Public School Finance: Prospectus Paper

Oklahoma utility companies are currently protesting the amount of taxes that
they must pay. The dispute came about because of the difference between what
utility companies and other commercial properties and other entities such as
railroads and airlines must pay. The utility companies originally protested all
of the taxes that they had to pay. They are now protesting the percentage of
taxes that they must pay above what the commercial properties pay. The money is
currently going into escrow accounts until a decision over the taxes has been
made. According to Oklahoma Tax Commission estimates, the protests could affect
more than $63 million in funding for schools and counties across the state. The
money will not be allocated into the schools until the dispute has been settled.

A large group of Oklahoma superintendents has been meeting with the big four
utility companies (Public Service Company of Oklahoma, Oklahoma Natural Gas,
Oklahoma Gas and Electric and Southwestern Bell) to try to reach a compromise.
The most recent meeting occurred on Monday, November 28, 1994. At that meeting
Marvin Stokes, Superintendent of Byng Schools, proposed that the utility
companies be assessed at 25 mills and that commercial properties be assessed at
20 mills. This would generate around $100 million in new revenue for Oklahoma
schools. Eugene Chitwood, Okemah County Assessor, suggested that public service
companies be assessed at 23 mills and that commercial properties be assessed at
15-19 mills. This would generate around $50 million in new revenue for Oklahoma
schools. The utility companies are currently paying 22.85 mills and commercial
properties are paying 11 mills. Private advalorem property is assessed at 11-14
mills. The utility companies were receptive to the suggestions. They do not
care if their taxes are increased as long as commercial properties are assessed
at a higher level as well. Another idea proposed to the utility companies for
their tax rate to decrease to 21.85 mills. This would free up around 58 million
dollars immediately if the utility companies agree.

The group of Oklahoma superintendents will meet with Glen Johnson ,Speaker of
the House, on Monday, December 5, 1995. The superintendents feel that it would
be to their advantage to have there concerns heard by the House even though the
State Equity board has the final say. The State Equity Board is comprised of
the Governor, Lieutenant Governor, State Superintendent of Schools, State
Treasurer, the State Auditor, and the State Secretary of Agricultural. In order
to get a measure passed by the State Equity Board, a measure must receive four
of the 7 votes. Dale Wells, State Representative for Oklahoma, feels like the
decision will end up on the legislature in February and that it will be one of
the first items discussed.

It is advantageous to the schools to have this matter settled as quickly as
possible. Some school districts who rely on the taxes from local utilities for
the majority of their funding are concerned as to whether they can keep their
school going past February of 1995 without the revenue derived from utility
taxes. In most districts, money from local utility companies accounts for as
least 40% of their fixed expenses. Schools who have to pay off bonds rely
heavily on the income gained from utility companies. If the matter is not
settled quickly, our schools could be in serious trouble. Court ordered
judgements could result against schools and counties which cannot pay their
bills. Funding for all schools will be reduced as State Aid is redistributed to
help replace the lost local/county ad valorem funding. Bond ratings of schools
could be adversely affected. Finally, schools and county governments could be
forced into consolidation.

I think that we are following a bad trend if we allow the utility companies to
lower the amount of taxes they pay once again. The utility companies have not
had an increase in there taxes in the past few years (since 1991). The utility
companies in Oklahoma in effect assess their own properties. If they wanted to
say that they were worth a lot less than they actually were, we would have no
way of knowing. Utility companies also choose the sites in which they build
around schools with lower millage rates - if the rates rise, they can simply
move their sites. The utility companies do not pay their taxes, the consumer
does. The utility companies make a profit regardless of the amount of taxes
that they must pay.

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