Fallin plays the fiddle

The consequences of drilling tax breaks

Several weeks ago Reuters asked Governor Mary Fallin to comment on a special report titled, “As oil boom goes bust, Oklahoma protects drillers and squeezes schools.” Reuters wanted to ask the governor about enormous tax breaks given to oil companies while funds for Oklahoma schools were slashed. Fallin declined an interview. Through a spokesperson, the governor’s office merely noted that, as Reuters soberly put it, “the tax breaks were created by her predecessors.” In other words, she passed the buck. 

The governor is not wrong. The tax incentives in question, which give a huge tax break to oil and gas companies far bigger than what they get in other states, were put in place in 1994, during the administration of Gov. David Walters, the second-to-last Democrat to hold the office. Without getting into the weeds on the intricacies of the tax code, suffice it to say that in order to give drillers an incentive to make risky investments, the state put in place an extremely low tax (of 1%, give or take) on horizontal wells—the kind that became ubiquitous during the fracking boom—with the stipulation that the rate increase over time. That’s far below the take in Texas, which taxes similar wells at about four times that rate, and North Dakota, which takes more than ten times the cut Oklahoma does. Thus, during the drilling boom in the 2000s, while North Dakota put $3.2 billion in taxes on oil production in the bank, oil tax revenue in Oklahoma actually fell from a peak of $1.3 billion in 2008 to $860 million in 2014. 

The end result—a billion-dollar-plus budget shortfall projected for next year—should have been the obvious outcome to anyone with even a basic education in mathematics, but maybe that’s the problem. Oklahoma’s schools have never been well funded, but between 2008 and 2014 the state cut spending per pupil by 24%, more than any other state in the wake of the worst financial disaster since the Great Depression. And then, as they say, the wolves came. 

Faced today with this current budget shortfall, the state has cut its education budget even further—$58 million out of a total $3 billion. Some Oklahoma school districts have already been forced to cut the school week to four days and may shorten the school year entirely. Statewide, around 1,000 education jobs are on the chopping block. 

Let’s cut the bullshit. Yes, there are other industries here but Oklahoma is a fossil fuel state. By giving huge breaks to the oil industry during what should have been our jackpot decade, the people in charge of Mary Fallin’s Oklahoma have bankrupted the treasury. Yes, families that can will pony up the cash to send their kids to private school and those kids—the ones who don’t get sent off to flat earth academies to study creation myths—may get a better education than they would have otherwise. Some Horatio Alger out there in Little Dixie or the Panhandle might thrive on the challenge of attending a crappy school. And obviously it’s true that you can’t throw money at a problem and expect it to solve itself, but in broad strokes educational outcomes track with spending on education. On the whole, if you spend $100 per pupil you will have better educated pupils than if you spend $1 per pupil. 

A January 2016 study found that Oklahoma schools were among the five worst in all 50 states. That was before the coming cuts. By supporting the oil and gas industry on the backs of children, Oklahoma’s political class has ensured that education in Oklahoma will be even worse in the coming years. What we will get are dumber Okies. 

Thinking people in Oklahoma often say they’re embarrassed by the madness that emits regularly from Oklahoma City. That’s fair enough, but it’s insufficient to capture the current state of affairs. Oklahomans voted in the current regime to promote an agenda of social and fiscal conservatism, but no one voted them in to screw over children. What these people have done is not just embarrassing, it’s infuriating and an unmitigated disaster for the state. 

Governor Fallin is right that the tax breaks that got us here were put in place under those who came before her. The state legislature is responsible, too. But in the years since Fallin took office, the crisis steadily deepened while she and others under her leadership did nothing. The grassfire became an inferno and if Mary could play the fiddle she might as well have been doing that. 

For more from Denver, read his article on America's newly-appointed national mammal, the bison.