9.2 Million of which was a direct reduction to the Advantage Waiver Program. Adopting budgets that don’t really balance and moving tax payment deadlines forward are some of the tricks that legislative leaders have used to keep from addressing the elephant in the room, that is, When is the legislature going to be honest and create a tax policy that provides recurring revenue for this and future fiscal years?

Destroying the Advantage Waiver is detrimental to patients and their families who often are able to work only because their loved one has in-home care. Because of a likely increase in the number of falls and a decrease in medication provided by Advantage Waiver, elimination of the program places additional untenable burdens on rural hospitals and mental health facilities that are already losing millions of dollars per year through uncompensated care.

With in-home care being eliminated, there most assuredly will be an increase in adult protective services referrals and fewer APS workers will have even fewer providers to refer patients to. In-home providers will be forced to lay off workers who will no longer be taxpayers, thus further damaging Oklahoma’s economy.

Legislative leaders who have caused those cuts, don’t like the heat that they are receiving from their constituents so they posture and complain that they are being “terrorized” by state agencies that have been forced to cut programs such as Advantage Waiver.

 Oklahoma, it is time to turn up the heat. Tell your legislator to increase gross production tax to at least the average in the region. Hopefully, it will not be too little, too late. If you have comments or questions, please call or write, 405-557-7401 or david.perryman@okhouse.gov.

 

Let's Really Fix This

Let’s Really Fix This - October 29, 2017

State Representative David Perryman

Oklahoma schools, mental health agencies, hospitals and health care agencies are in financial crisis. That crisis translates to impending catastrophe for hundreds of thousands of Oklahomans of all ages. Oklahoma’s state government has a revenue problem that has deepened to the point that services can no longer be provided.

This situation did not occur overnight. For the past ten years taxes have been recklessly cut without considering the cost or the impact on services that citizens expect government to deliver. Income taxes on high income earners have been slashed to the end that hundreds of millions of dollars have been taken out of state revenues.

Gross Production Tax on the oil and gas that is extracted from Oklahoma has been reduced from 7% which is actually low compared to other states to 2% which has the effect of subsidizing companies who are drilling in other states where the GPT is actually two and a half to six times higher.

If the Oklahoma legislature had the courage to stand up to the oil and gas industry and its lobbyists, we would have an opportunity to avoid being 48th, 49th or 50th in every category that impacts our quality of life.

I am not talking about punishing an industry that is so vital to Oklahoma. I am talking about simply reminding it that its Oklahoma operations are destroying our roads and contributing to earthquakes that damage our property and there is simply no reason for its tax structure to be so low. The legislature simply needs to tell the oil and gas industry to pay its fair share of taxes.

The legislature clearly does not have the intestinal fortitude to confront the oil and gas industry. Today marks the end of the 5th week of Special Session. If you would like to understand the situation, I would ask that you read the 7 points below:

First, the Oklahoma Energy Producers Alliance recently had a poll conducted that showed that 67 percent of Oklahomans favored an increase in the Gross Production Tax (GPT) to 7 percent.

Second, the current Oklahoma GPT rate is 2 percent for the first three years (“tax holiday”) of each well’s production and then it increases to 7 percent in the 37th month of the life of the well.

Third, Oklahoma’s GPT Tax Rate is not only the lowest in the country, if it were raised to 4%, it would STILL be the lowest in the country.

Fourth, the length of the “tax holiday” is every bit as important as the percentage rate. For instance, horizontal wells in Oklahoma are more than half depleted after just 36 months of production. So, when Democrats said months ago that they would accept 4% at 12 months; 4.5% at 18 months or 5% at 36 months, the length of the “tax holidays” were not just numbers that were casually tossed around.

• A 12 month tax holiday means that 37% of the lifetime oil production of the well is depleted before the 7% rate kicks in.

• A 24 month tax holiday means that 53% of the lifetime oil production of the well is depleted before the 7% rate starts.

• A 36 month tax holiday means that 62% of the wells total oil production is depleted before 7% applies.

Fifth, even though the Democrats have been requesting an increase in Gross Production Tax for months, it has only last week that the Republicans announced a budget deal WITH EACH OTHER… and that budget deal didn’t include the Gross Production Tax….or Democrats.

Sixth, last Friday, for the first time, Republicans claimed to offer a deal that included Gross Production Tax. The purported offer was: THE LOWEST GROSS PRODUCTION TAX RATE IN THE COUNTRY and a plan that would allow 62% OF EACH NEW WELL’S LIFETIME PRODUCTION OF OIL TO BE DEPLETED BEFORE the tax went to 7%. The “deal” ended up deadlocked and dying in committee with a tie vote that the Republican Chairman and Co-Chairman refused to break.

Seventh, I truly believe that most legislators (Republican and Democratic) want to fix this, but those who are beholden to their campaign contributors are having a tough time right now. They need courage. If you really want this fixed, pick up the phone or sit down and write a note to your legislator, Democratic or Republican, and encourage them to REALLY FIX this by increasing the Gross Production Tax and decreasing the length of the Tax Holiday.

If you have comments or questions, please call or write, 405-557-7401 or david.perryman@okhouse.gov.

Crooked Rivers

Crooked Rivers - September 10, 2017

State Representative David Perryman

Maps are my passion. In another life, cartography would have been my chosen career. Getting from point A to point B is always exciting and apps like Mapquest or GoogleMaps move plotting trips to a whole new level. Most of us have at one time or another dreamed of putting a canoe in a stream and allowing the current to take them toward the Gulf of Mexico.

Winding rivers tend to provide a romantic allure. Crooked rivers on the other hand impart a whole other meaning. If not for maps that show how the river continuously winds back on itself turning one mile in three, four, five or ten or more, many of us would probably have set off on such an adventure.

Just like water flowing across the surface of our state, takes the path of least resistance coursing its way through an often inefficient journey, we often tend to choose the path of least resistance in our lives. Governor Fallin has issued a press release indicating that she will likely call a special legislative session to address a revenue failure that has occurred because one party refused to negotiate with the other party regarding revenues that are needed to provide core services.

This week the editorial page of the Daily Oklahoman opined that a special session was necessary because the Oklahoma Supreme Court determined that the $1.50 per pack cigarette fee passed by Republicans in the legislature because they “failed to muster” support from Democrats was really a tax and was not legal. The Daily Oklahoman was wrong.

The cigarette tax (HB2372) needed 76 votes to be valid. At the time the Bill was voted on, there were 72 Republicans in the House of Representatives and 26 Democrats. In other words, the Republicans needed just 4 Democratic votes to pass a valid cigarette tax. When the dust settled the vote was 63-34 with 12 Democrats voting for the cigarette tax.

While it was true that 14 Democrats voted against the cigarette tax, 20 Republicans did likewise and one Republican failed to vote. While it is not truthful to say that the cigarette tax failed because of Democrats, it has always been abundantly clear how to get 100% of the Democrat’s to approve the cigarette tax…increase the gross production tax (GPT) on oil and gas to pay for teachers’ raises and roads and bridges and rural hospitals.

Democrats could take the path of least resistance and vote yes on a cigarette tax without demanding that Oklahoma’s revenue problem be fixed but that would not be in the best interest of our schools and our public safety and our roads and bridges or our rural ambulances and hospitals.

However, the path of least resistance does not provide a solution to Oklahoma and Oklahomans.

According to a May 10, 2017 article in the Daily Oklahoman, “What you can't argue is that the state's own effective rate for gross production taxes has been cut in half in the past five years, according to the Oklahoma Tax Commission. The state's effective gross production tax was 3.2 percent in FY 2016. It was 6.25 percent in FY 2012.”

The cost to the state of Oklahoma and its schools, roads, infrastructure and rural health care has been in the hundreds of millions per year and not only have oil and gas gross production tax revenues dipped by $300-400 Million per year, according to a May 2016 KFOR-TV news story, the scales have tipped. Quoting Oklahoma Policy Institute Executive Director David Blatt, the KFOR article said, “We’re at a point now where we are losing more from tax breaks than what we’re bringing in from the gross production tax.”

Rolling over and passing a cigarette tax without demanding that reckless GPT and state income tax cuts be addressed would make one complicit in a long term plan to shift the tax burden from the wealthy to the middle class and working poor (those Oklahomans who do not have paid lobbyists).

GPT and state income tax cuts over the past ten years have taken more than a Billion Dollars a year out of the state’s revenue. Henry David Thoreau said, “The path of least resistance leads to crooked rivers and crooked men.” Oklahoma’s solution will not come by taking the path of least resistance.

Thanks for allowing me to serve in the House of Representatives. Please call 405-557-7401 or write david.perryman@okhouse.gov with questions or comments.

Let's Make a Deal

Let’s Make a Deal - May 8, 2016

State Representative David Perryman

“Tell them what they’ve won, Jay,” was the way Monte Hall awarded game show prizes on the Long running game show, Let’s Make a Deal as contestants chose from Door Number One, Door Number Two or Door Number Three.

In less than three weeks, the 2016 legislative session must come to an end and it isn’t pretty. West Texas Intermediate crude is hovering around $42 per barrel and as a result of tax cuts, Oklahoma’s oil and gas gross production tax receipts are even lower than they were in 2001 when the price of oil was less than $27. Today, even if the price of a barrel of oil approached $50, the total gross production tax on that barrel would remain less than $1.

Projections for the Fiscal Year BEGINNING on July 1, 2016, are even more dire. Even though the legislature is dealing with an anticipated $1.3 billion budget gap and legislators MUST approve a budget before the end of this month, as of May 1, there had been no bills presented on the floor of the House of Representatives to address next year’s budget crisis.

One “solution” proposed by the Governor and her Finance Director is to borrow several hundred million dollars to supplement the budget covering ODOT payroll, materials and overhead and then paying the loan out of appropriations over the next several years.

Another of the Governor’s “solutions” is to raise additional tax revenue by “modernizing” our tax code through the elimination of certain sales tax exemptions and increasing the list of goods and services that are subject to sales taxes.

While those “solutions” are crafted for next year’s budget, they will do nothing for the current health care catastrophe facing Oklahoma RIGHT NOW with ambulance services folding, hospitals closing, mental health patients left untreated and 9 out of 10 nursing homes teetering on the edge of shutting their doors.

Which brings us to Doors Numbered One, Two and Three. Behind those doors in no particular order are possibly the only three ways to address Oklahoma’s health care disaster.

One door involves a plan for tens of thousands of working Oklahomans whose employers do not provide health insurance and who cannot afford private coverage on their salary of up to 133% of the poverty level. They would become eligible for SoonerCare Medicaid coverage and thereby decrease the millions of dollars that Oklahoma hospitals annually write off as bad debt of citizens who have no access to health care except the local emergency room.

One door involves a plan to boot more than 170,000 disabled, pregnant women and children from SoonerCare rolls over the next 3 years and require them to secure federally subsidized health insurance through the federal health care exchange.

One door leaves the disabled and pregnant women and children on SoonerCare but accepts federal funding for the expansion of Insure Oklahoma for those tens of thousands of working Oklahomans whose employers do not provide health insurance and cannot afford private coverage on their salary of up to 133% of the poverty level.

One plan is called Medicaid Expansion, one is called Medicaid Rebalancing, and one Expands Insure Oklahoma. All of these plans provide much needed mental health services, will improve health outcomes and will allow hospitals and ambulance services to recover fees for those they treat.

The funding for each of these plans will require an increase in the state’s tobacco tax and consequently will require a 75% vote from both the House and the Senate. There are many arguments on why we should not increase the tobacco tax. A tax increase will place a financial hardship on smokers across the state and will likely cause cigarette smuggling.

However, Oklahoma’s partisan obstinance and dogmatic pursuit of tax cuts has left us with no other options on the table. One thing is clear, health care must be saved and refusing to select a door will be catastrophic and will mean that as many as 4 out of 5 hospitals will not deliver babies and that more than a dozen hospitals will close within one year and that 9 out of 10 nursing homes will be forced to shut down. “Tell them what they’ve won, Jay.”

Questions and comments are welcome. David.Perryman@okhouse.gov or 405-557-7401.