Mt. Ranier from east side. ID’d by my friend Sharry White of Estes Park, CO.
I have written several posts about the ongoing fiasco that began in 2015 with the passage of HB 2244 and have represented school districts in litigation concerning related matters since March, 2016: first against the Oklahoma Tax Commission which misapplied the new law; then against nine overpaid and misguided school districts that falsely believed my clients were being overpaid; and currently against the Oklahoma State Department of Education that also falsely believes my clients were overpaid so it has intentionally reduced their state aid to take back their court-ordered corrections. For your convenience I will list the titles of my prior posts at the end of this one.
In a nutshell, between August, 2015 and August, 2017, the Oklahoma Tax Commission underpaid 270 school districts by $22.7 million in motor vehicle collections revenue (MVC). The same amount was overpaid to 146 school districts at the same time. Following the success of the first two court cases, the Tax Commission, as ordered by the courts, restored the $22.7 million during FY 2019 and FY 2020 to the underpaid districts by reducing the same amount from revenues paid to the overpaid districts. Following this court-ordered correction, the Oklahoma State Department of Education willfully reduced state aid for the 271 underpaid districts, and increased it for the overpaid districts, in FY 2020 and FY 2021, thus undoing the correction.
This was done because the OSDE believes the underpaid districts had been overpaid and wrongly compensated. The truth is that the underpaid districts lost $22.7 million due to the OTC’s error, gained it back through the court-ordered correction, and then lost it back again due to the OSDE’s wrongful inclusion of the correcting payments in the calculation of state aid. The OSDE and the overpaid litigious school districts believe the underpaid school districts lost the $22.7 million, then gained it back through the state aid formula’s “self correcting” mechanics, then gained it a second time through the court ordered correction, and therefore were made whole, or even, when OSDE took it back again by miscalculating state aid. I’ll leave it to you to read more about this in my earlier blogs to see why the OSDE’s analysis is simply wrong and defies basic mathematical analysis and common sense.
The current happening derives from the original legislation which put a cap on MVC at the amount collected for FY 2015 which for school districts was the total of $261,403,113.92 collectively. In the following six fiscal years the total amount apportioned to school districts stayed below that level. Here are the amounts, rounded to the dollar, for each year from both the OTC and OSDE reporting:
2016 $251,872,023
2017 $240,145,328
2018 $245,031,147
2019 $250,188,432
2020 $245,872,294
2021 $260,116,565
These amounts, which are derived from the sales and other transactions of motor vehicles in Oklahoma, are kind of a crude proxy for economic activity in the state over that period with the 2016 slow down and COVID preventing a full recovery until this year. It was apparent to me in preparing a budget amendment for Sand Springs in February that the cap likely would be reached and cause a significant reduction in MVC paid out to districts in June. I had this discussion with a new school finance friend and we both were surprised when June apportionments were made and the OTC reported FY 2022 MVC paid out to school districts totaled $282,601,069.81, exceeding the cap by $21,197,955.89. It looked to us like the OTC simply had forgotten the cap given so many years had passed since it was established, but never triggered. Turns out we were wrong.
My friend alerted me this week that it appeared the OTC implemented the necessary reductions with the July, 2022 apportionments which, my friend said, totaled about $5 million compared to the same month in 2021 of $26 million. I don’t know how to get the monthly totals which under the OTC’s previous reporting system were provided, but are not with the current system. I do see that the Sand Springs district received $43,101 in July, 2022 compared to $202,248 in July, 2021. June, August and September apportionments in 2022 have been close to that normal amount.
After learning this it readily became apparent what has happened. Early in our litigation with the OTC we became aware that they apply laws governing their revenue collections based on the month of collection, not on the month of apportionment or distribution. That is why when the OTC misapplied the 2015 amendment, which took effect July 1, 2015, the incorrect apportionments did not begin until August, 2015, rather than in July. The new law was applied to the July, 2015 collections which were then apportioned to school districts in August, 2015.
Applying the same logic, the OTC would view the cap as being determined by their collections from July, 2014 through June, 2015, which in turn would be school district apportionments for August, 2014 through July, 2015. So I took the total MVC for FY 2015 apportioned to school districts of $261,403,113.92, then subtracted the $23,082,447.82 apportioned in July, 2014 and added the $23,083,395.22 apportioned in July, 2015, yielding $261,404,061.32 as the amount I believe OTC has established as the cap going forward. It is applied to August through July apportionment totals.
However, as OSDE has made painfully clear in our current litigation, it will charge school districts with the MVC amount they are apportioned July through June the previous year. That means $282,601,069.81 has been used collectively, for the school districts “on the formula”, as their MVC chargeable amounts for FY 2023. But now we know that collectively school districts will receive no more than $261,404,061.32 from August through July. The difference of about $21.2 million is simply lost to those school districts receiving MVC and state aid in FY 2023.
It is a loss that will likely be for this year only as we may expect MVC to settle in at the $261.4 million level going forward, since the subsequent year formula adjustment prevents future losses at the same levels of MVC. It is also a loss to those school districts that insulates 129 charter schools and school districts not receiving MVC that will not experience similar losses.
There are exceptions, however, in the special world of Independent School District No. 29, Cleveland County, Independent School District No. 4, Cleveland County, Independent School District No. 4, Tulsa County, Independent School District No. 5, Tulsa County, Independent School District No. 22, Canadian County, Independent School District No. 9, Tulsa County, Independent School District No., 27, Canadian County, Independent School District No. 69, Canadian County, and Independent School District No. 6, Tulsa County, where they believe, as does the OSDE, that the formula is “self-correcting” and probably that 2 + 2 = 5 if it is repeated often enough. They will take comfort in their fantasy and, in their minds, suffer no harm.
With a correct understanding that the formula is not “self correcting” for year to year changes in the five lagging chargeables, the calculation of state aid for FY 2023 could have taken this one time loss into consideration and spread the grift if you will among all state aid recipients. By removing that $21.2 million from the formula calculations, the 415 MVC districts would still have born the brunt of the MVC cap being imposed, but I estimate about $2.4 million less than is going to occur.
As always, lunch is on me for the first to ID the location of the thinker photo above.
The previous posts about this subject are:
| House Bill 2244 Twas night before Sine die Motor Vehicle Litigation Update My Obsession |
| Okie Masterminds |
| Paradise Lost |
| Nuclear Option |
| Tables Rock |
| A picture is Worth |
| “WOLF!” The Oklahoma Tax Commission shorted Tulsa Public Schools $3.4 million of our taxes. |
| Oklahoma State Department of education has miscalculated state aid for FY2020 (and plans to do it again next year) |
| Munificent Obsession |