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Line between taxes, fees, continues to blur in Oklahoma

by The Oklahoman Editorial Board Published: July 11, 2013

IN theory, the difference between state taxes and state fees should be simple. Taxes are paid to support all of state government. User fees are supposed to cover the cost of specific services, such as licensure. But the line between the two is blurring, as a new report by the state Senate Appropriations Subcommittee on Select Agencies makes clear.

The operational costs of non-appropriated agencies, such as the Board of Nursing, are covered through fees; no separate state appropriation is provided. Yet the committee found that more than half of non-appropriated state agencies are required to pay 10 percent of their budgets into the state's General Revenue fund. This money, totaling more than $17.1 million in 2012, is then distributed to other agencies.

Oklahoma City attorney Jerry Fent previously challenged the constitutionality of the transfer practice, arguing that using licensing fees for general revenue expenses represents an unconstitutional tax. In 2012, the Oklahoma Supreme Court disagreed, ruling that non-appropriated agencies' use of other state agencies' services made the fee shift legal.

Fair enough. But the Senate committee found many non-appropriated agencies not only contribute fee money to general revenue, but also continue to pay separate fees to other state agencies.

“Many of the agencies expressed concern that the fees they use to operate require legislative approval in order to be changed,” the report noted. “However, the fees that they pay to other state agencies (Attorney General, Office of Management and Enterprise Services, etc.) seem to change at will. This can be problematic since the non-appropriated agencies cannot adjust their fees very quickly in order to account for the higher operating burden placed on them from other state agency fees.”

This indicates that licensure fees may ultimately be inflated to cover the operational costs of unrelated state agencies. Many citizens are likely unaware that state agencies make money off other state agencies. In fiscal year 2012, the Office of the Attorney General billed other state agencies at least $2.3 million. The money was in addition to the AG's $13.7 million appropriation.

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by The Oklahoman Editorial Board
The Oklahoman Editorial Board consists of Gary Pierson, President and CEO of The Oklahoma Publishing Company; Christopher P. Reen, president and publisher of The Oklahoman; Kelly Dyer Fry, editor and vice president of news; Christy Gaylord...
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