State could save millions by eliminating REAP

April 30, 2012

Following is an excerpt from OCPA’s Proposed State Budget for the Fiscal Year ending June 30, 2013.

With Oklahoma government spending at an all-time high (see chart), the time has come to set priorities and to exercise spending discipline.

According to the website of the Kiamichi Economic Development District of Oklahoma (KEDDO), “In 1996, the Oklahoma Legislature created the Rural Economic Action Plan (REAP). This Plan has made funds available for each of the rural Economic Development Districts to fund projects in communities with population of less than 7,000 and giving priority to fewer than 1,500 residents. Oversight of the application process is given to each of the Economic Development Districts ...” While most projects are small, some projects utilizing REAP funds are beneficial (road repairs) while others more resemble political patronage, earmarks, and “pork” (cars, renovations for community centers and storage buildings, etc.). Legislation in 2010 has helped steer REAP funds to more worthwhile projects, but the program still falls short in providing communities what they really need to thrive: job creators.

The failure of government programs to generate sustained “economic development” is nothing new. Oklahoma needs a bold, transformational plan that allows citizens and job creators to retain more of their own money to invest and spend, so local communities can attract job creators and not be reduced to reliance on unsuccessful state programs that breed more dependency. This is one of the main reasons Oklahoma must empower local communities by phasing out its personal income tax. As noted in the OCPA/Laffer study, “Eliminating the State Income Tax in Oklahoma: An Economic Assessment,” stronger economic growth would mean increased revenues for local governments across Oklahoma. And because there is no static tax reduction, every dollar of increased revenue created by Oklahoma’s stronger economy would increase the expenditure power of the economic growth estimated in the study. “Assuming local government revenues’ share of personal income remains constant, in aggregate, revenues for local governments would increase by $100 million in 2013, rising to an increase of $3.5 billion by 2022.” Therefore, based on the economic gain to local communities by lower state tax burdens, and the less-than-desired results of most state “economic development” programs, the legislature should no longer fund the REAP program.

The potential savings from implementing such reforms would be more than $11 million annually.

Submitted each year by the Oklahoma Council of Public Affairs, Inc. to the taxpayers of the State of Oklahoma and their elected Officials, the OCPA “Budget Book” is carefully crafted by Fiscal Policy Director Jonathan Small to help lawmakers set priorities and exercise spending discipline while creating a state budget that respects your family budget. Offering unmatched fiscal policy analysis and recommendations, Small draws on his experiences as a former budget analyst for the Oklahoma Office of State Finance, former fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and former director of government affairs for the Oklahoma Insurance Department to provide perspective on the state budget that you cannot find anywhere else.