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ACE Book 2015 Accountability for A Competitive Economy RESEARCH FOUNDATION
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Table of Contents 2015 Overview: About the Data 1 Chapter 1: An Overview of Oklahoma’s Economy & Infrastructure 2 Net Migration 3 Per Capita Personal Income 4 The Relative Value of $100 5 Industry GDP as a Percent of Oklahoma’s Total GDP Compared to U.S. Total 6 Change in GDP by State 7 Non-Agricultural Employment Growth 8 Infrastructure Fast Facts 9 State Expenditures on Roadways 10 Chapter 2: Business Climate 11 Oklahoma’s Business Rankings 2014 12 America’s Top States for Business 13-14 Percentage of Residents without Health Insurance 15 Percentage of Privately Insured Persons with Employment-Based Insurance 16 Unemployment Insurance Taxes 17 Workers’ Compensation – Benefits Paid 18 Oklahoma’s Permanent Partial Disability Claims 19 Chapter 3: Taxation & Business 20 Snapshot of Oklahoma’s Taxes 21 State Business Tax Climate Index 22 State-Local Tax Burden 23 Business Share of Total State and Local Taxes 24 State and Local Business Taxes by Type 25 Chapter 4: Education & Workforce Development 26 Oklahoma Public School A-F Grades 27 State per Pupil Spending 28 Educational Spending per $1,000 of Personal Income 29 Average Annual Salary of Teachers in Public Elementary and Secondary Schools 30 Educational Attainment of Population 25 and Older 31 Import/Export Ratio of College-Bound High School Graduates 32 Research Foundation Board of Directors 33
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The 2015 Accountability for a Competitive Economy (ACE) Book provides a snapshot of some key elements of the Oklahoma economy in order to provide a better understanding of how Oklahoma can build towards the future. This book is broken up into four sections (Economy and Infrastructure, Business Climate, Taxation and Business, and Education and Workforce Development). Each section focuses on the strengths and weaknesses of Oklahoma’s economy and how our state compares against our regional neighbors and the United States as a whole. While Oklahoma’s economy has seen improvement due to a significant increase in job creation, gross domestic product and per capita personal income over the past ten years, our state’s growth is inhibited by our poor education system and the quality of health of Oklahomans. Workforce development is tied to both of these obstacles, which affects the future of our economy. Until the problems of our education system and the health and well-being of Oklahomans are solved, our economy will not achieve its maximum growth and performance. This assessment of Oklahoma’s situation compared to other states is designed to inform and assist policy makers in their quest to guide Oklahoma towards a more prosperous future. 2015 Overview: About the Data 1
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Due to an increase in migration, per capita personal income and non-agricultural employment, Oklahoma’s economy continues to show great promise. People are moving to Oklahoma due to our sound economy, which in turn bolsters our state’s economic performance. With more people and businesses moving to our state, a sound infrastructure is critical. From our roads and bridges to our water and telecommunications, every aspect of our infrastructure is important. We must continue to build and maintain our infrastructure so Oklahoma can continue to grow. An Overview of Oklahoma’s Economy & Infrastructure Chapter 1 2
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Source: U.S. Census Bureau; State Chamber of Oklahoma Research Foundation (Economic Assessment of Oil and Gas Tax Policy in Oklahoma) While Texas welcomed more new residents than every state in the nation with 177,715 migrants, Oklahoma attracted 19,000 new residents, which was the 13th most in the nation. Growth in the oil and gas industry helps explain Oklahoma’s large increase in migration since 2000, as more than 118,000 people relocated to Oklahoma between 2002 and 2012. Oklahoma’s Growing Economy Continues to Attract Residents from Other States and Countries Rank State Net Domestic Migration Net International Migration Rank 1 Texas 113,528 64,187 4 4 Colorado 36,284 8,573 20 9 Oklahoma 14,268 4,756 32 29 Arkansas -2,031 2,965 37 38 Missouri -7,612 7,462 23 41 New Mexico -10,526 1,717 42 42 Kansas -12,557 5,105 31 Total Net Domestic & International Migration July 2012 - July 2013 3
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Source: U.S. Bureau of Economic Analysis Oklahoma’s Per Capita Personal Income is on the Rise While increasing at a higher rate, Oklahoma’s personal per capita income has been consistently lower than the U.S. average since 2000. Oklahoma’s largest jump came between 2007 and 2008 when our per capita personal income increased by 8.7% to $37,648. Although our state saw a large drop the following year due to the effects of the 2008 recession, Oklahoma’s per capita personal income has increased at a higher rate than every state in our region since 2000. Rank State % Change from 2000 2013 Rank 4 Oklahoma 67.67% $41,586 28 13 Arkansas 58.40% $36,086 45 16 New Mexico 54.95% $36,284 42 17 Texas 53.67% $43,552 25 20 Kansas 52.68% $43,916 24 United States 45.63% $44,543 35 Missouri 42.46% $39,897 33 46 Colorado 36.18% $46,610 16 Per Capita Personal Income (2000-2013) Per Capita Personal Income (% Growth 2000-2013) US OK 4
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Source: U.S. Bureau of Economic Analysis; Tax Foundation $100 Will Take You Farther in Oklahoma than in Most Other States Rank State Value of $100 2 Arkansas $114.16 3 Missouri $113.51 10 Kansas $111.23 10 Oklahoma $111.23 24 New Mexico $105.49 26 Texas $103.63 United States $103.15 38 Colorado $98.43 Oklahoma is a low-price state, which means that $100 will buy what would cost $111.23 in a state that is closer to the national average. In comparison to the District of Columbia, where $100 is worth the least at $84.60, Oklahoma’s purchasing power is 32% greater. 0 $20 $40 $60 $80 $100 $120 U.S. Average Texas New Mexico Missouri Kansas Colorado Arkansas Oklahoma The Relative Value of $100 5
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Source: U.S. Bureau of Economic Analysis; State Chamber of Oklahoma Research Foundation (Economic Assessment of Oil and Gas Tax Policy in Oklahoma) The mining industry, which includes oil and gas, is a much more significant piece of the economy in Oklahoma than it is nationwide. This is due to Oklahoma being home to the second largest concentration of oil and gas activity in the United States. While oil and gas firms account for only 3.2% of all business establishments in Oklahoma, they hire five percent of wage and salary workers and generate 13.5% of total earnings statewide. Outside of government, Oklahoma’s economy leans heavily on the mining, retail and wholesale, and manufacturing industries. Together, the three industries made up 36.2% of Oklahoma’s total GDP in 2013. Industry GDP as a Percent of Oklahoma’s Total GDP Compared to U.S. Total (2013) Oklahoma’s Largest Sectors: Government and Mining Oklahoma U.S. Total 6
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Source: U.S. Bureau of Economic Analysis Oklahoma’s gross domestic product increased 6.2% from 2012 to 2013. The two industries that showed the greatest growth in GDP during this time period are the agriculture, forestry, fishing and hunting industry (36.7%) and the mining industry (24.4%). Oklahoma’s Percent Growth in GDP Outpaced the Region and Most of the Nation Gross Domestic Product % Growth (2012-2013) Overall Rank State % Change (2012-2013) 2013 State GDP (in millions) % of US GDP Rank 6 Oklahoma 6.2% $182,086 1.1% 27 9 Colorado 5.7% $294,443 1.8% 18 11 Texas 4.8% $1,532,623 9.2% 2 14 Arkansas 4.4% $124,218 0.7% 34 23 Kansas 3.7% $144,062 0.9% 31 United States 3.5% $16,701,415 100.0% 27 New Mexico 3.4% $92,245 0.6% 36 38 Missouri 2.6% $276,345 1.7% 19 7
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Source: U.S. Bureau of Labor Statistics (State Employment Data); State Chamber of Oklahoma Research Foundation (Economic Assessment of Oil and Gas Tax Policy in Oklahoma) The Number of Non-Agricultural Jobs in Oklahoma has Seen Great Growth *Amount in thousands Non-Agricultural Employment Growth 10-Years (April 2004 – April 2014) Overall Rank State % Growth April 2004* April 2014* Jobs Added (Lost) Rank 2 Texas 21.7% 9,445.5 11,494.8 2,049,300 1 5 Oklahoma 13.6% 1,463.1 1,661.9 198,800 13 6 Colorado 12.8% 2,149.9 2,424.9 275,000 7 26 Kansas 5.2% 1,319.0 1,388.0 69,000 24 33 Arkansas 4.1% 1,149.1 1,196.2 47,100 32 35 New Mexico 3.1% 787.0 811.2 24,200 40 38 Missouri 2.2% 2,721.4 2,780.4 59,000 27 In the ten year span from April 2004 to April 2014, Oklahoma added 198,800 non- agricultural jobs. Fifteen percent of those jobs have been added since April 2013. The ten year growth can partly be attributed to growth in the energy industry. Oklahoma oil and gas companies created 29,000 new wage and salary jobs between 2002 and 2012. Oil and gas firms are not the only businesses adding jobs in Oklahoma. With companies like Boeing, NORDAM, and Macy’s planning to bring more jobs to Oklahoma, we will continue to see an increase in the number of non-agricultural jobs. Non-Agricultural Job Growth (2004-2014) 8
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Source: U.S. Census Bureau; Federal Highway Administration; Oklahoma Aeronautics Commission; Association of American Railroads Oklahoma Infrastructure Fast Facts 112,821 Miles of Public Roads 22,912 Bridges 5,828 Deficient Bridges 47,872,000,000 Miles Traveled on Oklahoma’s Roads in 2012 140 Public Use Airports 933 Miles of Interstate 3,273 Freight Railroad Miles 5 Military Installations Largest Export Civilian aircraft, engines, and parts – 8.6% of Oklahoma’s total exports in 2013 Largest Import Crude oil from petroleum and bituminous miner – 37.8% of Oklahoma’s total imports in 2013
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Source: U.S. Census Bureau; U.S. Department of Transportation Oklahoma’s Roads and Bridges Continue to Need Improvement State Expenditures on Roadways (2012) While Oklahoma still spends more dollars per capita on roadways than the other six states in our region, from 2011 to 2012, our state’s expenditures on roadways dropped almost $100 per capita. Rank State Total Per Capita Capital Per Capita Rank Maintenance Per Capita Rank 14 Oklahoma $429.36 $374.90 11 $54.46 31 15 Texas $410.59 $328.86 15 $81.73 17 16 Kansas $399.68 $349.17 14 $50.51 34 20 Arkansas $358.67 $269.17 25 $89.50 14 United States $311.73 $242.19 $69.54 32 Missouri $303.73 $226.81 33 $76.92 21 39 Colorado $255.59 $175.21 44 $80.38 18 46 New Mexico $218.19 $212.65 37 $5.54 50 10
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Oklahoma continues to be an attractive place for business, as our state provides a more competitive business climate than in the past. While we have improved, more work must be done. This year’s ACE Book includes several indicators that could prevent Oklahoma from being competitive with other states, unless we do something to correct them soon. Business Climate Chapter 2 11
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Oklahoma’s Business Rankings 2014 The graph below shows how Oklahoma ranks in the measures reported in the following CNBC report. Oklahoma moved up one spot to number one this year in the cost of doing business category, but declined overall due to poor air quality, health and education. Source: CNBC 12
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Source: CNBC Overall Rank State Cost of Doing Business Economy Infrastructure Workforce Quality of Life Technology & Innovation Business Friendliness Education Cost of Living Access to Capital 1 Georgia 30 3 1 1 32 16 14 32 22 11 2 Texas 23 1 1 11 37 2 20 27 18 5 3 Utah 16 6 28 12 15 18 4 46 20 1 4 Nebraska 10 11 18 16 8 40 3 19 21 35 5 North Carolina 23 4 21 4 34 12 19 33 14 17 6 Minnesota 38 5 5 30 4 11 15 12 28 11 7 Washington 34 2 17 24 6 4 23 25 38 9 8 Colorado 35 8 29 5 12 9 16 28 34 1 8 Virginia 30 29 19 10 22 10 5 9 32 19 10 North Dakota 22 7 10 8 5 49 7 22 12 45 11 South Dakota 6 20 31 6 10 50 2 30 16 26 12 Iowa 7 18 25 37 20 29 9 22 12 49 13 Arizona 28 15 8 2 27 19 16 50 27 5 14 Tennessee 13 14 4 6 50 28 18 39 9 33 15 Kansas 26 31 8 13 25 27 11 14 24 41 16 Idaho 8 42 34 8 16 41 6 45 11 21 17 Wisconsin 26 22 10 40 24 20 25 10 23 37 18 Ohio 15 15 6 46 43 17 33 15 15 29 19 Indiana 21 30 7 27 44 25 11 15 7 37 20 Florida 37 11 27 3 28 12 35 38 31 7 21 Wyoming 18 41 12 18 16 46 8 12 33 35 22 Oregon 33 10 23 39 13 22 26 39 37 15 23 Missouri 11 15 13 44 48 24 29 20 18 39 24 South Carolina 9 13 14 25 40 30 34 43 10 41 25 Massachusetts 46 19 45 20 7 5 21 3 45 9 America’s Top States for Business 2014 (1-25) 13
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Overall Rank State Cost of Doing Business Economy Infrastructure Workforce Quality of Life Technology & Innovation Business Friendliness Education Cost of Living Access to Capital 26 Michigan 31 28 16 15 45 14 32 34 17 23 27 Illinois 40 36 3 32 30 5 41 15 29 14 28 Oklahoma 1 26 33 35 49 39 27 41 3 41 29 Nevada 25 21 19 14 35 35 22 49 30 15 30 Arkansas 2 25 35 19 41 44 45 37 2 39 30 New Hampshire 32 33 48 41 3 26 13 10 43 19 32 California 48 9 24 36 23 1 48 26 47 1 33 Montana 12 38 25 46 11 45 42 21 25 27 34 Alabama 4 40 21 20 46 31 38 47 7 45 35 Maryland 45 24 39 20 26 7 42 7 41 27 36 Mississippi 4 26 31 17 38 47 49 48 6 31 37 New Mexico 17 43 15 30 33 32 47 36 26 23 38 Delaware 36 32 44 34 29 23 1 24 36 44 39 Kentucky 14 46 29 29 42 37 36 35 1 47 40 Louisiana 3 44 36 26 47 36 39 44 4 47 40 New York 50 34 38 43 21 3 29 1 50 4 42 Vermont 41 23 49 50 2 37 31 2 40 31 43 New Jersey 43 47 47 23 18 15 37 4 44 11 44 Pennsylvania 42 37 37 48 35 8 39 6 35 17 45 Maine 29 48 46 41 8 43 28 8 38 29 46 Connecticut 47 49 42 32 14 21 24 5 48 7 47 Alaska 39 50 41 27 30 42 10 30 46 21 48 West Virginia 18 39 40 44 39 48 50 28 5 49 49 Hawaii 49 34 43 49 1 33 44 42 49 33 50 Rhode Island 43 44 50 38 19 34 45 18 42 23 America’s Top States for Business 2014 (26-50) 14
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The Percentage of Uninsured Oklahomans Remains High Source: U.S. Census Bureau Rank State % Uninsured (2013) % Uninsured (2000) Rank (2000) % Change (2000-2013) Rank (% Change) 20 Kansas 12.3 9.6 16 2.7 33 23 Missouri 13.0 8.6 13 4.4 46 32 Colorado 14.1 12.9 32 1.2 28 United States 14.5 13.1 1.4 37 Arkansas 16.0 14.1 37 1.9 30 44 Oklahoma 17.7 17.4 46 0.3 12 46 New Mexico 18.6 23.0 50 -4.4 1 50 Texas 22.1 22.0 49 0.1 10 The number of uninsured Oklahomans has increased by 0.3% since 2000. While this rate is the third best among states in our region, only six states nationwide have a larger percentage of uninsured residents. Percentage of Residents Without Health Insurance (2013) 15
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The Percentage of Privately Insured Oklahomans with Employment Based Insurance Significantly Declined from 2012 to 2013 Source: U.S. Census Bureau Between 2012 and 2013, the percentage of privately insured Oklahomans with employment- based insurance decreased 5.2%. Only ten other states had larger declines. Rank State 2013 2012 2012-2013 Difference Rank 17 Texas 84.2% 89.2% -5.0% 39 United States 83.0% 85.9% -2.9% 26 Missouri 82.0% 84.0% -2.0% 20 30 New Mexico 81.5% 85.6% -4.1% 36 36 Oklahoma 80.4% 85.6% -5.2% 40 41 Arkansas 79.5% 83.3% -3.8% 33 42 Colorado 78.8% 84.4% -5.6% 43 44 Kansas 78.5% 79.4% -0.9% 12 Percentage of Privately Insured Persons with Employment-Based Insurance (2012-2013 Difference) 16
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Source: U.S. Department of Labor, Employment and Training Administration (UI Data Summary); Tax Foundation (2015 State Business Tax Climate Index) Oklahoma’s Unemployment Insurance Taxes Have Declined Between 2012 and 2013, Oklahoma’s unemployment insurance taxes on average, full-time employees decreased by $20. Even though our unemployment insurance tax was the highest in the region in 2013, our state is considered to have the least damaging UI tax system in the nation due to having a rate structure with low minimum and maximum rates and a federal level wage base. UI Tax on Average Full-Time Employee Overall Rank State Tax on Average Full-Time Employee Tax Rate Taxable Wage Base 22 Oklahoma $454 2.26 $20,100 United States $430 3.31 $12,992 23 Arkansas $397 3.31 $12,000 27 New Mexico $369 1.61 $22,900 33 Colorado $314 2.78 $11,300 35 Missouri $295 2.27 $13,000 39 Texas $262 2.91 $9,000 46 Kansas $215 2.69 $8,000 Unemployment Insurance Taxes (2013) 17
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Source: National Academy of Social Insurance; National Council on Compensation Insurance: Oklahoma State Advisory Forum 2014 Oklahoma’s Workers’ Compensation Costs Are the Highest in our Region From 2011 to 2012, Oklahoma’s workers’ compensation benefits per covered worker increased by $11.67. However, workers’ compensation costs are expected to decline as of January 1, 2015, because Oklahoma’s overall loss cost rate will drop by 7.8%. This will allow businesses to pay less in workers’ compensation insurance costs in 2015 than they did in previous years. The National Council on Compensation Insurance expects goods and services to be the industry in Oklahoma with the largest average loss cost change at -9.6%. Rank State $ Per Covered Worker % of Covered Wages Rank 1 Washington $840.31 1.63% 3 2 Alaska $797.55 1.61% 4 3 California $783.95 1.38% 7 4 West Virginia $701.87 1.81% 1 5 New York $640.07 1.02% 19 6 Oklahoma $622.08 1.52% 5 7 Montana $605.17 1.67% 2 8 Wyoming $598.91 1.36% 8 9 New Jersey $594.75 1.02% 19 10 Connecticut $550.73 0.89% 30 11 Maine $541.76 1.43% 6 12 Delaware $541.50 1.05% 16 13 Pennsylvania $533.21 1.11% 11 14 South Carolina $529.17 1.36% 8 15 Vermont $504.98 1.25% 10 16 Illinois $488.07 0.94% 25 17 Louisiana $469.36 1.09% 14 18 Iowa $445.01 1.11% 11 19 Hawaii $436.61 1.05% 16 20 Wisconsin $434.43 1.04% 18 21 Ohio $428.84 0.98% 21 22 New Mexico $422.49 1.07% 15 23 Florida $415.07 0.97% 22 24 Maryland $410.81 0.79% 37 25 Oregon $409.77 0.93% 26 26 Rhode Island $402.87 0.88% 31 Rank State $ Per Covered Worker % of Covered Wages Rank 27 Minnesota $401.88 0.82% 34 28 Georgia $399.18 0.87% 32 29 Idaho $396.55 1.11% 11 30 Colorado $384.15 0.77% 40 31 Kentucky $383.70 0.96% 23 32 North Carolina $383.02 0.90% 28 33 Alabama $382.84 0.93% 26 34 New Hampshire $378.55 0.79% 37 35 North Dakota $378.53 0.83% 33 36 Nebraska $350.28 0.90% 28 37 Missouri $344.52 0.82% 34 38 Nevada $336.41 0.78% 39 39 Mississippi $333.54 0.95% 24 40 Kansas $330.06 0.81% 36 41 Tennessee $320.86 0.74% 41 42 Michigan $316.02 0.68% 42 43 Massachusetts $306.84 0.51% 49 44 Arizona $300.05 0.67% 44 45 Virginia $272.36 0.54% 47 46 Utah $248.61 0.61% 45 47 South Dakota $242.61 0.68% 42 48 Indiana $225.83 0.55% 46 49 Texas $203.17 0.40% 50 50 Arkansas $195.94 0.52% 48 District of Columbia $195.62 0.26% United States $464.34 0.95% 18
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Source: National Council on Compensation Insurance: Oklahoma State Advisory Forum 2014 Oklahoma Has More Permanent Partial Disability Claims Than Every State in Our Region Permanent Partial Disability Claims per 100,000 Workers (2010-2011) 0 100 200 300 400 500 600 700 800 National Average Regional Average Texas New Mexico Missouri Kansas Colorado Arkansas Oklahoma Even though the most recently released data shows that Oklahoma experienced 745 claims for Permanent Partial Disability (PPD) for every 100,000 workers from June 2010 to May 2011, we expect to see those numbers drop substantially in the near future due to the passage of Senate Bill 1062 in 2013. 19
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Business taxes are an important part of every state’s tax code. In 2013, businesses in Oklahoma paid $7 billion in total state and local taxes. Most of the taxes collected were not from the corporate income tax, which is commonly misconceived as the only tax cost for businesses. There are many other taxes that businesses have to pay, including property taxes and excise taxes. Oklahoma’s largest portion of taxes paid by businesses came in the form of sales taxes in 2013, while businesses nationwide paid the largest portion of their taxes in property taxes. Taxation & Business Chapter 3 20
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Source: Tax Foundation (Facts & Figures 2014: How Does Your State Compare?) Snapshot of Oklahoma’s Taxes Compared to other states, many of Oklahoma’s tax rates rank in the bottom 25 of the 50 states. Twenty-nine states have a higher top individual income tax rate, and 33 states have a higher corporate tax rate. The only tax rate where Oklahoma ranks near the top is our combined state and average local sales tax rate. Note: For all rankings on this page, 1 indicates the highest among the 50 states. Individual Income Tax Number of brackets 7 Top income tax rate 5.25% Top bracket kick-in $8,700 Bottom income bracket rate 0.50% Bottom bracket kick-in $0 Collections per capita $730 Collections rank 32 Corporate Income Tax Number of brackets 1 Corporate tax rate 6% Collections per capita $117 Collections rank 28 Other Taxes Rate Gross receipts tax None Capital stock tax 0.125% Inheritance tax None Estate tax None Property Tax Collections per capita $590 Collections rank 49 Property taxes paid as share of owner-occupied housing value 0.84% Property taxes paid rank 30 Sales Tax State rate 4.50% State + average local rate 8.72% State + average local rank 5 Collections per person $1,039 Collections rank 17 General Info Rank National Average Income per capita $40,620 28 $43,735 Federal aid as % of gen eral revenue 36.2% 14 32.8% State debt per capita $2,626 33 $3,678 Excise Taxes Rate Rank Gasoline taxes and fees $0.17 per gallon 47 Cigarette taxes $1.03 per pack 30 Spirits taxes $5.56 per gallon 25 Beer taxes $0.40 per gallon 15 Cell phone taxes 9.87% 25 21
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Source: Tax Foundation (2015 State Business Tax Climate Index) Note: 1 is best, 50 is worst. Oklahoma Business Tax Climate Ranks below Most Neighboring States Oklahoma’s business tax climate falls behind competing states like Texas and Missouri due to a high sales tax rate and a low top bracket kick-in for the top individual income tax rate. We rank 38th in the sales tax category due to a high local option sales tax of 4.26%. Oklahoma remains competitive in some categories by having the least damaging unemployment insurance taxes in the nation and a single-rate corporate income tax system with a comparatively low rate of six percent. Our state also scores high in the property tax category as a result of having a low effective property tax rate of 1.56% and collecting less in property taxes per capita than 48 other states. Overall Rank Corporate Tax Rank Individual Income Tax Rank Sales Tax Rank Unemployment Insurance Tax Rank Property Tax Rank Wyoming 1 1 1 13 34 35 South Dakota 2 1 1 35 41 18 Nevada 3 1 1 39 43 9 Alaska 4 30 1 5 24 32 Florida 5 14 1 12 3 16 Montana 6 18 20 3 18 8 New Hampshire 7 48 9 2 44 43 Indiana 8 22 10 10 7 5 Utah 9 5 12 19 22 4 Texas 10 39 6 36 15 36 Washington 11 28 6 46 19 23 Oregon 12 36 31 4 30 15 Michigan 13 10 14 7 47 27 Delaware 14 50 33 1 2 13 Tennessee 15 15 8 47 26 37 North Carolina 16 25 15 33 11 29 Missouri 17 4 29 29 12 7 Mississippi 18 11 21 28 8 33 Idaho 19 21 24 22 46 3 Colorado 20 12 16 43 35 22 West Virginia 21 17 26 25 23 25 Kansas 22 38 18 30 9 28 Arizona 23 24 19 49 4 6 Massachusetts 24 37 13 21 48 45 North Dakota 25 19 36 20 16 2 Kentucky 26 29 30 11 45 17 Virginia 27 6 39 6 37 26 Alabama 28 27 23 41 25 10 Nebraska 29 31 25 27 13 39 Hawaii 30 9 37 15 28 12 Illinois 31 47 11 34 38 44 Oklahoma 32 7 40 38 1 11 Maine 33 45 22 9 42 40 Pennsylvania 34 46 17 24 50 42 Louisiana 35 23 27 50 6 24 Georgia 36 8 42 17 36 30 South Carolina 37 13 41 18 40 21 New Mexico 38 35 35 45 10 1 Arkansas 39 40 28 44 39 19 Maryland 40 16 45 8 21 41 Iowa 41 49 32 23 33 38 Connecticut 42 32 34 31 20 49 Wisconsin 43 33 43 14 27 31 Ohio 44 26 47 32 5 20 Rhode Island 45 43 38 26 49 47 Vermont 46 42 44 16 17 48 Minnesota 47 44 46 37 29 34 California 48 34 50 42 14 14 New York 49 20 49 40 31 46 New Jersey 50 41 48 48 32 50 22
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Source: U.S. Bureau of Economic Analysis; Tax Foundation (Annual State-Local Tax Burden Rankings FY 2011) Oklahoma’s Per Capita Tax Burden is lower than Most States State-Local Tax Burden 2011 Rank State 2011 Per Capita Burden As % of State Income % of State Income Rank 6 New Mexico $3,044 8.6% 14 8 Texas $3,088 7.5% 4 12 Oklahoma $3,187 8.5% 12 19 Missouri $3,380 9.0% 18 21 Arkansas $3,405 10.3% 39 30 Kansas $3,849 9.4% 25 United States $4,217 9.8% 35 Colorado $4,220 9.0% 19 A state’s per capita tax burden accounts for taxes paid by residents to their home state and taxes paid to other states. States without a major tax are some of the least- burdened. Texas does not have a tax on wage income and has the lowest burden as a share of income in the region. From 2010 to 2011, the U.S. average of state-local tax burdens as a share of income decreased from 10.2% to 9.8%. Oklahoma also saw a decrease from 9.0% to 8.5%. This correlates with Oklahoma’s increase in per capita income during the same time period. 2011 Per Capita Tax Burden 23
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Source: Council on State Taxation (Total State and Local Business Taxes: State-by-State Estimates for Fiscal Year 2013) Oklahoma Businesses Pay Half of our State’s Taxes State and local business taxes accounted for 49.8% of all taxes collected in Oklahoma in 2013. Out of the states in our region, only Texas and New Mexico collected a greater percentage of their taxes from businesses. The reason that Texas businesses pay such a large percentage of their state’s taxes is because the state does not collect an individual income tax. The graph shows the total effective business tax rate (TEBTR) imposed on businesses by state and local governments for the states in our region. The TEBTR, which is the ratio of state and local business taxes to private-sector gross state product (GSP), helps compare tax burdens across states, but it does not indicate the economic incidence of a tax. While businesses that reside in states with higher TEBTRs bear a larger initial tax burden than those in states with lower TEBTRs, they may be able to pass part of their tax burden on to consumers depending on how their state derives its business taxes. Oklahoma’s TEBTR is the 22nd highest out of 50 at 4.7%, which is the same as the U.S. average. Total Effective Business Tax Rate (TEBTR) Business Share of Total State and Local Taxes, FY2013 Rank State Business Share of Total State and Local Taxes Business Share of State Taxes Rank Business Share of Local Taxes Rank Change from FY2012 Rank 4 Texas 63.5% 63.1% 4 63.9% 8 7.7% 3 6 New Mexico 58.6% 57.3% 8 61.8% 11 1.1% 43 17 Oklahoma 49.8% 46.9% 14 55.8% 23 -0.2% 45 19 Colorado 48.0% 36.3% 34 59.1% 17 4.9% 13 United States 44.9% 40.6% 51.4% 4.3% 29 Kansas 44.3% 34.8% 38 59.7% 15 -2.6% 47 38 Arkansas 40.9% 39.6% 27 47.0% 39 4.7% 17 40 Missouri 40.3% 32.5% 46 50.3% 34 1.8% 41 24
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Source: Council on State Taxation (Total State and Local Business Taxes: State-by-State Estimates for Fiscal Year 2013) Oklahoma Collected $7 Billion in Total State and Local Business Taxes in 2013 State Property Tax Sales Tax Excise Tax Including Public Utilities and Insurance Corporate Income Tax Unemployment Insurance Tax Individual Income Tax on Business Income License and Other Taxes Total Business Taxes Arkansas $1.0 $1.5 $0.5 $0.4 $0.4 $0.3 $0.3 $4.4 Colorado $5.7 $2.4 $1.0 $0.7 $1.0 $0.7 $0.6 $12.0 Kansas $2.4 $1.6 $0.5 $0.4 $0.4 $0.2 $0.2 $5.8 Missouri $3.2 $2.1 $0.7 $0.4 $0.7 $0.6 $0.7 $8.5 New Mexico $0.8 $2.0 $0.4 $0.3 $0.2 $0.1 $0.9 $4.6 Oklahoma $1.4 $2.1 $0.7 $0.6 $0.6 $4.0 $1.1 $7.0 Texas $28.0 $18.5 $7.6 -- $2.8 -- $11.2 $68.0 United States $242.1 $139.8 $82.8 $53.3 $50.8 $36.6 $65.4 $670.8 Out of the seven states in our region, Oklahoma ranks in the middle of the pack in terms of state and local business tax collections. Out of the seven tax categories, Oklahoma collected the most from businesses through the sales tax (29.8%) and the least from businesses through the individual income tax on pass-through income (7.9%). The corporate income tax made up 8.4% of Oklahoma’s total business taxes in fiscal year 2013. 25 *Taxes categorized under “other” include death and gift taxes, documentary and stock transfer taxes, severance taxes and local gross receipts taxes. Composition of Oklahoma’s State and Local Business Taxes, FY2013 7.9% 8.2% 15.5% 19.5% 29.8% 10.7% 8.4%
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Oklahoma’s education system is underperforming. We are lagging behind most states in terms of student achievement, education spending and teacher salaries. Consequently, our students are not ready for college or the workforce after they graduate from high school. Workforce development needs to be more of a priority, and it starts with common education. Oklahoma must look at our education system as an early training ground for developing a workforce that will help our state thrive in the future. Education & Workforce Development Chapter 4 26
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Source: Oklahoma State Department of Education; American Legislative Exchange Council Oklahoma’s Public Schools are Not Meeting Expectations Oklahoma Public School A-F Grades Oklahoma is one of 15 states that currently uses an A-F grading system to rate its public schools. It is designed to show how students within a school are meeting or exceeding grade-level academic standards. In 2014, more Oklahoma schools were given grades of “C”, “D” and “F”, while the number of schools given grades of “A” and “B” decreased. This is the second straight year that the number of schools given “D” and “F” grades has increased. 27
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Source: U.S. Census Bureau; National Association of State Budget Officers; Center on Budget and Policy Priorities Oklahoma Spends Less Money on Education than Every State in Our Region State per Pupil Spending (2012) Total per Pupil Spending (2000-2012) While Oklahoma spent more per pupil in 2012 than 2000, per pupil spending declined from 2010 to 2012. This could be due to a 17.2% loss between 2011 and 2012 in federal education funds under the American Recovery and Reinvestment Act of 2009. This loss occurred because the federal government allowed most of the emergency fiscal relief aid to expire at the end of the 2011 fiscal year. While state-appropriated dollars for education have slightly increased since 2010, they have not increased enough to make up for the loss in federal funds. Oklahoma has remained in last place for total spending per pupil in comparison to six regional states and the national average since 2000. The only area that Oklahoma has outspent the national average is in administrative spending. 1 United States 10,608 US 6,430 MO 298 2 Kansas 9,748 KS 6,040 KS 252 3 Missouri 9,436 MO 5,661 OK 249 4 Arkansas 9,411 AR 5,350 AR 224 5 New Mexico 8,899 NM 5,138 US 202 6 Colorado 8,548 CO 4,944 NM 188 7 Texas 8,261 TX 4,934 CO 143 8 Oklahoma 7,466 OK 4,065 TX 122 2012 Regional Overall Rank Total Spending Instructional Spending Administrative Spending 28
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Source: U.S. Census Bureau Oklahoma’s Educational Spending is Lower than the National Average Educational Spending per $1,000 of Personal Income (2012) Educational Spending per $1,000 of Personal Income (2000-2012) 1 Arkansas 44.79 AR 25.48 MO 1.17 2 New Mexico 40.46 KS 24.30 OK 1.12 3 United States 39.30 US 24.02 AR 1.07 4 Kansas 39.21 NM 23.36 KS 1.01 5 Texas 37.99 TX 22.69 NM 0.85 6 Missouri 36.92 MO 22.15 US 0.74 7 Oklahoma 33.89 OK 18.56 TX 0.56 8 Colorado 31.91 CO 18.47 CO 0.53 2012 Regional Overall Rank Total Spending Instructional Spending Administrative Spending Oklahoma’s total educational spending per $1,000 of personal income has been consistently lower than the national average since 2003. This could be explained by the gradual increase in per capita personal income in Oklahoma since 2000. 29
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Source: National Center for Education Statistics Average Teacher Pay for the Region Falls Below the National Average Average Annual Salary of Public School Teachers Average Annual Salary of Teachers in Public Elementary and Secondary Schools (2012-13) Oklahoma’s average annual salary of public school teachers dropped 10.5% between the 2010-11 and 2011-12 school years. The U.S. average only dropped 1.2% during the same time period. While the loss in federal funds coincides with this drop, it does not explain it because Oklahoma’s state minimum teacher salary schedule did not change between the 2010-11 and 2011-12 school years. Rank State Average Annual Salary United States $56,383 31 Colorado $49,844 37 Texas $48,110 40 Missouri $47,517 41 Kansas $47,464 44 Arkansas $46,632 45 New Mexico $46,573 48 Oklahoma $44,128 30
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Source: American Community Survey (2008-2012) Finishing College Needs to be More of a Priority in Oklahoma Educational Attainment of Population 25 and Older (2012) Bachelor’s Degree Completed High School (or Eq.) Advanced Degree Rank Region % % Rank % Rank 2 Colorado 36.7 89.9 16 13.2 8 15 Kansas 30.0 89.7 17 10.4 18 United States 28.5 85.7 10.6 30 Texas 26.3 80.8 50 8.7 34 33 Missouri 25.8 87.2 28 9.6 27 34 New Mexico 25.6 83.4 42 11.0 15 42 Oklahoma 23.2 86.2 32 7.7 44 49 Arkansas 19.8 83.3 44 6.7 50 While Oklahoma’s percentage of the population 25 and older who have a bachelor’s degree or higher decreased from 2011 to 2012, the percentage of Oklahoman’s who have completed high school has increased. 31
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Source: National Center for Educational Statistics; Oklahoma State Regents for Higher Education (FY 2013-14 Tuition Impact Analysis Report; 2013 Annual Report) More High School Graduates Come to Oklahoma for College than Leave the State to Pursue Higher Education Oklahoma has a higher import/export ratio of college-bound high school graduates than every state in our region and the national average. Students come from all 50 states to attend Oklahoma’s 45* colleges and universities. A large number of Oklahoma high school graduates stay in state for their college education as well. This could be due to the affordability of Oklahoma’s colleges and universities for Oklahoma residents. The average cost of attending one of Oklahoma’s two research universities is ten percent less than the average of the other public Big 12 universities, while the cost of attending one of Oklahoma’s community colleges is 38% less than the peer average. Import/Export Ratio of College-Bound High School Graduates (Fall 2012) Rank State Import/Export Ratio (<1=Exporter, >1=Importer) Migration Out-of-State Migration In State Freshmen Enrolled in Institutions Inside State Rank 9 Oklahoma 2.80 2,459 6,893 27,102 28 10 Arkansas 2.64 1,940 5,112 23,356 32 20 Kansas 1.83 3,181 5,814 24,867 31 25 Missouri 1.47 7,118 10,434 46,105 14 34 New Mexico 1.15 1,928 2,214 15,117 35 United States 1.11 402,327 446,197 2,174,664 38 Colorado 0.89 7,872 7,019 30,290 27 44 Texas 0.51 20,294 10,330 166,881 2 *Note: Does not include branch campuses. FY14 Undergraduate Resident Tuition and Mandatory Fees 32
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Research Foundation Board of Directors President – Fred Morgan Executive Director – Mike Seney Board: Roger Beverage – Oklahoma Bankers Association David Boren – University of Oklahoma Bill W. Burgess, Jr. – Vortex, Inc. Debra C. Cook – KPMG LLP Burns Hargis – Oklahoma State University Daniel G. Keating – Summit Consolidated Group, Inc. Phil Kennedy – Comanche Home Center Larry Mocha – APSCO, Inc. J. Larry Nichols – Devon Energy Corporation David Rainbolt – BancFirst Corporation Steve Turnbo – Schnake Turnbo Frank|PR The State Chamber Research Foundation is a research organization working in partnership with state business leaders, economists and university researchers to advance and fund activities in public policy research that promote the future of Oklahoma. The State Chamber of Oklahoma has had an affiliated research foundation since 1981. Over the last 30 years, the foundation (and its predecessors, Oklahoma 2000 and Oklahoma 21st Century) has been a critical voice for improving Oklahoma’s pro-business climate. RESEARCH FOUNDATION 33
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WE MEAN BUSINESS 330 NE 10th Street, Oklahoma City, OK 73104 www.okstatechamber.com RESEARCH FOUNDATION