MuniLand

Two weeks ago I wrote about what seemed to be a smear campaign against Steven Dow, a forceful commissioner in the Oklahoma Department of Human Services who agitated for investigations into a series of deaths of children who were wards of the state and under DHS supervision. Dow was issued a public reprimand by the state’s Ethics Commission for alleged conflicts of interests related to his position as the unpaid director of a social service agency while he was simultaneously serving as a commissioner at DHS. His agency’s contracts with the DHS were tiny, and when they were brought up at the department, he recused himself from those discussions. Last Friday, in the state’s first-ever reversal, the Ethics Commission withdrew its public reprimand of Dow, citing newly discovered evidence that the alleged ethics violation was “inadvertent.”

As I wrote previously, the initial Ethics Commission action looked bogus because it was hard to see Dow’s motive:

The basis of the reprimand from the Oklahoma Ethics Commission was that there was a conflict of interest with Dow serving on DHS because he is also the unpaid director of Community Action Program (see page 8), a Tulsa non-profit serving the low-income community.

Over nine years it appears that CAP has received about $1.5 million in DHS contracts, or 0.5 percent of its revenue (see CAP’s contracts with DHS here). That said, I’m not convinced that Dow ever had an incentive to seek personal enrichment from his DHS service. After all, his wife, Tracy Schusterman, is one of the richest people in Oklahoma. She recently sold her family’s business, Samson Energy, to KKR for $7.2 billion. Nevertheless, following the public reprimand, Dow decided to resign.

Dow avoided any possible conflict of interest prior to beginning his tenure as DHS commissioner and even notified the governor’s office directly about his position at the social service agency. From the Oklahoman:

Voters and legislators in two very red states, Oklahoma and North Dakota, have recently defeated conservative initiatives to eliminate important taxes. Among some Republicans, there seems to be a realization of the need to pay taxes to fund essential services like schools and police and firemen, and of the need to find other sources of revenue once a given tax is repealed.

North Dakota has become the first state in the nation to propose and subsequently defeat a constitutional amendment banning property taxes. The proposal, Measure 2, would have given all local revenue decisions to the state legislature without detailing how the process would work. It was overwhelmingly rejected – by 77 percent of voters. This comment in the Bismark Tribune seems to capture the reasoning of voters on the issue:

I voted “no” on M2 because it was too vague and when I inquired supporters on how funding gets reacquired they kept stating that politicians will be forced to rethink the budget when, in reality, politicians always get funding by raising taxes. There is no such thing as a vacuum in government budgets and this argument relies on common sense in government actually taking effect. If Mandan elects a grocery personality with dubious managerial skills (I worked for the guy, he severely lacks leadership), then I have serious doubts that politicians will “rethink” anything.

Last September I wrote about Steven Dow, an outspoken commissioner in the Oklahoma Department of Human Services. Dow, the only social service professional on the commission, was agitating for investigations into a series of deaths of children who were wards of the state and under DHS supervision. He was basically being stonewalled by both his fellow commissioners and the head of the agency. I hadn’t revisited the issue until I saw this tweet and wondered if it was about Dow:

Public reprimand issued against Oklahoma Department of Human Services commissioner bit.ly/NcrLOt

— NewsOK Politics (@NewsOKPolitics) May 30, 2012

It turns out it was. The basis of the reprimand from the Oklahoma Ethics Commission was that there was a conflict of interest with Dow serving on DHS because he is also the unpaid director of Community Action Program (see page 8), a Tulsa non-profit serving the low-income community. Over nine years it appears that CAP has received about $1.5 million in DHS contracts, or 0.5 percent of its revenue (see CAP’s contracts with DHS here). That said, I’m not convinced that Dow ever had an incentive to seek personal enrichment from his DHS service. After all, his wife, Tracy Schusterman, is one of the richest people in Oklahoma. She recently sold her family’s business, Samson Energy, to KKR for $7.2 billion. Nevertheless, following the public reprimand, Dow decided to resign.

Conservatives are working in legislatures across the country to eliminate or reduce state and local tax rates with the stated purpose of promoting job creation. These legislative efforts have received support from the American Legislative Exchange Council (ALEC), an ultra-conservative lobbying group. Oklahoma Governor Mary Fallin is the latest beau ideal for ALEC’s fiscal austerity drive as she leads the charge to eliminate her state’s income tax. She writes in the introduction to ALEC’s latest edition of “Rich States, Poor States”:

I have been committed to these fundamental principles for years, and we are seeing incredible results because our legislators have had the courage to stand with me in support of conservative governance. Oklahoma’s economy is outperforming the national economy, and our success stands in stark contrast to the record of dysfunction, failed policies, and outrageous spending that occurs in Washington, D.C. Oklahoma could teach Washington a lesson or two about fiscal policy and the proper size and role of government – and so could the tax and fiscal policy reforms espoused by ALEC.

I’m all for state and local governments shrinking their workforces and learning more efficient ways to deliver government services. There is nothing sacred about the current level of the government’s labor force, especially at a time when the non-public sectors of the society are continuously seeking to deliver goods and services with fewer economic inputs. It is only fair that we ask similar efforts of the public sector.

Of the $763 billion in tax revenues that states collected in 2011, only $14.6 billion – less than 2 percent – came from severance taxes on coal, gas and oil. Energy production is very concentrated in the United States: Just nine states receive over 5 percent of their tax revenues from energy producers. Currently, the bulk of severance revenues comes from oil production. Alaska, a state floating on an ocean of oil, gets 76 percent of its revenues from a handful of big oil companies that have drilling rights on the North Slope of the state.

Although there has always been natural gas production in America, hydraulic fracking has given rise to substantial drilling activity in several Northeastern states along the Marcellus and Utica shale formations. Pennsylvania, West Virginia and Ohio have substantial reservoirs of natural gas, but the impact this boom will have on state finances is not yet known. These new supplies have come to market when demand is down and have swamped the nation’s usage and storage capacity, driving gas prices down to record lows. States that rely on, or plan for, revenues from energy severance taxes will face a lot of volatility from demand and price changes. Natalie Cohen, head of municipal research at Wells Fargo, sketched it out in a recent report:

Wyoming, for example, collects severance tax based on the taxable value of current-year production. With the drop in natural gas prices, it has had to reduce its forecast on severance tax revenue. The state is now looking to cut 4% out of next year’s budget, despite a current-year budget surplus. According to the state’s Economic Analysis Division, each dollar drop in natural gas prices costs the state about $226 million in revenue.

One of the strongest earthquakes in the history of Oklahoma hit near the town of Sparks on Saturday night. At 5.6 in magnitude, it was the bell-ringer of a series of shakes. What is not clear is where this unusual seismic activity is coming from. The Oklahoman reported:

After the main shock, there were 12 temblors registering at magnitudes of 3.0 or higher and more than 70 quakes with magnitudes of 1.0 to 2.5, Oklahoma Geological Survey research scientist Amie Gibson said Sunday.

“We really hope that the 5.6 was the main shock because I don’t want to see anything like that again, personally. It would be ignorant to assume anything right now, because who would assume that we’d have the two biggest ones in one day?” Gibson said.