Budget & Tax

Use TSET to protect vital services

October 25, 2017

Jonathan Small

In the final hours of the 2017 legislative session, lawmakers desperate to find revenue passed Senate Bill 845 to impose a $1.50 per pack tax on cigarettes. (To get around constitutional limits on legislative power, they labeled the measure a “fee.”)

The Oklahoma Supreme Court unanimously struck down the revenue provisions of Senate Bill 845. This left some elected officials claiming them must pass new and larger tax increases. To strengthen their case, they have the same doom-and-gloom predictions they trot out for every tax debate: nursing homes will close, rural hospitals will fail, health and human services will be depleted. All this supposedly because lawmakers couldn’t constitutionally pass a tax on tobacco.

But if lawmakers want to use tobacco money to protect vital services, there is a better place to look.

It’s called the Tobacco Settlement Endowment Trust, or TSET. This is a public trust that manages money received by the state as a result of the tobacco lawsuit and settlement from years ago. This fund alone recently topped $1 billion, and it gets more money and spends about $50 million in earnings every year.

TSET does a few important things, but also has plenty of questionable spending. Right now, TSET is spending around $770,000 to lecture Oklahomans to (among other things) drink more water. Last year, public outrage forced TSET to change course when it attempted to create a new administrator position at a salary of $250,000 a year.

So, when you take a billion-dollar bank account, growing every year and generating annual earnings around $50 million, then factor in some questionable spending, it’s obvious TSET offers state leaders an alternative to increasing the tax burden on Oklahoma families. The money is already there to prevent all of the doom-and-gloom scenarios.

This is why OCPA has called on lawmakers to reform TSET and access those funds to stabilize reimbursement rates for nursing homes and rural hospitals. This could also fund the Physician Manpower Training Commission and fill gaps in health and human services funding. It could all be done without taking away from existing TSET programs or the current endowment.

Believe it or not, some have ridiculed this suggestion simply because it is not a tax increase. Others say the reform is too complicated.

The state constitution does say that reforming TSET requires a vote of the people. But so does passing any tax hike that has less than three-fourths support in both legislative chambers. Why not let Oklahomans vote to break down this funding silo, just a little, in order to shore up some basic services?

It’s time to use TSET funds to prioritize rural hospitals, nursing homes, and other vital services without increasing the burden of taxation on Oklahoma families.

Jonathan Small is the president of the Oklahoma Council of Public Affairs. A Certified Public Accountant, he previously served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden.