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December 8, 2013

Fiscal impact of state question 766 for counties, schools, and career technology centers

DUNCAN — On November 12, 2012, S.Q. 766 was on a ballot and went to the vote of the people to eliminate tax assessments on intangible personal property. What you might not know is that prior to the vote of S.Q. 766, legislation was already in place to prevent any NEW tax assessments on intangible personal property. At the time S.Q. 766 was being considered, the Oklahoma Tax Commission released a fiscal impact statement which estimated that the governmental entities supported by ad valorem (property tax) revenues would lose $50 million if S.Q. 766 passed. Some examples of intangible property taxes are:

Patents, inventions, formulas, designs, and trade secrets

Licenses, franchise, and contracts

Land leases, mineral interests, and insurance policies

Custom computer software, and trademarks, trade names, and brand names

S.Q. 766 passed because voters decided that it would be best to do away with intangible personal property tax altogether. We now have current information provided by the Oklahoma Tax Commission on the actual financial impact of this vote.

According to the Oklahoma Tax Commission, 90 of the approximately 250 public service companies that now qualify for the tax exemption created by S.Q. 766 took advantage of the tax break this year; at a cost of $60 million to counties, school districts, and career technology centers.

School districts receive 65% of all centrally assessed property taxes. What this means for schools in Oklahoma is that of the $60 million lost, districts will annually lose $30,777,600 of existing revenue. Of the $60 million lost, local taxpayers will annually pay an additional $9,002,400 to the sinking fund of local school districts. This statewide revenue reduction does not impact the amount of money available to the legislature for state appropriations because ad valorem revenue is used to directly support the work of counties, school districts and career technology center.

S.Q. 766 deprived counties, schools, and career technology centers of $60 million this year. One large corporation alone received a $23 million tax break because of S.Q. 766. Given that level of tax savings, the logical expectation is that more and more eligible corporations will take advantage of this new state created tax break. Should more corporations, especially large ones, exercise this particular tax break, it will lead to fewer county generated taxpayer dollars dedicated to support county government, school districts, and career technology centers. Information provided by the Oklahoma Tax Commission suggests that counties, school districts, and career technology centers could be financially impacted in excess of $100 million annually over the next few years.

Anytime, revenue sources for counties, school districts, and career technology centers are diminished, it is cause for concern. The question that school leaders always ask is, “If we do away with a funding source, what will replace it?” I am still waiting on the answer.

Sherry Labyer,

Duncan Superintendent

580-255-0686,

sherry.labyer@duncanps.org

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