Evaluating Economic Incentives

By Rep. Mike Sanders

The Oklahoma Incentive Evaluation Commission met this past week to begin discussing proposedevaluation criteria for 12 state economic incentives scheduled for review this year.

A 2015 state law requires each state economic incentive to be independently evaluated once every four years. The evaluations, performed by independent contractor Public Financial Management Inc., will help determine the effectiveness of each incentive and recommend whether it be retained, reformed or repealed.

This year’s incentive evaluations will be delivered to the Oklahoma House of Representatives, the state Senate and the governor before the start of the legislative session.

This work would happen even in the best of budget years. But, in a year when we had to work hard to come up with enough money to fill a $1.3 billion budget hole to support core state services, the commission’s work becomes even more pronounced.

Incentives to be evaluated this year include ad valorem tax exemptions for certain  types of new and expanding manufacturers, including researcher and development companies, computer services and data processors, aircraft repair companies, oil refineries and wind power generators; the Oklahoma Film Enhancement Rebate Act, which is hoped to spur job creation, bring dollars to Oklahoma businesses and enhance the state’s image; as well as tax credits for electricity generated by zero-emission facilities, for historic rehabilitation, and for aerospace engineering employees, among others. One incentive would provide access-road building assistance for certain industries needing to connect to state roadways.

As with all incentive and tax credit programs offered by the State of Oklahoma, we need to make sure they make sense for our taxpayers and for the preservation of core state services such as transportation, education, health care and public safety.

One of the commission members on Thursday said the criteria should include the effects that similar incentives have had. It’s also good to look at the state’s changing environment. What might have made sense 10 years ago when an incentive was legislatively approved may no longer be reasonable as the state’s industrial climate changes.

Commission members stressed that we need to ask questions about impact such as do these incentives bring jobs, skilled workers, tourists or others to our state to do business, build our communities and contribute to our tax base. Do they increase our sales tax collections? Does an incentive actually aid a company’s, and therefore the state’s bottom line?

One commission member pointed out that we want to make sure we stay competitive with other states. That’s important.

We need to ask questions about why we’re offering certain incentives. Is it a matter of pride? Is it to remove blight, to bring jobs, to boost local or state economies?

These are all things that will go into the criteria the Incentive Evaluation Commission develops for its next meeting before the evaluators get to work studying each of these 12 incentives.

These evaluations will then let me and other state representatives know which incentives we will need to preserve for the future and which will either need to be revised or repealed in our upcoming legislative session.

As always, I would love to hear from you. I can be contacted at (405) 557-7407.

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