Oklahoma Debate Begins On Need for Tax Reform

February 22, 1989 4 min read

Copyright 1989, Editorial Oklahoma’s public schools are facing a fiscal crisis that can be averted only by substantial changes in the property-tax system, school-finance experts and at least some state lawmakers are saying.

The state is one of only two in the nation in which per-pupil aid declined over the past five years. But even supporters of a tax-reform measure pending in the Senate say the bill falls far short of achieving the revisions that would be needed to bolster aid to schools.

Gov. Henry Bellmon, a Republican, unveiled a plan this month to raise schools’ local revenues by increasing the maximum property-tax rate allowed under the constitution from 39 mills to 54 mills.

That proposal, however, drew protests from members of Mr. Bellmon’s own party, and led to the Senate finance committee’s adoption of an alternative bill to raise the maximum rate to only 49 mills. The full Senate, which is controlled by Democrats, was expected to vote on the proposed constitutional amendment this week.

Senator Stratton Taylor, chairman of the Senate appropriations committee, predicted that the compromise plan would face an uphill fight in the legislature.

"[This] is not ad valorem reform,” he added. “Anyone who says that is misleading the public. This is a Band-Aid.”

Longstanding Problem

The property-tax-reform issue has bedeviled Oklahoma governors and legislators for decades.

Under the current system, all residential, commercial, and agricultural property is appraised at its fair market value. County tax assessors, who are elected in Oklahoma, apply to the property’s appraisal a tax ratio that can range from between 9 percent to 12 percent to determine the land’s assessed valuation for taxation. School districts then levy their millage against the assessment to determine an owner’s tax bill.

For example, if a home has a fair market value of $100,000 and if a 10 percent tax ratio is applied, the assessed valuation would be $10,000. If the district charges the maximum 39-mill tax rate allowed under the constitution, the tax bill would be $390.

According to John Augenblick, a school-finance consultant based in Denver, the Oklahoma system’s problems stem from the 39-mill tax limit and the wide leeway that the elected county assessors have in determining a property’s tax ratio.

Because many assessors are under pressure from voters to keep tax assessments low, property-tax revenues fluctuate from district to district and often fail to meet schools’ needs, Mr. Augenblick said.

“I think it’s gotten out of hand,” Mr. Augenblick said last week of the state’s property-tax system. “It’s to the point where something has to be done.”

Declining State Aid

Recent declines in state aid to education have compounded the problem, Mr. Augenblick and Robert Salmon, a school-finance expert and professor at the Virginia Polytechnic Institute and State University, said at a meeting last month of superintendents from eastern Oklahoma.

Mr. Augenblick pointed out that between fiscal years 1983 and 1988, average per-pupil spending increased by 41 percent nationally.

But in Oklahoma, historically a low-spending state, per-pupil spending decreased by 10 percent. The only other state that cut school aid during the same period was Alaska, whose economy was also rocked by the steep fall in oil prices.

Despite enacting tax increases, Oklahoma lawmakers could not maintain education funding because of the state’s ailing economy, Mr. Augenblick continued. All 611 school districts are now levying the maximum 39-mill tax rate, which leaves them with nowhere to turn for additional money, he said.

Action Last Year

Last year, the Oklahoma legislature took its first major step toward property-tax reform by agreeing to place a proposed constitutionalel15lamendment before voters during a March 1989 special election.

That proposal would have set property-tax assessments at 100 percent of fair market value, and would have lowered the maximum tax rate from 39 mills to 3.9 mills to keep the new system revenue-neutral during its first year.

Governor Bellmon, however, announced late last year that he opposed the amendment and would campaign against it. Lawmakers, fearing the proposal would fail because of the Governor’s opposition, voted to remove it from the ballot.

Mr. Bellmon asked lawmakers on Feb. 6 to set a special statewide election for the early fall to let voters decide on his plan to increase the constitutional tax-rate limit from 39 mills to 54 mills.

Voters in individual districts would then vote on whether their schools should receive all or part of the 15-mill increase.

“This proposal gives local voters the opportunity to increase local support and local control of schools and to reverse the trend toward more state financing and increasing state control,” the Governor said in announcing the plan.

Senator Taylor, the Democratic chairman of the chamber’s appropriations committee, said Senate leaders decided to back only a 10-mill increase after Republican lawmakers balked at endorsing the Governor’s plan. If approved, the bill would appear on the ballot in September 1990.

Democrats are still angry with the Governor for saying nothing about the property-tax reform efforts until late last year, according to Mr. Taylor.

“The mood among the Democrats is the Governor lost his courage and now is trying to regain it,” he said.

A version of this article appeared in the February 22, 1989 edition of Education Week as Oklahoma Debate Begins On Need for Tax Reform