Response to Barnett's Attack Ads

Howard Barnett’s chalkboard attack ad just doesn’t add up any way you look at it. Not only is the math wrong, the numbers are incorrect and misleading.

The Attack – The attack ad claims that State Treasurer Scott Meacham, when he was State Finance Director, “promised” new revenues from the lottery, gaming and tobacco tax that have not been realized. The Office of State Finance prepares estimates of new non-tax revenues and reports estimates prepared by the Oklahoma Tax Commission of tax revenues. This information is then utilized by the State Board of Equalization in certifying state revenues and by the legislature in making appropriations of the revenues.

The first chalkboard (the one that doesn’t add up) falsely claims $221 million was “promised” to education but only $89 million was collected, which the ad claims is a negative $131 million. The chalkboard blends lottery and gaming revenue to make this claim. Based upon a press release issued by the Barnett campaign dated October 24, 2006, it is a blend of claimed lottery revenues from October 2005 through September of 2006 of $69 million plus $20 million of gaming revenues for fiscal year 2006 (July 1, 2005 through June 30, 2006).

The second chalkboard deals with the tobacco tax. It erroneously says $76 million was promised but only $58 million was delivered, which the ad claims is a negative $18 million.

The Lottery – The truth is that the Office of State Finance projected, when Scott Meacham was State Finance Director, that the lottery when fully implemented would bring in between $100 million and $150 million new revenue for education each year. The variance was based upon whether Oklahoma’s lottery would be as popular as the Texas lottery, which has the highest play per household in the region, or more like the Kansas lottery, which has the lowest participation in the region.

The Oklahoma lottery was phased in beginning with sale of scratch off tickets in October of 2005 and concluding with the introduction of Powerball in January of 2006. Because of the phase in, the Office of State Finance, under the direction of Scott Meacham, projected the lottery would bring in $65.2 million for education in fiscal year 2006. The actual revenues were $68.9 million, or $3.7 million above the estimate. Subsequent to Scott Meacham being named State Treasurer, the Office of State Finance estimated fiscal year 2007 lottery revenues to be nearly $124 million (right in the middle of the original $100 million to $150 million projection.)

The Barnett attack ad lottery number of $69 million in revenue from October of 2005 through September of 2006 is just plain wrong. As stated above, the lottery made this amount for education through the end of June, 2006. Although a measure of October through September would be a “full year” of lottery revenues, it is not a full year of fully-implemented lottery revenues. Powerball was not added until January of 2006. Therefore, only 9 months of Powerball sales would be included. Candidate Barnett’s lottery numbers are wrong.

Gaming Revenues – Treasurer Meacham, when he was State Finance Director, predicted that tribal and race track gaming, when fully implemented and adopted by all tribes and tracks, would bring in approximately $70 million per year for education.

This revenue source was very difficult to predict because of the many variables involved such as the number of facilities, number of electronic games per facility, number of card games per facility, daily revenues per electronic game per facility, daily revenues per card game per facility, adoption rates by tribes of compacted games, speed of manufacturers in producing compacted games, and the interpretation by the federal government of the definition of permissible tribal electronic gaming devices.

The Barnett attack ad utilizes fiscal year 2006 revenues from gaming of $19.7 million. Once again, these numbers do not reflect fully implemented gaming revenues. The 2006 fiscal year began July 1, 2005. Remington Park, the largest horse racing track gaming facility in the state, did not even open its doors until November 21, 2005. The other two horse racing tracks began operations in October and December.

Likewise, the tribes were delayed in their installation of the new compacted games. Manufacturers were slow in developing new compacted games that would communicate with the tribe’s existing electronic accounting systems. These new games did not start being installed by tribal casinos until the first few months of 2006.

As expected, monthly gaming revenues have grown steadily through 2006 as more tribal casinos get more compacted games installed. Without any additional growth, FY-07 gaming revenues are on track to bring in more than $40 million for education. These revenues will continue to increase as tribes shift their operations over to compacted games. Once again, candidate Barnett’s numbers are misleading.

Tobacco Tax – The tobacco tax estimates were prepared by the Oklahoma Tax Commission and reported by the Office of State Finance by then State Finance Director Scott Meacham. Candidate Barnett claims that the revenue estimate for tobacco for FY-06 was $76.2 million and actual collections were $58.4 million. Although he has the year wrong in that the numbers reported are actually for FY-05, this time he does correctly match up half year collections with half year estimated revenue since the tobacco tax increase passed by the voters did not go into effect until January 1, 2005.

The problem in this case is that candidate Barnett’s numbers fail to take into account stockpiling of cigarettes and tobacco products by wholesalers, retailers and consumers in December in anticipation of the tax increase on January 1, 2005. In fact, December 2004 tobacco sales numbers indicated a huge increase as large scale stockpiling occurred.

A much better measure of the tax would be FY-06 where there was a full year of collections and the stockpiled tobacco was, for the most part, worked out of the system. In FY-06, the tobacco tax brought in an extra $108.1 million for health care for Oklahoma families. For FY-07, it is on track to bring in $115.3 million. Once again, candidate Barnett’s numbers are misleading and fail to tell the whole story.

The Smokescreen – The biggest problem with candidate Barnett’s attack ad is that it is an attempt to divert the voters’ attention from the real duties of the State Treasurer’s Office. The State Treasurer has nothing to do with estimating revenue sources or even collecting revenues. The collected revenues are deposited in the State Treasurer’s accounts. The State Treasurer then manages and invests those funds until the Legislature spends them. Since candidate Barnett has no plan for managing the Treasurer’s Office more efficiently than Treasurer Meacham, he has to try to divert the voters’ attention to irrelevant matters utilizing incorrect and misleading information.