Treasurer Ken Miller
Oklahoma lawmakers could have a permanent source of tens of millions of dollars each year that would not require any new taxes or fees. All it would require to guarantee such a generous long-term payoff is a little short-term discipline. Sure, this is a hefty ask in the political realm where time horizons center around election years, but our history shows it’s possible.
Thanks to the foresight of statesmen like Drew Edmondson, Robert Butkin and others, Oklahoma is the only state with a constitutionally-protected tobacco settlement endowment. In 2000, voters wisely approved an amendment to the state constitution to permanently set aside and invest the majority of Oklahoma’s annual payments from the tobacco industry, with only the fund’s earnings used to fund annual public health and education efforts.
After 15 years and a beginning balance of only $20 million, the Oklahoma Tobacco Settlement Endowment Trust Fund has grown to almost $1 billion today.
The fund’s board of investors recently certified more than $52 million in annual earnings. Since inception, more than $242 million in earnings have been invested in our people while the corpus has been preserved for future Oklahomans.
The unclaimed property fund could be structured in the same manner. Business remittances of unclaimed property vary between $18 million and $70 million each year. With such a wide variance in annual remittances, the Legislature should not depend on the fund to fill ongoing budget needs to the extent that it does now.
Even so, lawmakers have taken more than $230 million from the unclaimed property fund in the past six years, including $54.5 million for the current budget. With such fluctuations in receipts and historic amounts reunited with each new year, this growing dependence is unsustainable unless changes are made. Left as is, collections will soon be insufficient to return funds to the rightful owners and meet budget obligations.
That problem would be solved if annual remittances were allowed to grow into an endowment where only the earnings could be appropriated. Even with ever-increasing amounts successfully returned to the rightful owners, some of the money will forever go unclaimed. Although these unclaimed amounts will remain a state liability, unclaimed property laws were written so that these funds eventually benefit the public.
What is now a volatile source of revenue could be molded into a steady, recurring revenue stream. As with standard endowments, the money could be placed into higher-yield, long-term investments with earnings spun off for appropriations each year. Sufficient money would be set aside to pay claims, while the remainder would be put to work providing a permanent source of funds for public use.
Imagine if the Legislature took the long view and stopped current consumption of the unclaimed property fund. Placing $40 million a year into an endowment, at an eight percent growth rate for 15 years, would yield a corpus of $1.173 billion – an amount capable of spinning off more than $58 million annually. Waiting to tap the fund until year 20 would create an endowment of almost $2 billion and generate as much as $100 million in earnings per year.
As with the Oklahoma Tobacco Settlement Endowment Trust Fund, an Oklahoma Unclaimed Property Endowment Trust Fund could provide a substantial and ongoing revenue stream that would better serve the budget process and all Oklahomans for generations to come.
