Oklahoma's EDGE: Economic Development Generating Excellence: EDGE Action Plan

IMMEDIATELY REFORM AND IMPROVE OUR BUSINESS CLIMATE

Implementing the above three major recommendations will have a huge positive impact on Oklahoma. But, to be economically successful and to provide a high quality of life for its citizens, Oklahoma must make additional fundamental changes to keep and create jobs. Without these changes Oklahoma will not be as successful in an environment where technology drives business, where knowledge workers make businesses profitable, and where goods and services are produced and consumed globally. The EDGE process, with its thousands of participants, is very clear about the need for statewide leaders to take these steps.

Throughout the EDGE process, Oklahomans recommended more than 350 actions that could be taken to improve the economic conditions in the state. The following are the highest priority and must be taken if Oklahoma is to keep jobs in the state and to create more jobs.

Tort Reform

A comprehensive review of tort reform is needed immediately. The need for action on tort reform is imperative to reduce business costs while protecting the fundamental legal rights of our citizens. Example reforms could include:

Changing the joint and several liability doctrine to tie a defendant's responsibility more closely to the percentage of damage which he or she actually caused—especially in those industries where injured parties are likely to recover full damages through insurance.
Changing the collateral source rule so that juries will know if a plaintiff recovers damages from other parties unless a right of subrogation exists.
Requiring expert certification before any product liability lawsuit can be filed.
Investigating class action reforms that improve the balance of costs and benefits within the system, such as requiring class member notification about the purposes, progress, and likely outcomes of the litigation, and monitoring the distribution of compensation funds.

Progressive actions should be pursued through an intense study led by the Governor and involving legislative leadership of both parties, business representatives and labor leaders with the expectation of considering the resulting recommendations in the 2004 legislative session.

Workers' Compensation

The Governor should appoint a group of experts to make recommendations on changes in workers' compensation that will meet the specific needs of Oklahoma, with these recommendations to be considered in the 2004 legislative session. Workers' compensation costs are driven heavily by utilization rates and health care costs (discussed above). Therefore, a central component of workers' compensation reform should include specific proposals to reduce the permanent partial disability incidence and lower costs, while increasing benefits to injured employees. Worker training and safety education programs have proven to be extremely effective in reducing workplace injuries, compensation claims and costs. Tax incentives, premium rebate programs or other policies should be considered to encourage employers to create worker training and safety education programs.

Regional Economic Development Partnerships

It is recommended that the Oklahoma Department of Commerce formalize and initially fund new regional economic development partnerships, based on regional economies and resources, that provide the best opportunity for Oklahoma to respond competitively to market forces. The Department of Commerce, with legislative support, should provide leadership to develop regional economic development partnerships with local chambers of commerce, the State Chamber and other community economic development organizations. Regional economic development is crucial to ensuring that all of Oklahoma thrives because this work:

Unifies efforts to benefit urban, suburban and rural constituencies.
Leverages expertise, often clustered in metropolitan areas, for regional impact.
Streamlines contacts with prospects (rather than multiple communities providing prospects with dissimilar data).
Increases efficiency of public and private expenditures by pooling resources for centralized data collection and communication.

Oklahoma's Military Bases

The state should work with the Oklahoma Strategic Military Planning Commission and each of Oklahoma's five military communities in addressing the 2005 Base Realignment and Closure activity to ensure the continuation and expansion of Oklahoma's military bases and the economic systems associated with them.

Oklahoma's Industry Clusters

Oklahoma's Department of Commerce should facilitate the enhancement of industry clusters identified through the EDGE process. Industry clusters, including their supply chains and shared workforce, will benefit from legislative and executive actions that are industry specific to ensure that our companies and businesses thrive in today's global economy.

Regulatory Policy

The Governor, working with the Legislature, should take action to streamline Oklahoma's regulatory policies. Regulatory policies are designed to guide and manage the state's economic, social and environmental values and resources. Because policies are usually created over time, and because conditions change, the state should periodically review the effectiveness of its regulatory policies and ensure that they are not contradictory or unnecessarily burdensome.

International Trade

The state should develop a focused international trade and investment approach to coordinate all resources. This could include reinventing and retooling the Oklahoma Department of Commerce's foreign offices representing the state and increasing the emphasis on promoting Oklahoma as a destination for international tourism. In addition, Oklahoma's global reputation could benefit greatly by establishing an annual national and international small and independent business networking and policy forum.

Weather Industry

Based on more than $500 million in federal investments over the past four decades and significant state investments, Oklahoma should develop a “best in the world” weather industry. The public and private sectors should work with the Legislature in targeting funds to make the National Weather Center the best in the world, expand the involvement of existing Oklahoma corporations in weather-related activities and create new companies with high-paying jobs.

Oklahoma Center for the Advancement of Science and Technology

To continue the immediate returns to private industry and the transfer of technology to the private sector, the state should increase its financial support for the Oklahoma Center for the Advancement of Science and Technology and its Oklahoma Technology Commercialization Center. The Oklahoma Center for the Advancement of Science and Technology (OCAST) already has an established track record of providing strong economic dividends, and the Oklahoma Technology Commercialization Center (OTCC) has great potential to build an investment pool to support start-up businesses that are commercializing new technologies.

Endowed Chairs Program

The Endowed Chairs program has been a significant success, attracting high-quality faculty to Oklahoma's public colleges and universities. This success has been the result of generous contributions by numerous organizations and individuals who understand the power of the program and have been willing to invest in it. The program requires that the State Regents for Higher Education match these private contributions from legislative appropriations. Insufficient money has been available, and currently, approximately $45 million in private gifts cannot be matched. The Governor should urge the Legislature to permit the State Regents for Higher Education to acquire sufficient debt to immediately pay off the backlog of endowed chairs, repaying the debt over a period of years. In addition, the State Regents should be encouraged to restructure the Endowed Chairs Program to include a focus on national and international “all stars” that will attract world-class research and teaching programs to Oklahoma.

Tax Policy

The Legislature should revise specific taxes to encourage the creation of jobs and wealth by:

Extending the Small Business Capital Formation Act and Rural Capital Formation Act to seven years and increasing the tax benefits to 40 percent for urban small businesses and 60 percent for rural businesses.
Passing a constitutional amendment to Article X, Section 6C, that would clarify tax increment financing (TIF)so that revenue streams may be dedicated for more than one year to projects in TIF districts and related project areas.
Continuing to reduce the state estate tax. In 1998, the Legislature and Governor Frank Keating approved legislation that implemented annual reductions in the estate levy. For example, the current state tax exemption of $850,000 will rise to $1 million in 2006. Policy makers should continue to monitor the tax exemption, particularly in light of recent federal changes, and consider additional reductions in the future.
Reducing capital gains tax by implementing differential treatment for capital gains attributable to the sale or initial public offering of a business interest, and by incrementally reducing the top rate for net capital gains taxes from 7 percent to no more than 2.35 percent. Oklahoma's current tax system treats capital gains as ordinary income. High capital gains tax rates can discourage saving and investment, raise the cost of capital for new investment, encourage capital flight and slow economic growth.
Reducing taxes on lump sum retirement payments to individuals. Oklahoma's current system of taxation on retirement benefits has the unintended consequence of encouraging some of the state's most talented people as well as employers to relocate to avoid taxation. This, in turn, deprives the state of talent and wealth that might otherwise remain in our state.
Putting in place a system to quantify the costs and benefits of existing incentives and tax credits. The state should systematically quantify the costs and benefits of all current and proposed business incentives and tax credits to determine whether they effectively encourage the type of business behavior they seek to stimulate.
Ensuring that future tax credits and incentives concentrate on knowledge-based businesses and are tied to higher-paying jobs. Oklahoma cannot afford to offer tax credits and incentives that do not increase the net benefits to the state and its citizens.
Creating a revolving source of revenue to service bonds over a longer period of time and identifying specific projects in a more flexible manner. Currently, the mechanisms for bonding projects are slow and cumbersome, thus significantly reducing the state's flexibility.

Quality of Life

The state should take a number of actions to retain and attract members of the “creative class” and promote the cultural values of Oklahoma, including:

Coordinate a “One Night in Oklahoma” event when people from around the state would gather for concurrent dinners in private homes to discuss and take actions to improve the quality of life in their communities.
Expand Oklahoma Today magazine into an interactive, online current information source for statewide events and activities.
Conduct research to identify the living and working preferences of young professionals.
Initiate recruiting campaigns to attract college graduates and members of the “creative class” to Oklahoma, especially native sons and daughters who might return.
Consider tax exemptions, partially forgiving student loans, or other incentives to retain graduating Oklahomans with advanced college degrees.