Month: June 2011

State Budget vs. Union Benefits

By Christopher Robinson

Mediation continues in Salem between two major labor unions and Governor John Kitzhaber’s team over public employee benefits. The governor is seeking concessions from SEIU and AFSCME regarding the Public Employees Retirement System (PERS) and the state employees’ health insurance plan.

 

PERS members pay 6% of their salary towards retirement. Currently, the state pays for this mandate as part of a previous deal. The state also pays 100% of employees’ health insurance premiums.

 

It’s no secret that Oregon is facing budget shortfalls, including financing for public employee benefits. Attempts at legislative reform have largely failed. State negotiators initially aimed to end the 6% pick-up and to require that employees pay 5% of insurance premiums. They have since dropped the pick-up demand.

 

Union supporters argue state employees have already made concessions by forgoing certain wage increases in favor of hardier retirement benefits. However, this still does not account for free health insurance premiums or the wealth of other benefits union membership provides. SEIU Local 503 members are eligible to receive, among other things, free life insurance and legal compensation. AFSCME members get heating oil and rental car discounts.

 

The worst case scenario of not being able to fund state employee benefits is bankruptcy. Making a few concessions wouldn’t be a bad idea, and Oregon taxpayers likely would agree.

 

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An Open Letter to President Obama

Dear President Obama:

Your recognition of the importance of rural America is appreciated, but it appears shallow thus far in your presidency. The announcement of the establishment of the White House Rural Council has lofty goals, but actions speak louder than words. At this point your administration’s actions have done little to relieve the economic woes of rural communities, especially in Oregon.

The executive order establishing the Council lists 25 agencies and other federal government entities that will participate under the leadership of the Secretary of Agriculture to “better coordinate Federal programs and maximize the impacts of Federal investment to promote economic prosperity and quality of life….” My question is, whose quality of life and economic prosperity? The only mention of economic opportunity in the order pertains to “…energy development, outdoor recreation, and other conservation related activities.”

Here in Oregon, we have lived with this utopian concept of economic development for more than twenty years. If you were to ask folks who actually live in rural communities throughout Oregon, you would be informed overwhelmingly that the results of this new conservation economy are dismal at best. In fact, statistics show that the poverty rate in rural Oregon has increased from 12% in 1979 to 17.2% today.

Your administration has touted the billions of dollars that have been spent on pet projects throughout the country like broadband and renewable energy. Why not allow communities to identify projects that will best fit their needs locally? Better yet, in these financially strained times, let’s consider removing bureaucratic roadblocks to prosperity and allow the free market to determine the viability of industries, instead of the federal government investing billions of dollars picking the economic winners and losers.

Ethanol is one of the best examples of the federal government picking winners and losers. Corn growers definitely have benefited from ethanol subsidies, but livestock growers have seen the costs of their feedstuffs skyrocket.

There are also great examples of how public-private partnerships can be successful without federal government funding and bureaucracy. Just look at Powell, Wyoming, which successfully created a community based broadband network without any of the $7.2 billion being offered by the federal government to subsidize broadband development.

A critical and often forgotten factor in stimulating America’s rural economy is removing the burdensome regulations placed on communities and businesses throughout the country. Your administration has introduced a litany of rules that only continue to increase the bureaucratic burden on businesses of all sizes and has offered little to no relief or flexibility to businesses trying to meet often over-reaching regulations.

Durkee, Oregon is just one rural community caught in the cross hairs of EPA regulations. The town’s largest employer, Ash Grove Cement (116 employees), is facing possible closure despite investing $20 million in retrofits to control airborne mercury emissions. EPA has proposed new airborne emission standards for mercury that are below the natural background levels and beyond levels which technology can economically address in this area. Without an exception to the proposed rule, the business will have to shut down, eliminating a significant number of full-time family wage jobs. There are numerous other examples of egregious, overly restrictive regulations forced upon rural communities by a multitude of federal agencies which greatly diminish market opportunities for businesses.

Last, but most important to Oregon and to the stabilization of our rural economy, 53 percent of our land is owned by the federal government. The federal government has shifted its land management philosophy from sustainable active management of renewable natural resources to a passive management regimen that has cost our communities thousands of full-time living wage jobs and greatly increased the vulnerability of our forests to disease, pest infestations and devastating wildfires. The negative impacts of federal management decisions (or the lack thereof) on our renewable resources have been destructive to both the environment and rural communities.

Whether it is the livestock industry struggling to meet the impossible demands of federal grazing leases, or lumber mills trying to source enough timber to make up for the lost volume no longer coming from the federal forests — all of Oregon has been impacted. In fact, 31 out of 36 counties in Oregon receive funds from the federal welfare program for counties known as the Rural Secure Schools Act. These funds are provided to counties in a dismal attempt to offset the economic impact on county government (not individuals or businesses) due to the lack of management and bureaucratic entanglement of federal lands in Oregon. Local governments, business and citizens alike would prefer to be self-sufficient, but that is unlikely to happen unless the federal government liquidates its land holdings or begins to actively manage its natural resource assets.

While facing this recession, there is no better time for the federal government to stop frivolously spending money choosing economic winners and losers and to begin looking at how it could remove regulatory burdens that would free citizens and businesses to rethink free market opportunities and invest in their own future.

Daniel Kemmis wrote in This Sovereign Land: “…[P]eople who live and work, raise their families and build their communities, on a particular landscape cannot be and will never be persuaded by any amount of purely legal reasoning that people who have no such dependence on or knowledge of those landscapes should have an equal say in their governance.” Rural communities like Burns or Enterprise, Oregon would welcome the opportunity to host a listening session and tour for the White House Rural Council to reveal opportunities which would allow them to control their own destiny and once again flourish.

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The Truth about the Canadian Health Care System

By Frank S. Rosenbloom, M.D.

President Barack Obama and supportive members of Congress were able to get the Patient Protection and Affordable Care Act (ObamaCare) passed, in part by extolling the virtues of the Canadian health care system. In speech after speech, Obama has touted the alleged lower cost, “universal coverage” and better medical care of that system. All of the mentioned supposed benefits are untrue, but the most disconcerting fact is that Mr. Obama has never discussed any deficiencies of the Canadian system.

Other influential people have shared their concerns about the serious deficiencies in the Canadian health care system. Perhaps the most important of these is the man some call the ”father” of the Canadian health care system, Claude Castonguay. Although several provinces had government involvement in health care from 1946, Castonguay was the pioneer of socialized medicine in Quebec, which gave impetus to the establishment of a nationwide socialized medical care law in 1966.

However, in 2008 Castonguay had this to say about the health care system: “If nothing is done, at one point we will reach a crisis point. This is why we say it is urgent to act. There’s no miracle solution, there is no simple solution.” He has urged some privatization in the health care system to increase choice and fees of up to $100 for doctor visits. How could this be? Haven’t we been led to believe that the Canadian health care system is financially stable? In fact, the system is close to collapse.

Let’s review the facts. The Canadian health care system was established in the 1960s, when the government was spending like a drunken sailor trying to promote economic growth. Sound familiar? The assumption was that the economy would grow at a predictable rate and that the system therefore would be affordable. However, Canadians made the same fundamental mistakes governments always make when establishing entitlement programs; that the economy would act predictably and that the program’s costs would grow in a predictable linear fashion. These two assumptions have proven to be incorrect in all cases, as they were in establishing our own Medicare system.

Health care reform has been a serious issue in Canada for over fifteen years, as the financial burdens of socialized medicine have put increasing strain on resources. Canadian media regularly trumpets fears about escalating health care costs. Furthermore, since accurate statistics are kept only on government spending, substantial hidden costs are associated with that system. Some Canadians are even breaking the law by opening private clinics to relieve a system that is imploding. One significant reason the Canadian system has lasted this long is the safety valve provided by the U.S. system, where Canadians can receive timely care at a fair price. Yet, if you believe President Obama, the Canadian health care system moves along like a well oiled machine.

Although Canadians spend less per capita than we do in the U.S., the rate of rise in their health care costs has been at times equal to or greater than ours during the past decade. So, how can we be told that Canadian health care costs are rising at a slower rate than our own? The rate of rise in Canadian health care expenditures can be seen by reviewing the widely available graph below.

 
Canadian Institute for Health Information

The graph shows total expenditures in constant 1997 dollars. A quick review shows Canadian health care costs rose about 240 percent from 1996 to 2009, by which time they actually exceeded $180 billion.

By contrast, the rise in U.S. health care costs can be reviewed below.

 
Centers for Medicare & Medicaid Services, Office of the Actuary. National Health Expenditure Accounts – Projected, Table 1: National Health Expenditures; Aggregate and Per Capita Amounts, Percent Distribution, and Average Annual Percent Growth, by Source of Funds: Calendar Years 2003-2018

We see that in 1996, U.S. health care spending was about $1 trillion. By 2009 it had reached about $2.4 trillion, which is an increase during that period of about 240%. Now, wait a minute! The rate of rise of Canadian health care costs is really no lower than ours? Yes, President Obama, (and Governor Kitzhaber), there is no Santa Claus, and no Shangri-La. The often reported, widely disproportionate cost increases between the Canadian and the U.S. health care systems are a myth.

Statistics can be adjusted to promote a particular ideology, as was seen by the graph above adjusted to constant 1997 dollars and the addition of the “projected” 2018 spending in the U.S. graph. Despite these difficulties, the truth about the Canadian health care system and socialized medicine is available to anyone who diligently studies the matter. Unfortunately, many Americans have relied on liberal politicians for their information, and nothing but higher costs and lower quality medical care will be the inevitable result. If we really want costs to decrease while maintaining quality health care, we need real free market reform before the inevitable complete collapse that will occur nationally under ObamaCare and the disaster that will befall Oregon under Gov. Kitzhaber’s reform proposals.


Frank S. Rosenbloom M.D. is a practicing physician and president of the Docs 4 Patient Care Oregon chapter. He is a guest writer for the Cascade Policy Institute, Oregon’s free market public policy research organization.

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Milton Friedman Birthday Celebration!

Come celebrate the birthday of one of the economic greats of our time!

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John Charles Gives Legislature Issues to Work for Next Session

On 6/2, John Charles was an invited witness before the House Committee on General Government and Consumer Protection. He proposed issues for the committee to work on between now and the start of the 2012 legislative session.

Click here to listen

Testimony starts at 35:43

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John Charles testimony on OPEB Unfunded Liabilities

John Charles was an invited witness before the Senate Government Operations committee on June 8th. It was an informational hearing about the unfunded liabilities of OPEB (other post employment benefits), such as retiree health insurance.

Click here to listen

Testimony starts at 37:32.

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Oregon’s Next Green Folly

By Michael Bastasch

Governor John Kitzhaber’s new “green” energy ploy, the Oregon “Cool Schools” Initiative or House Bill 2960, directs the Oregon Department of Energy to give out zero to low-interest loans and grants to school districts for energy efficiency building improvements, and also create jobs in Oregon. HB 2960 is a bad idea for at least three reasons.

First, Washington State launched a similar initiative in 2005 and found that many “green” schools used up to 52% more energy than predicted, students’ academic performance was actually lower on average than in comparable schools, and most of the money each district received went to meeting non-energy-saving requirements.

Second, Gov. Kitzhaber claims that for $1 million spent 10 to 15 jobs will be created, but he ignores total economic costs. Each job created in this initiative will be temporary and cost between $67,000 and $100,000, meaning tens of millions of taxpayer dollars will be spent to temporarily benefit a small group of people at the expense of everyone else. How will that solve Oregon’s economic problems?

Third, Washington State’s initiative has a 43-year payback time for school energy efficiency upgrades. Since schools rarely go that long without being renovated, Oregonians will never see these upgrades pay for themselves. The Legislature should have considered the economic implications of HB 2960 before it was passed.


Michael Bastasch is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Say what you want about John Charles…

… but you can always enjoy his show!

(This excerpt is from a TriMet board meeting on June 11, 2011).

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John Charles to TriMet Board: Understand Obligations Before Signing FTA Grant Agreement

Testimony before the TriMet Board of Directors

Regarding Resolution 11-06-38

Application for a Full Funding Grant Agreement with FTA for the Milwaukie Light Rail Line

June 8, 2011

In your consideration of this Resolution, please focus your attention on the second “Whereas” clause: “Federal assistance will impose certain OBLIGATIONS upon the applicant.”

I suggest you review and UNDERSTAND those obligations BEFORE you approve the resolution. Your predecessors approved a similar resolution for the Green MAX Line, yet TriMet is now operating that line at service levels 33% those originally planned do to financial problems.

How, specifically, will TriMet operate this line successfully when there is not even a plan to fully restore transit service over the next decade? I’ve sent you all a copy of my letter to FTA about the Green Line. No one from TriMet has responded or even acknowledged receipt of the letter.  I’ll take that as an admission that you don’t HAVE a response.

You have a fiduciary obligation to conduct proper due diligence. Have you accounted for the following factors?

  • The $25 million promised from Clackamas County is unlikely to be available when you need it, due to an initiative petition being circulated that would require a public vote on new urban renewal districts. The only option Clackamas County has to generate the $25 million is through Urban Renewal. We know from the recent county defeat of the small, $5 motor vehicle fee for the Sellwood Bridge replacement that Clackamas County voters would likely vote against Urban Renewal by a wide margin.  
  • The legislature may begin requiring all units of government to begin making annual required payments into OPEP trust funds, which would be a $60 million hit to TriMet’s general fund.
  • What is TriMet’s “Plan B” if you lose the arbitration dispute with the ATU? The boad’s only public statements have indicated that loss of arbitration would result in more service cuts.  How will you operate the Milwaukie line successfully if you are reducing service for the 5th time in less than 3 years?
  • What happens if someone on the relevant Congressional oversight Committee decides that your Milwaukie FFGA application should be held up until such time that you restore service to the Green Line? You’re going to be building this line for an entire year on SPECULATION that the FFGA will be approved. What if it isn’t? What is your back-up plan?

 Conclusion

You promised the legislature in 2003 that you would increase service if they gave you a payroll tax rate increase. They approved the tax rate increase, you took in $60 million in new revenue, and you cut service. You BROKE the promise.

You promised the FTA you would operate the Green Line properly if they gave you federal grant money. You BROKE the promise.

You promised the public last year that you would begin funding OPEB obligations in FY 12 at the rate of $1 million per year. You will BREAK that promise when you adopt the budget later this month, by only putting in $435,000.

This will be a dark day in the financial history of TriMet when you approve this resolution. TriMet’s “business model” is broken, and now you plan to make things much worse. I just want the record to show that you knew all of these risks when you voted YES.

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