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.
Such cost-shifting can prompt interagency squabbles. In 2012, legislation was unsuccessfully promoted to require a specific $65,000 appropriation to help the state treasurer's office pay for its annual audit by the state auditor and inspector. In fiscal 2011, the Office of State Finance (now the Office of Management and Enterprise Services) billed other agencies $9.8 million after getting $20.6 million in direct appropriations.
In the 2012 legislative session, OSF was also authorized to bill other agencies for information technology services, potentially generating $3.6 million more. The fee wasn't part of the state's initial IT consolidation plan, touted and approved in 2011 as a cost-savings measure.
Non-appropriated state agencies are now feeling the impact. The Senate report notes, “The mandated IT consolidation for all state agencies has either been cost-neutral or usually a cost burden for the agencies, with some agencies expressing much frustration with slowed service or lost data due to the conversion.”
In Oklahoma government, agencies are appropriated money to pay other state-appropriated agencies. Non-appropriated agencies' fee revenue is used to cover the costs of services provided by appropriated agencies — but the non-appropriated agencies are still billed for those services.
Whether through fees or taxes, citizens foot the entire bill, but the fee-shift model seems designed to obscure government costs. Oklahomans deserve transparent government accounting, but often get budget shell games.