State Policy & Economic Development in Oklahoma: 2006
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STATE POLICY & ECONOMIC DEVELOPMENT IN OKLAHOMA: 2006 A Report to OKLAHOMA 21st CENTURY, INC. 330 N.E. 10TH OKLAHOMA CITY, OKLAHOMA 73104-3200 OKLAHOMA 21st CENTURY, INC. BOARD OF DIRECTORS RUDY ALVARADO LARRY MOCHA Chairman & CEO President Advancia Corporation Air Power Systems Company, Inc. DAVID L. BOREN STEVEN E. MOORE President Chairman, President & CEO University of Oklahoma OGE Energy Corp. E.L. BATCHELDER DR. DONALD A. MURRY Sr. Vice President Services & Professor of Economics Emeritus Chief Information Officer University of Oklahoma ConocoPhillips C.H. Guernsey & Company DONALD E. CAIN J. LARRY NICHOLS President Chairman & CEO AT&T - Oklahoma Devon Energy Corporation SAM COMBS DR. KENT W. OLSON President Professor of Economics ONEOK Oklahoma State University LUKE R. CORBETT RICHARD P. RUSH Chairman & CEO President & CEO Kerr McGee Corporation The State Chamber C. KENDRIC FERGESON DR. DAVID J. SCHMIDLY Chairman President, Oklahoma State University & NBanC-Altus CEO, OSU System JEANETTE L. GAMBA THOMAS W. SHIRLEY President & CEO President Jordan Associates Bank of America - Oklahoma DR. GILBERT C. GIBSON DR. LARKIN WARNER Director – Government Relations Professor of Economics Emeritus IBC Bank - Lawton Oklahoma State University JUDY J. HATFIELD Published February 2006 President & CEO Equity Realty, Inc. For copies contact: C. WYNDHAM KIDD, JR. REGINA MANNING President Administrative Manager BlueCross/BlueShield of Oklahoma OKLAHOMA 21st CENTURY, INC. 330 NE 10th Street STANLEY A. LYBARGER Oklahoma City, OK 73104-3200 President & CEO (405) 235-3691 Bank of Oklahoma, N.A. [email protected] OKLAHOMA 21st CENTURY, INC. KLAHOMA 21st CENTURY, INC. is a non-profit, non-partisan organization, Ofounded as OKLAHOMA 2000, INC. in 1981. Its name was changed in 2000. The organization is affiliated with the State Chamber - Oklahoma’s Association of Business and Industry. It operates, however, under its own charter and is governed by its own Board of Directors. OKLAHOMA 21st CENTURY, INC. conducts and promotes research on the role of state policy in Oklahoma’s economic development. The results of this research are provided to federal, state, and local government agencies, government officials, civic organizations, and the general public. OKLAHOMA 21st CENTURY, INC. is pleased to have provided support for this study. The findings reported and the views expressed in this study, however, are solely those of the authors. OFFICERS STEVEN E. MOORE Chairman DONALD E. CAIN Vice-Chairman KENT W. OLSON President LARKIN WARNER Vice President RICHARD P. RUSH Secretary REGINA MANNING Administrative Manager STATE POLICY AND ECONOMIC DEVELOPMENT IN OKLAHOMA: 2006 A Report to OKLAHOMA 21st CENTURY, INC. By Dr. Robert C. Dauffenbach Associate Dean for Research and Graduate Programs, and Director, Center for Economic and Management Research Price College of Business University of Oklahoma Dr. Alexander Holmes Regents Professor of Economics University of Oklahoma Dr. Ronald L. Moomaw Spears School of Business Associates’ Professor of Economics Oklahoma State University Dr. Kent W. Olson Professor of Economics Oklahoma State University Dr. Larkin Warner Regents Professor of Economics - Emeritus Oklahoma State University TABLE OF CONTENTS Preview ............................................................................................................................................. v Kent W. Olson Chapter 1 The Skinny on Oklahoma’s Personal Income ................................................................................ 1 Robert C. Dauffenbach Chapter 2 A Taxpayer Bill of Rights and the Debate Over the Size of Government .......................................................................................... 21 Alexander Holmes Chapter 3 Oklahoma’s Long-Run Budget: Sustainable? Affordable? ......................................................... 33 Kent W. Olson Chapter 4 State Policy and Oklahoma High-Tech Economic Development .............................................................................................................. 49 Larkin Warner and Robert C. Dauffenbach Chapter 5 Education Reform in Oklahoma: A State at Risk? ...................................................................... 63 Ronald L. Moomaw Preview Kent W. Olson Chapter 1 while the shares of the northeast, northwest, and southwest quadrants (outside the Oklahoma City The Skinny on Oklahoma’s Personal Income and Tulsa metropolitan areas) will continue to Robert C. Dauffenbach decline. The pace of change is likely to be quite slow, however. This chapter presents what the author calls the There is substantial variation in higher educa- skinny, or real facts, on Oklahoma’s real per capita tional achievement of the adult population both personal income (RPCPI), a measure of economic within and outside of Oklahoma, with Oklahoma st welfare that is often used to determine how well a ranking 21 in the nation in percentage increase of state is doing in terms of economic development. the degreed adult population, 1990-2003. Substan- The first part of the chapter is a primer on per tial variation also exists among the states in degree capita personal income as a measure of economic of urbanization, housing cost, and climate, all of well-being and the price indexes that can be used which, along with variations in college attainment, to convert per capita personal income (PCPI) into are potential contributors to interstate differences real per capita personal income (RPCPI). Data on in RPCPI. Econometric analysis of RPCPI among the latter are used then to make comparisons of states reveals that in both 1990 and 2003, a one- growth among various states and also among percentage point increase in the share of the adult regions within Oklahoma. Some economic factors population who have bachelor’s or higher degrees that may help explain differentials in RPCPI are is associated with a $720 - $790 increase in real then examined, including educational attainment, per capita personal income. degree of urbanization, housing costs, and climate. Isolating the importance of educational This discussion is followed by an econometric attainment in the determination of RPCPI is analysis that isolates the effects of these variables probably the most significant finding reported in on interstate differences in RPCPI. this chapter. Oklahoma has boosted the educa- The author finds that, although Oklahoma’s tional attainment of its degree-holding adult RPCPI is below the national average, it has population from 17.8 percent in 1990 to 24.3 actually grown slightly faster than the national percent in 2003, a 6.5 percentage point gain. As average RPCPI since 1929, and it has increased in noted, the state has also seen its real per capita recent years from 81 to 84 percent of the national personal income ratio rise from 81 percent to 84 average. RPCPI varies widely within Oklahoma; percent of the national average in recent years. It is however, the variation across counties has been hard to imagine a future where degree attainment falling slowly over time. The county-average will not continue to have great importance. growth rate was a quite respectable 2.1 percent over a broad span of time (1969-2003) and 2.2 percent more recently (1991-2003). Chapter 2 The two major metropolitan areas of the state, Oklahoma City and Tulsa, accounted for 64 A Taxpayer Bill of Rights and the Debate Over percent of the state’s total real per capita income in the Size of Government 2003, rising from 57 percent in 1969. In terms of Alexander Holmes recent marginal contributions to total real personal income, these two areas account for 70.7 percent Advocates of a so-called taxpayer’s bill of of the growth, suggesting that their shares of state rights (TABOR) have recently gathered enough RPI will continue to increase. Simulations suggest signatures on initiative petitions that it appears that if present trends in regional gains remain in state voters will have to decide whether they are effect, the southeast quadrant will stabilize at going to place additional restraints on state gov- about one-eighth of the total real personal income ernment spending. The initiative’s vehicle, State v Question 726, is not about budget priorities or Holmes concludes by noting that TABOR is a which function or functions of government are choice between a rigid constitutional constraint appropriate for the state. Instead, it is a question and the flexibility of legislatively determined of what metrics ought to define the absolute levels of government spending. If one believes that magnitude of government. Implicit in State legislators are responsive to their constituents’ Question 726 is the notion that a state government desires for government services, both in terms of has an “optimal” size when measured by some, but the scale and type of service offered, then a not all, of its revenue sources. TABOR has no place in the constitution. If one As proposed in State Question 726, the state believes that the election process can not provide government of Oklahoma will be at its optimal the appropriate discipline to determine the proper size if spending is limited to grow at an annual rate outcome in a democratic system, then constitu- equal to no more than the sum of the rate of tional constraints are appropriate. inflation, as defined by the consumer price index of the Bureau of Labor Statistics, plus the rate of growth of the population, as defined by the U. S. Chapter 3 Census Bureau. While it might be logical to assume