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Education Funding Concerns Kill Effort to Wean Oklahoma Budget Off Oil

Voters rejected a financial practice already common in most other oil-dependent states.

Oil pumps in rural Oklahoma
For results of the most important ballot measures, click here.

After hard-fought wins for education funding this year, Oklahoma voters have rejected a proposal that education advocates warned would compromise those gains.

By a 15-point margin, voters dispatched with Question 800, which would have set aside oil revenue for a new state investment fund to build wealth for future generations.

Educators, who have endured repeated cuts to state education funding, raised concerns about the initiative’s immediate impact. Only recently has education funding in the state stabilized -- and that was after a massive statewide teacher strike earlier this year. Currently, about 10 percent of oil revenue goes to schools, according to the Oklahoma State School Boards Association. The association argued that education funding could be compromised in the short term as oil revenues are transferred into the fund.

“There’s nothing visionary about the planned erosion of dedicated funding for public education,” the association’s Executive Director Shawn Hime told the Tulsa World. “It’s bad policy and a step backward.”

But proponents of the measure argued that it was a vital step in weaning the state budget from the depleting natural resource. The proposal would have mandated that 5 percent of the state's gross oil production revenue be deposited into the so-called Oklahoma Vision Fund. That set-aside percentage was to increase each year. Meanwhile, 4 percent of the five-year average balance in the fund would have been transferred into Oklahoma’s general revenue fund to support the operating budget.

Oklahoma’s budget has been extremely vulnerable to the ebb and flow of the oil economy. 

“The pattern in Oklahoma had been that they were spending all of the [oil revenue],” said Scott Drenkard, director of state projects at the conservative-leaning Tax Foundation. “But the whole concept of severance taxes is partially supported by the idea that the thing you’re taxing is not renewable. So you have a tax and you save some of that for future generations.”

Setting aside some of the proceeds for the future is common in nine of the 10 other oil-producing states, as well as in many countries whose economies rely on natural resource extractionThe practice essentially works like an endowment: The money is invested, and the earnings are used to help pay for critical government services.

For results of the most important ballot measures, click here.

Liz Farmer is a former GOVERNING fiscal policy writer.
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