State lost VW plant, but $700M stays here
Funds ostensibly will be at Legislature discretion
Volkswagen’s decision to build its electric vehicle battery manufacturing plant in Ontario instead of Oklahoma has freed up nearly $700 million originally earmarked as incentives.
The money was first set aside for Panasonic last year when that company was considering Oklahoma for a similar factory. Like Volkswagen, Panasonic passed on Oklahoma.
Unless the Oklahoma Department of Commerce has another large manufacturer waiting in the wings that would qualify for the incentives, the money will be released back to the Legislature on April 15. With hundreds of millions of dollars back in lawmakers’ hands, there are several ways to spend it.
Lawmakers consider the money to be one-time funds, however, because it is not part of a recurring revenue stream. Politically, that will likely limit the options that the Legislature is willing to consider because the money won’t be available next year.
Here are a few of the choices available to them.
Tax cuts
Gov Kevin Stitt and others have called for lowering the state’s corporate and personal income tax rates. In his proposed budget released at the opening of this year’s legislative session, Stitt asked lawmakers to reduce the personal income tax rate by 0.76%, to a rate of 3.99%.
That plan would cost the state an estimated $260.9 million.
He also called on the Legislature to cut the corporate income tax by threefourths of one percent, which would reduce state revenue by $43.7 million.
A proposal with bipartisan support would eliminate the state sales tax on
groceries at a cost of $351.1 million.
Legacy Fund
The Senate and the governor have called for the creation of a state Legacy Fund that would earn money from investment profits. Those profits would then be used to pay for future tax cuts, funding state pension plans or any number of priorities that arise.
The state would have to put over $1 billion in the bank before they could use that revenue, however.
“As you grow that corpus, or you grow the revenue off of it, you could pay for a tax cut down the road at some point,” said Senate leader Greg Treat, R-Oklahoma City.
Education spending
A number of education spending plans are up for debate at the state Capitol that include teacher pay raises, school choice tax credits and public school funding. House Speaker Charles McCall has endorsed an $800 million plan to fund those priorities. That includes $5,000 in refundable tax credits for each child sent to private schools. Families who home-school their children could receive $2,500 in refundable tax credits.
McCall, R-Atoka, also has proposed raising salaries for all Oklahoma teachers by $2,500 and pumping an extra $300 million into public-school funding to support additional school staff raises and classroom needs.
The Senate is considering $541 million plan of new funding to improve Oklahoma public schools, recruit teacher candidates and retain current school staff. Several of the bills in the Senate’s plan were advanced on Tuesday.
Discretionary spending
The money also could be used for something completely different, like a proposal that was scrapped early in budget negotiations because of lack of funds or an emergency situation that requires immediate one-time funding.
While Senate leadership are hopeful that the money is spent on creating the Legacy Fund, House Appropriations and Budget Chairman Kevin Wallace, RWellston, is keeping his cards close to the vest for now, at least publicly.
Wallace said he planned to present an idea during a lunchtime meeting with Senate leadership on Tuesday.