Oklahoma law makes government more expensive and less effective

Oklahoma’s blacklist of banks and investment firms accused of discriminating against oil and gas companies has cost Oklahoma’s taxpayers, municipalities, and businesses an estimated $185 million to date. According to a study conducted by the University of Central Oklahoma for the Oklahoma Rural Association, recently enacted legislation is costing the state nearly $11 million a month, limiting efforts to pay for critical public projects.

“Any tax dollar unnecessarily spent is wasteful — especially to the tune of more than $185 million. Oklahomans deserve better, and we encourage our lawmakers to right this wrong,” ORA President Monica Collison told the Oklahoman.

The 2022 Energy Discrimination Elimination Act (EDEA) directed Oklahoma Treasurer Todd Russ to develop a blacklist that prohibits offending banks and investment firms from doing business with government entities in the state.

As a result, according to the study, the law has created higher borrowing costs for local governments, which in turn has forced them to cut expenses and project or seek higher taxes.

“Increased borrowing costs also result in delays or complete abandonment of projects intended to improve critical infrastructure or improve basic quality of life aspects,” the study concluded. “These foregone projects would benefit the community but now they cannot, and these foregone and delayed projects harm the economic opportunities for those who would have been hired to complete the projects.”

Some Oklahomans have already felt the impact. Stillwater officials agreed on low-interest funding for water and other projects with Bank of America. But that bank was blacklisted by the state; moving to the city’s second choice lender added $1.2 million to the project’s cost. In response, the city was forced to reduce the scope of that work. 

The OK State Treasurer, Todd Russ, faced a lawsuit over his push to force the Board of the Oklahoma Public Employees Retirement System (OPERS) to cease exercising their fiduciary exemption that allowed them to continue using State Street and BlackRock as their investment managers even though the OPERS’ estimate of making a transition away from the two blacklisted firms was of an initial cost of at least $10million to the retirement system.

And according to a report from Bloomberg, some Oklahoma lawmakers already proposed at least a partial retreat, reconsidering whether their blacklist is really in the state’s interest. The proposed legislation — Senate Bill 1510 — would change the law to only apply to state agencies, and not to local governments. However, it failed on the House floor 40-44 on April 25.

Laws like this one in Oklahoma are disrupting public finance in other states as lawmakers have copied other state’s boycotts on investment firms that allegedly incorporate environmental, social, and governance (ESG) factors.

The Texas version is estimated to cost that state’s economy $668.7 million, 3,034 fulltime permanent jobs, and $37.1 million in local tax revenue, according to an economic analysis commissioned by the Texas Association of Business Chambers of Commerce Foundation.

 In Louisiana, initial estimates found that the state’s four public pension funds would need to earn an extra $6.27 billion to cover the impact of a boycott, according to the legislative auditor.

The evidence is stacking up. State after state is seeing that inserting politics into investment decisions for pension plans, and projects for schools and state and local government is putting retirees and taxpayers at risk.