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Originally published at OCPA.
In 2022, Oklahoma lawmakers passed the state’s “Energy Discrimination Elimination Act” (EDEA), which requires the office of the state treasurer to conduct a review of firms to identify those that boycott investments in oil-and-gas companies due to their embrace of so-called “Environmental Social Governance” (ESG) policies. State entities, including state pension funds, cannot contract with firms on that list. In April, the Oklahoma Rural Association released a study that claimed the Energy Discrimination Elimination Act has increased municipal borrowing costs by 15.7 percent. But now a new study, released by the American Energy Institute, has examined the Oklahoma Rural Association’s work and found it riddled with flaws and omissions that skewed its findings. “As we release this comprehensive analysis, it’s clear that the Energy Discrimination Elimination Act of 2022 is crucial for safeguarding Oklahoma’s economic interests and ensuring sound fiduciary practices,” said Jason Isaac, CEO of the American Energy Institute. “Our research debunks the flawed claims against the EDEA, highlighting its role in protecting vital energy sectors and promoting financial stability for the state.” “Fact versus Fiction: Examining Oklahoma’s Energy Discrimination Elimination Act of 2022” was authored by Vance Ginn, former chief economist of the White House’s Office of Management and Budget and a fellow at the American Energy Institute, and Byron Schlomach, an economist with 30 years’ experience in state-level public policy who served on the Piedmont City Council and was the director of the 1889 Institute in Oklahoma. The two men examined the “Energy Discrimination Elimination Act” and the Oklahoma Rural Association’s critique of the law, and found the critique deeply flawed. “The Oklahoma Rural Association’s report on the state’s Energy Discrimination Elimination Act and its purported impact on municipal borrowing costs contains significant methodological flaws,” Ginn and Schlomach write. “It fails to establish a causal relationship between the EDEA and higher municipal borrowing costs. Changes in federal policy with respect to the oil industry, first positive under President Trump and now decidedly negative under President Biden, are more plausible explanations for Oklahoma’s relatively increased borrowing costs. Furthermore, the push towards ESG investing overlooks the opportunity costs associated with divesting from reliable energy sources like oil and gas, which are crucial to Oklahoma’s economy.” Due to the flaws in the Oklahoma Rural Association study, Ginn and Schlomach conclude that it “should not be used as a reason to question or delay the implementation of protections put in place by the elected representatives of states like Oklahoma and Texas against asset managers using the assets of those states to push ESG-aligned political objectives.” Instead, they write that policymakers should “ensure that investment decisions prioritize profitability and fiduciary responsibilities over politically driven, subjective ESG criteria through increased transparency, independent audits, and clear rules. This approach will better safeguard economic interests and promote sustainable growth, benefiting the broader community and the environment.” Among the problems that Ginn and Schlomach identify in the Oklahoma Rural Association report is the fact that a comparison of Oklahoma municipal bonds with a national index “shows Oklahoma’s interest rates varied by less since September 2022, before the law went into effect in November 2022 and when the Treasurer issued the restricted financial companies list in May 2023.” “This indicates that EDEA did not cause interest rate movements and that the paper’s results come from cherry-picking the data and specific states,” Ginn and Schlomach write. The two economists also write that the Oklahoma Rural Association report overlooked other important factors, “such as the upward trend in interest rates,” and also contained “methodological challenges of correlation versus causation.” The Oklahoma Rural Association’s report claims the EDEA has increased municipal borrowing costs by approximately 59 basis points (0.59 percent), a 15.7 percent increase compared to some states, and attributes that increase to reduced financial competition that the report suggests has been created by the EDEA. However, Ginn and Schlomach note that the Oklahoma Rural Association report notably omitted New Mexico from the selected neighboring states examined, “raising questions about whether the chosen states moved in parallel with Oklahoma before the EDEA’s implementation.” In addition, they note that “a substantial outflow of funds from municipal bonds” occurred nationwide in 2022 and 2023. Ginn and Schlomach note that Oklahoma’s municipal borrowing interest rates were “trending upward long before the EDEA’s passage and implementation.” And the two economists argue that the Oklahoma Rural Association report fails to address the negative impact of ESG investing strategies on Oklahoma. “Divesting from reliable energy sources like oil and gas in favor of renewable energy projects often result in lower returns and economic disruptions,” Ginn and Schlomach write. “States with significant economic output from the oil and gas sector, such as Oklahoma and Texas, face significant spillover effects from reduced investment in these industries. These spillover effects include job losses, reduced economic activity, and lower tax revenues, which ultimately create ripple effects on the broader state economy.” Further, using ESG criteria in public pension funds and state investments “can lead to lower financial performance and increased risks, as highlighted by critiques and evidence.” “EDEA is specifically designed to counteract the growing trend among financial institutions to shun investments in fossil fuel industries due to ESG pressures,” Ginn and Schlomach write. “By enforcing this law, Oklahoma ensures that its oil and gas sectors, which are crucial to its economy, remain robust and well-funded.”  Originally published at Kansas Policy Institute.
As Kansas gears up for a special legislative session in two weeks, the state stands at a pivotal point. Governor Laura Kelly’s call to reconvene the legislature after vetoing three key tax relief bills this year, let alone what she vetoed previously, indicates the struggle to pass pro-growth policies. For Kansas to thrive, it must pursue significant income tax reductions complemented by responsible budgeting. Despite an appealing low unemployment rate of 2.8%, a deeper look at Kansas’ labor statistics reveals significant challenges. The labor force participation rate, the share of residents either working or actively looking for work, has dropped to a historic low of 66.1% since 1977, and the workforce has been flat since 2008. This stagnation points to a need for reform policies that do more than temporarily boost employment numbers—they must encourage sustainable work and investment. Current tax relief discussions, including proposals to eliminate the state’s 2% sales tax on groceries, reduce the current 20 mill state property tax levy for K12 education, and end the state income tax on Social Security benefits, though politically attractive, do not provide the necessary economic improvements as cutting personal income taxes:
In contrast, flattening and cutting income taxes would dramatically improve Kansas’s economic environment. As noted in a recent report by The Buckeye Institute for KPI, this sort of pro-growth tax policy in Kansas would make the state more attractive to entrepreneurs and skilled workers, fostering an ecosystem ripe for innovation and investment that increases economic growth and job creation across sectors, contributing to a wider tax base and more tax collections. Kansas must also embrace responsible budgeting for these tax cuts to be sustainable. The state should learn from the lesson of excessive spending during the last decade’s troubles, which led to deficits and foolish tax hikes. This can be achieved by spending on only limited roles outlined in the state’s constitution, providing opportunities for strategic budget cuts and growth of no more than the rate of population growth plus inflation. This balanced approach helps ensure fiscal sustainability without compromising essential services. The upcoming special session is a golden opportunity to initiate significant economic reforms. By adopting bold income tax cuts and responsible budgeting, Kansas can set a prosperity cycle that benefits all residents. This approach goes beyond temporary fixes to establish a solid foundation for future economic stability and growth, which can’t be achieved with the other proposals. Now is the time to implement visionary reforms that position Kansas as a smart, growth-oriented fiscal policy leader. This special session is ideal for Kansas to boldly step into a future marked by robust economic health and lasting prosperity. By seizing this moment to enact significant tax cuts and set the table for disciplined spending, Kansas can ensure its competitiveness and prosperity for generations. Let this session be remembered when Kansas took bold steps to secure its economic future, setting a precedent for fiscal responsibility and proactive economic strategies that lead to a flourishing state. Join my conversation with Dr. Judge Glock, director of research and a senior fellow at the Manhattan Institute, on the latest Let People Prosper Show podcast.
We explore: 🗽 America's Economic Landscape: What's working and what's not? 🏠 Housing Market Fixes: Key issues and practical solutions. 💸 Debt Crisis Solutions: National and local debt challenges and how to tackle them. Like, subscribe, and share the Let People Prosper Show, and visit vanceginn.substack.com and vanceginn.com for more. |
Vance Ginn, Ph.D.
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