Counties, schools suffer from tax break

Monday, September 19th 2005, 1:17 pm
By: News On 6

OKLAHOMA CITY (AP) _ Some county officials are considering a lawsuit against the Oklahoma Legislature over its failure to reimburse counties for funding lost because of a law that doubles the homestead exemption for low-income property owners.

The statewide shortage has averaged $5 million each of the past three years. Tulsa and Oklahoma counties account for $1.9 million of that.

About 70 percent of the money would go to school districts, with 10 percent to run county government and the rest split among Careertech centers, ambulance districts, health departments and libraries.

County assessors claim the state has plenty of money to reimburse counties, but that legislators haven't made it a priority.

``This is absolutely wrong. It just disgusts me,'' said Pittsburg County Assessor Jim Kelley, whose county is owed roughly $100,000 for each of the last three years.

State Treasurer Scott Meacham recently told Kelley that county governments might have to sue the Legislature.

Kelley told Meacham that county officials had already talked to an attorney.

``It's very distasteful to me, as much pride as I have in the state of Oklahoma, that I have to sue the leaders to get them to pay their obligations to the county,'' Kelley said.

While counties seek repayment for the double homestead exemption, assessors say the real problem is a separate exemption given to product manufacturers. A constitutional amendment passed by voters in 1985 provided a five-year tax exemption to companies that locate a manufacturing site in Oklahoma.

In 1985, when the state was still smarting from the oil bust, the Legislature set aside 1 percent of state income taxes to fund that mandate. The fund has grown slowly, to about $26 million this year, but hardly at the rate needed to repay counties for the exemptions, said Kenny Chuculate, deputy director of the Oklahoma Tax Commission's ad valorem division. Kelley said he first learned about eight years ago the fund was evaporating.

A separate state question in 1988 gave the Legislature authority to decide what constitutes a manufacturing plant, and over the years legislators have changed the eligibility language about 70 times, Chuculate said.

The result: Manufacturing tax exemptions went from $143,000 in 1986 to $51 million in fiscal year 2004, Chuculate said. He expects the total this year to reach $57 million.

In its early years, the reimbursement fund contained far more than needed to repay counties.

However, legislators added a clause saying any unused money would be put back in the general fund to spend as the Legislature saw fit, Chuculate said.

The first exemption reimbursement deficit came in 2003.

Legislators agreed upon a three-year plan to reimburse counties for that shortfall. However, counties and schools aren't being repaid for a separate property tax exemption, one that doubles the $1,000 homestead exemption for homeowners whose income is less than $20,000 a year.

Meacham said the law needs tweaking by providing an additional revenue source to repay counties.

``It's a problem we've been dealing with for three years,'' he said. ``No one wants to focus on it.''