Month: April 2014

Cover Oregon: Out of the Frying Pan…

On April 25th, after wasting more than $200 million in federal cash, Cover Oregon’s Board voted to pull the plug on Oregon’s failed ObamaCare health insurance exchange and go with the federal exchange technology as the “core” of its system. The first open enrollment period for Oregonians ends today. Oregon hopes to be back in business using the federal technology when the next enrollment period opens up on November 15.

The only problem is that―as I testified before the Board―the Affordable Care Act states some nine times that only individuals signing up through “state established exchanges” qualify for federal tax credits to make their insurance premiums more “affordable.” Those using the federal exchange aren’t eligible for these credits, although the Obama Administration has ignored the clear wording of the law and granted them anyway.

On March 25 the Federal D.C. Circuit Court of Appeals heard arguments on this in the Halbig v. Sebelius case. One judge seemed to telegraph how he might rule by stating, “There is an absurdity principle, but there is not a stupidity principle. If the law is just stupid, I don’t think it’s up to the court to save it.”

If the courts eventually rule against granting tax credits to those using the federal exchange, Cover Oregon’s Board may have just pushed many Oregonians out of the frying pan and into the fire.

Steve Buckstein is founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Beaverton’s Renewable Energy Purchase: Well Intentioned, Little Impact

By William Newell

The decisions we make are often greatly influenced by the information and advice we receive from other people. The same is true for elected officials, who generally seek the advice of experts in order to make important public policy decisions. Unfortunately, the system fails when decision makers receive information and advice that fail to tell the full story. By not taking into account all the necessary factors, policy makers can create unintended consequences that run counter to their intentions.

In 2007, the City of Beaverton began purchasing renewable energy “offsets” as a way to show the city’s commitment to sustainability and green energy. This year, Beaverton announced its success in purchasing renewable energy equivalents for all city operations. The city claims that its purchase offsets emissions from fossil fuel plants, thus providing a social and environmental benefit. Unfortunately, Beaverton’s well-intentioned policy has mixed results for the environment and the taxpayers.

The City of Beaverton purchases its renewable energy equivalents through Portland General Electric’s Green Power Program. The program charges a premium price for the purchase of renewable electricity. The cost on top of regular electric services goes to the purchase of renewable energy certificates, as well as program administration and marketing.

Purchasing RECs is intended to encourage the production of renewable energy, but RECs are too inexpensive to act as a real market incentive. The payments RECs generate aren’t required to be used for expanded production, either. Green energy producers themselves consider RECs to be little help in financing their green projects. RECs are largely a way for ratepayers to burnish their “green” credentials while paying power producers very little. Furthermore, little of the money spent on RECs actually gets to energy producers, due to green power marketers who act as middlemen in the REC marketplace.

If RECs represent the “positive environmental qualities” of renewable energy, they also represent the negative ones. Energy sources like wind and solar create negative externalities for ratepayers and the environment. Wind and solar are intermittent sources of power and must be backed up when the sun isn’t shining and the wind isn’t blowing. This means utilities must have non-intermittent energy sources such as hydropower or natural gas generators. Oregon’s hydropower system is already complex, and adding wind has made operating the system more difficult. Due to that fact, utilities must rely on other generation sources like natural gas peaking plants and possibly even coal plants for backup power.

When gas and coal plants are used as backup power, maintenance costs and generator inefficiency rise. This can be monetarily costly but also worse for the environment. If power plants designed to operate continually are used to make up for intermittent generators, their fuel consumption rises while overall electricity output stays the same or falls. Wind turbines, the main energy source supported by RECs, damage sensitive bird and bat populations with their large spinning blades.

In the end, Beaverton is faced with two facts. If RECs don’t encourage new renewable energy, the city has wasted taxpayer money and made false claims. If, on the other hand, RECs spur more renewable energy development, then more grid variability and environmental externalities will occur, mitigating the positive benefits of that energy. The City of Beaverton needs to faithfully represent its residents by eliminating the dubious purchase of RECs and return to straightforward policies that are transparent and effective.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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“Do Business Owners Have Religious Freedom Rights?”

Please join us for Cascade’s monthly Policy Picnic led by Cascade Policy Institute publications director Kathryn Hickok on Wednesday, April 30th, at noon.

Do we give up our 1st Amendment rights when we start a business? The Supreme Court just heard oral arguments in Sebelius v. Hobby Lobby, determining whether individuals lose their religious freedom when they open a family business. At issue is the ObamaCare Health and Human Service (HHS) Mandate, which requires David and Barbara Green and their family business to provide and facilitate potentially life-terminating drugs and devices in their health insurance plan, against their religious convictions, or pay severe fines to the IRS. The Obama Administration argues that companies can’t have religious convictions, but other cases have upheld business owners’ 1st Amendment free speech rights. Should free speech be protected but not religious freedom? We’ll talk about the arguments before the Court, which is expected to rule in June.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

Sponsored By

 

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Green Data Center Bill Is Just More “Greenwashing”

By William Newell

In February, the Oregon Legislature passed House Bill 4126. This bill would allow utilities to purchase renewable energy certificates, or RECs, to meet Oregon’s renewable portfolio standards, rather than actually purchasing electricity produced by renewable sources.

The bill is simply “greenwashing.” “Greenwashing” is a tactic for companies, in this case large data centers, to burnish their environmental credentials without actually being any “greener.”

Many RECs are sold separately from renewable electricity and are meant to give energy producers extra income. While buying RECs allows purchasers to claim the use of renewable electricity, this notion is deeply flawed. The low price of the certificates (one to five dollars) prevents such commodities from realistically encouraging an increase in renewable energy production. RECs alone are not the reason renewable energy is generated or new plants are built. It is simply selling the right to claim that your electricity is renewable. Not only that, but RECs generally support solar and wind energy, which can negatively impact grid reliability, other generation sources, and the environment. Oregon-based Nike backed off from purchasing RECs because of their controversial nature.

The Legislature needs to alter course to avoid costing ratepayers boatloads of money with little actual return. It is time to stop the forced subsidization of energy sources that do more harm than good to our electric grid and our environment.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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Do You Know Taxes Take 30% of Your Year?

If every penny earned since the beginning of the year went to pay federal, state, and local taxes, by April 21 Americans would have worked long enough to pay this year’s tax bills (April 20 for Oregon). Tax Freedom Day is a calendar-based illustration of the cost of government which divides all taxes by the nation’s income. By this calculation, Americans will work 111 days in 2014 and pay 30.2% of their earned income to all levels of government.

But this is only what Americans actually pay, not what government spends. According to the nonpartisan Tax Foundation: “Since 2002, federal expenses have exceeded federal revenues….If we include this annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur on May 6, 15 days later.” That’s an additional two weeks of federal government spending paid for by borrowing.

Americans pay more in taxes ($4.5 trillion) than they do on food, clothing, and housing combined. The saying goes, you should “work to live, not live to work.” But the more government grows, the more Americans are working less to live and more to pay for runaway government spending. That leaves fewer resources to invest in the real engines of economic growth: private sector businesses that create jobs and produce goods and services for a market fueled by Americans’ hard-earned purchasing power.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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Elliott State Forest Management Puts Small Birds over Small Kids

By John A. Charles, Jr.

Last year the S&P 500 Index had a total return on investment of 32%. That should have been good news for Oregon public schools, which receive twice-yearly checks from an endowment known as the Common School Fund (CSF).

One of the largest assets supporting the Fund is the 93,000-acre Elliott State Forest, near Coos Bay. Net timber harvest receipts from the Elliott are transferred to the CSF, where the money is invested in stocks, bonds, and other financial instruments.

Unfortunately, the Elliott did not return 32% last year. It did not even return zero percent. The state actually lost $3 million. That is quite a feat of mismanagement for timberland valued at more than $500 million.

The Elliott is governed by the State Land Board, comprised of Governor John Kitzhaber, Secretary of State Kate Brown, and State Treasurer Ted Wheeler. Under their leadership, timber harvesting has steadily declined on the Elliott, so that roughly 78% of the forest is off-limits. Since overhead is relatively fixed (e.g., fire suppression and road maintenance), if harvest is halted, the forest loses money.

 

The Elliott is part of a broader portfolio of lands known as the Common School Trust Lands. Under the terms of the Oregon Admissions Act, the primary management objective for Trust Lands is to raise money for the Common School Fund. Therefore, the Land Board has a fiduciary duty to maximize timber harvest on the Elliott.

As environmental litigation became more widespread in the 1980s, it became clear that “fiduciary trust” would start taking a back seat to wildlife habitat preservation in state forests. Knowing this, in 1994 outside consultant John Beuter was retained by the Department of Forestry to look at various options for increasing revenue to the School Fund from the ESF. His conclusion: “Selling the Elliott is the only marketing alternative likely to significantly increase net annual income to the CSF.”

The Land Board did consider this option in 1995-96, but rejected it. Instead, the Board wasted more than a decade on a futile attempt at negotiating with the federal government on a so-called “Habitat Conservation Plan” (HCP) for spotted owls and marbled murrelets. But ultimately the Board was left at the altar by federal negotiators, and the HCP was abandoned.

This continual appeasement emboldened environmental activists, who sued to halt virtually all commercial logging on the Elliott. As single-issue advocates, they have never cared about the collateral damage to schools. They only want one thing, and that is a shutdown of commercial timber harvest on the ESF.

There is a better way. Selling or leasing the Elliott would result in much more revenue for schools while still protecting bird habitat, because private landowners are subject to Endangered Species Act regulation just as the state is. However, it’s well known in the industry that private landowners use different compliance techniques that allow reasonable levels of harvest, while also maintaining necessary habitat. Private owners generally don’t waste time trying to negotiate HCPs.

To its credit, the Land Board has recently acknowledged that the status quo is unacceptable and is reviewing bids for three parcels of the ESF that it may sell off this year, totaling some 2,700 acres. Selling this land would help erase the $3 million loss from last year, but the basic problem remains: The state itself is a poor manager of commercial timberland.

A recent study by independent economist Eric Fruits reinforces the conclusion made by John Beuter 20 years ago, namely that Oregon schools would gain additional revenues of $40-50 million per year if the state placed management of the Elliott in private hands. While this is not the only option available, it is clearly the one that would generate the most money for schools. Therefore, it needs to be seriously considered by the Land Board.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Time to Stop Throwing Money down the WES Sinkhole

In its proposed fiscal year 2015 budget, TriMet forecasts the purchase of two additional vehicles for the Wilsonville-to-Beaverton commuter rail line known as WES. The total cost will be $8.5 million in borrowed funds. None of those costs will be paid by WES riders; $600,000 annually in debt service will be paid by taxpayers for the next 20 years, for a total of $12 million.

This is a critical decision point for the TriMet board. Approving the proposed budget will expand the WES vehicle fleet from four to six and irrevocably commit the agency to commuter rail. But the five-year track record of WES suggests that another decision would be more defensible: shutting the train down completely.

There are at least three reasons to consider this option. First, WES is an energy hog. According to a new report by the Federal Railroad Administration, the average energy consumed by all commuter rail systems in America during 2010 was 2,923 British Thermal Units (BTU) per passenger-mile. WES was close to the bottom: It consumed 5,961 BTU per passenger-mile, more than twice the national average (by comparison the top performer was Stockton, CA: 1,907 BTU/passenger-mile).

Not only is WES inefficient compared with its peer group, it is wasteful compared with other modes of travel. The national average for all transit buses was 4,240 BTU per passenger-mile; for all light-duty cars, the average was 3,364.

In a state where most politicians are obsessed with energy conservation, it is difficult to justify expansion of a publicly subsidized line that is so wasteful.

Second, WES is TriMet’s most expensive fixed-route service, with an average per-ride cost of $12. Thus, even if ridership grows, it will not help TriMet, since the agency loses about $10 on every trip.

To see just how expensive WES is, we can compare it to an express bus route in the same corridor opened last year by the transit operator in Wilsonville, South Metro Area Rapid Transit (SMART). The costs of the bus are only 3% of WES: $1.30 per mile versus $43.74 for WES.

Transit Service from Wilsonville Station to Beaverton Transit Center

Operating cost/mile

Operating cost/hour

TriMet Express Rail

$43.74

$949.84

SMART Express Bus

$   1.30

$   83.17

Finally, WES ridership is tiny. WES now has about 940 daily riders who account for 1,880 average weekday “boardings.” This is still far below the forecast of 2,500 that was made for opening-year service (2009).

I’ve ridden WES at least 100 times in order to catch the express bus to Salem that picks up WES transfers in Wilsonville. For the privileged few on the train, it’s a nice trip. There are usually plenty of empty seats, free internet service, and lots of legroom. Plus, I feel like royalty as we shut down traffic temporarily on more than 20 east-west cross streets along the way. While this results in a net increase in regional congestion, it’s fun for the train riders.

But just because I personally enjoy WES, that doesn’t make it a good public investment. The bus alternative would move just as many riders at less cost and with lower fuel consumption.

Back in the 1990s, Westside politicians and rail boosters fell in love with the concept of a commuter train to Wilsonville. As with all such pork-barrel campaigns, the promises vastly exceeded eventual performance. But current TriMet board members can claim plausible deniability; none of them were on the Board back then, so it wasn’t their fault.

Now they have a chance to clean up the mess. It won’t be fun having to admit that mistakes were made; but if the Board is serious about re-setting TriMet on a path of financial sustainability, there will be many such decisions to be made. A long journey begins with the first step.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Are Small Birds More Important than Small Kids?

Last year the S&P 500 Index had a total return on investment of 32%. That should have been good news for Oregon public schools, which receive twice-yearly checks from an endowment known as the Common School Fund.

One of the largest assets of the Fund is the 93,000-acre Elliott State Forest, near Coos Bay. Unfortunately, the Elliott did not return 32% last year. It did not even return zero percent. The state actually lost $3 million. That is quite a feat of mismanagement for timberland with a value of more than $500 million.

The Elliott is governed by the State Land Board, comprised of Gov. John Kitzhaber, Secretary of State Kate Brown, and State Treasurer Ted Wheeler. Under their leadership, more than 84% of the Elliott has been set aside in no-touch zones to accommodate the alleged needs of a small bird known as the marbled murrelet. Refusing to harvest timber means that schools lose out.

There is a better way.  A recent study shows that by simply selling or leasing the Elliott, Oregon schools would gain additional revenues of $40-50 million per year, with larger amounts over time.

Markets work when we allow them to. It’s time to apply market-based principles to the Elliott State Forest.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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Energy-Efficiency Myths of Commuter Rail

Advocates of rail transit tend to argue that we need trains because they are more energy-efficient than buses or cars. Unfortunately, that’s only true in some cases.

According to a new report by the Federal Railroad Administration, the average energy consumed by all commuter rail systems in America during 2011 was 2,923 British Thermal Units (BTUs) per passenger-mile. But the commuter line operated by TriMet (WES) was close to the bottom: WES consumed 5,961 BTU per passenger-mile, more than twice the national average.

Not only is WES inefficient compared with its peer group, but it is wasteful compared with other modes of travel. The national average for all transit buses was 4,240 BTU per passenger-mile; for all light-duty cars, the average was 3,364.

Based on these numbers, the environment would be better off if WES were terminated and riders simply got in their cars.

Nonetheless, TriMet management is “all-in” on more commuter rail. In its proposed FY 15 budget, the agency plans to purchase two additional rail vehicles at a total cost of $8.5 million. None of those costs will be paid by the privileged few who ride WES; debt service will be paid by taxpayers for the next 20 years.

It’s a cliché but still true: In government, nothing succeeds like failure.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

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