The Enduring Impact of House Bill 1017 on Oklahoma Public Education

By Derald Glover, OASA Assistant Executive Director

Since its approval more than 30 years ago, House Bill 1017 (HB 1017) has become a bedrock for Oklahoma public education, its influence still present in many aspects of schools. Its ultimate passage, however, was not an easy feat. The 1980s was a tumultuous time in Oklahoma public schools, with several lawsuits centered around the lack of equity in school funding across the state. In 1980, a group of schools formed the Fair School Finance Council of Oklahoma (FSFC), and in 1990, forty of those schools filed suit against the state, contending the state’s funding system delivered insufficient funds to offer an adequate education to all students.

During this time, an education reform study, Task Force 2000, recommended several reform measures to the legislature to address large class sizes, teacher pay and certification, and state testing. Due to the task force, the efforts of FSFC, and a potential teacher walkout, HB 1017 was approved. It is important to note that Republican governor Henry Bellmon championed this reform effort. It did not come without a fight. Opposition to the tax increases needed to fund the new law was significant. Ultimately, a 1991 vote of the people established that no further tax increases could be passed without a 3/4th majority vote of the legislature or a vote of the people. That compromise has proven to be problematic – it has been very difficult to pass a tax increase for needed services since its passage.

HB 1017 stands as possibly the most significant education reform measure ever passed by the Oklahoma legislature. The law created the Education Reform Revolving Fund (ERRF) which, along with the general revenue fund, mineral leasing fund, education technology fund, and lottery fund, provide all the money for the state funding formula. CCOSA monitors these funds on a monthly basis, and in summer 2023, we noted that the ERRF had reserves of over $500 million, funds that should be allocated to schools for the reforms established in HB 1017.

In recent months, Oklahoma elected officials have proposed using ERRF reserves for initiatives outside the scope of HB 1017. Because of CCOSA’s monitoring of the funds, we researched the growth of the reserves by comparing appropriations over the last eight years to collections and notified some elected officials that the proposed use was outside the scope of the fund. The fund has consistently overcollected, particularly in the last three years. According to the latest Board of Equalization report, they are at $580 million, and if collections come in as projected, the figure could grow to $630 million.

Knowing the history of HB 1017 is critical to protecting these dedicated dollars for education. It is important to shine light on the excess ERRF reserves and to ensure that any proposed uses meet the intent of the law to help schools continue to reduce class sizes, hire staff, pay teachers, and other purposes identified in state law.

HB 1017 brought sweeping changes to public education, but even with the tax increases, funding was unable to meet all of its reform measures, and many fell to the wayside. Many small schools consolidated during the years following its passage. However, it still represented a significant effort to address various issues plaguing the state’s education system and was intended to improve the quality of education for Oklahoma’s students. Let's review its key aspects.

Henry Bellmon was Oklahoma’s Governor from 1963-1967 and from 1987-1991.

Funding Mechanism

The law established the ERRF to provide a dedicated source of funding for education. By leveraging multiple funding sources, including sales tax increases, income tax revisions, lottery revenue, and other sources, HB 1017 was intended to provide a stable and robust financial foundation for its initiatives. This diversified funding approach helped to ensure that the reforms outlined in the law could be adequately funded and sustained over time, facilitating long-term improvements in Oklahoma’s education system. ERRF derived its funding from various sources to support its initiatives to improve education in Oklahoma:

■ Sales Tax Increase: One of the primary funding sources for HB 1017 was a one-cent increase in the state sales tax. This increase was specifically earmarked for education and represented a significant commitment of state resources to support the reforms outlined in the law.

■ Income Tax Revisions: The law also included revisions to the state’s income tax structure, which generated additional revenue for education. Increases in corporate and personal income tax were to provide a more stable and sustainable funding source for education initiatives.

■ Lottery Revenue and Other Funds: Eventually the Oklahoma lottery funds were also included in HB 1017 funding, as were use tax, cigarette/tobacco tax, and tribal gaming revenues, among others.

Teacher Salaries

One of the most notable provisions of HB 1017 was its focus on increasing teacher salaries. It provided for a multi-year pay raise for teachers to help attract and retain high-quality educators in the state. This was a crucial recognition of the importance of teachers in the education system.

Class Size Reduction

Another important aspect of the law was its emphasis on reducing class sizes. At the time, it was believed that smaller class sizes could lead to improved student outcomes, and HB 1017 sought to address this issue by providing funding to reduce the student-to-teacher ratio in classrooms.

Accountability Measures

HB 1017 also included measures to increase accountability in the education system. This included requirements for state-level testing and establishing performance standards for students and schools. This portion of the law was designed to hold schools accountable for their performance by driving improvements in educational outcomes.

Support for At-Risk Students

The law included provisions to provide additional support for at-risk students, such as those from lowincome backgrounds or with special educational needs. This recognition of the importance of addressing the needs of all students, regardless of their background, was a positive aspect of HB 1017.

Overall, HB 1017 represented a landmark effort to improve education in Oklahoma. By addressing issues such as teacher salaries, class sizes, and accountability, the law sought to ensure that all students in the state had access to a high-quality education. Now, it is important that schools monitor the revenue sources that fund ERRF and that elected officials continue to implement the law as intended and strive to find funding sources to ensure reforms are continued. The recent elimination of the grocery sales tax and efforts to reduce personal income tax and corporate tax threaten to cut funds intended for ERRF.

Another issue has arisen around the $580 million in reserves that have built up in the ERRF fund over the past several years. State leaders have previously made attempts to use these reserves to offset state obligations outside of public education. The charts below show how ERRF collections have exceeded appropriations over the past few years. Fiscal year 2024 will likely yield another $50 million increase in reserves. CCOSA will continue to monitor these funds and fight to ensure that excess funds are used for the purposes intended by HB 1017. ■

ERRF: Appropriations and Collections

■ The February 15, 2024, Board of Equalization (BOE) packet showed HB 1017 ERRF reserves of $582 million.

■ BOE packets show reserve growth, with additional growth likely based on FY2024 estimates.

■ According to BOE data, ERRF collections since FY2018 have exceeded appropriations by $622,658,900 (see chart).

■ It is unclear why there is a discrepancy between the BOE packet and historic data.

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