In response to growing concerns about revenue shortfalls in the State’s Ad Valorem Reimbursement Fund and the impact these shortfalls have on Oklahoma’s schools, Sen. Randy Bass, D-Lawton, has filed a package of bills to address this issue.
“We have known for years that the funding gap in the Ad Valorem Reimbursement Fund and reimbursement delays to Oklahoma’s schools cause major problems for many of Oklahoma’s schools,” Bass said. “These problems were once again highlighted in the interim study we held this fall on the issue. I’m proud to present this package of reforms related to the Ad Valorem Reimbursement Fund and look forward to working with my colleagues in both the Senate and the House in making these important changes for Oklahoma’s schools.”
Bass’ package of bills to address the issues with the Ad Valorem Reimbursement Fund includes measures which would:
Modify the apportionment of general revenue to increase the amount going to the Ad Valorem Reimbursement Fund if the fund drops below a certain threshold (SB 738)
Adjust the ad valorem exemption provided to wind power industries by removing the special exemption for wind manufacturing that releases the industry from the jobs creation requirement every other manufacturer must meet (SB 739)
Change the schedule for making claims against the Ad Valorem Reimbursement Fund so counties receive reimbursement from the fund in a more timely fashion (SB 741)
According to the Oklahoma Tax Commission (OTC), the state's Ad Valorem reimbursement cost was more than $41 million in 2002. By 2013, the amount increased to more than $64 million, with approximately half resulting from Ad Valorem exemptions for wind farms.
In addition, since 2003 there has been a lack of sufficient revenue in the Ad Valorem Reimbursement Fund to immediately pay all claims against the Fund, resulting in both delays in payment to the schools as well as the need for a supplemental appropriation from the legislature to make up the shortfall.
The Oklahoma Tax Commission currently directs one percent of state income tax collections to the Ad Valorem Reimbursement Fund to make up for lost ad valorem revenue for school districts, career and technology districts and counties as a result of manufacturers claiming tax exempt status as authorized by state law.
There is an expectation that claims against the Ad Valorem Reimbursement Fund will rise even higher in the near future as more entities – especially wind farms – take advantage of available manufacturer's exemptions from local ad valorem taxes.
In addition, schools expecting reimbursement for lost local ad valorem taxes often receive them in an untimely fashion. The reimbursement fund has always been funded at a lower rate than is needed to reimburse Oklahoma’s school districts on time, affecting their abilities to budget properly from year to year.
These reforms will be considered after the session reconvenes on February 2.