Month: February 2017

How Legislators Can Balance Oregon’s Budget—Without Raising Taxes

By Eric Fruits, Ph.D.

Despite an eight percent increase in general fund revenues, Governor Kate Brown and some lawmakers say Oregon is facing a $1.7 billion budget shortfall in the 2017-19 biennium. Nevertheless, the Governor has released a budget that expands entitlements while raising taxes, fees, and charges by nearly $275 million for the general fund alone.

Expanding programs while increasing taxes is something Oregon could do if it were a rich state. Oregon is not a rich state. Income for the average Oregonian is about nine percent lower than the national average, and the cost of living is 15 percent higher. In other words, the average Oregonian earns less but pays more for basic items than the average American. Oregon legislators and other policymakers must face the reality that the state simply cannot afford costly new or expanded programs.

My analysis published in Facing Reality: Suggestions to Balance Oregon’s Budget Without Raising Taxes (February 2017), by Cascade Policy Institute and Oregon Capitol Watch Foundation, identifies seven straightforward solutions to the state’s current budget crisis for savings of nearly $1.3 billion in the next biennium.* If all the solutions were implemented, none of the tax and fee increases outlined in the Governor’s budget would be necessary.

Governor Brown blames three-fifths of the budget crisis on Oregon’s decision to expand Medicaid coverage under the Affordable Care Act. Policymakers undertook the expansion with full knowledge that the federal government would be shifting some of the costs of expansion to the state. Janelle Evans, budget director for the Oregon Health Authority, estimates these costs to the state’s general fund will be as much as $360 million in the next biennium. With many portions of the ACA likely to be reformed or replaced by this Congress, Oregon can see immediate budget savings by opting out of the Medicaid expansion now.

The skyrocketing costs of Oregon’s Public Employee Retirement System presents the biggest long-run challenge to balancing state and local government budgets. As reported in The Portland Tribune, the impact on the 2017-19 state budget is approximately $500 million because the state funds two-thirds of the operating costs of school districts, which will also be hit with the steep increase in PERS costs. In addition to the higher costs of PERS padded into the agency costs, the Governor’s budget includes a $100 million line item to support the state’s increased PERS costs.

Senate Bill 560 provides a reform that would cap at $100,000 the final average salary used to calculate Tier 1 and Tier 2 retirement benefits. The PERS actuary calculates this reform alone would save the state budget approximately $135 million in the 2017-19 biennium.

Oregon has the 12th highest pay in the U.S. for state employees. The Governor’s budget proposes increasing the state government workforce by 675 full-time-equivalent employees. This expansion of the public sector workforce would cost the state more than $120 million in additional compensation costs for the 2017-19 biennium. A halt on adding more state employees during this biennium would free up resources and ward off some of the pressure to increase taxes, fees, and charges.

In addition to these items, Oregon can face its budget reality by adopting targeted reductions already identified by the Department of Human Services, reforming the state’s cash assistance programs, saying “no” to the Governor’s wish to expand Medicaid to those who are not “legally present” in the state, and saying “no” to Measure 98’s unfunded high school education spending mandate.

State tax revenues are approaching all-time highs. Nevertheless, the state must face the budget reality that Oregonians do not have the resources to support ever-expanding spending programs that outpace our ability to pay for them.

 

* Solution Impact
Medicaid—opt out of ACA expansion $360 million
Cover All Kids—reject expansion $55 million
PERS—$100,000 cap $135 million
Department of Administrative Services—halt additional hiring $120 million
Department of Human Services—targeted reductions $321 million
Department of Human Services—cash assistance reforms $160 million
State School Fund—reject Measure 98 $139 million
Total $1,290 million

 


Eric Fruits, Ph.D. is an Oregon-based economist and adjunct professor at Portland State University. Fruits has been invited to provide analysis to the Oregon Legislature regarding the state’s tax and spending policies. His testimony regarding the economics of the Oregon public employee pension reforms was heard by a special session of the Oregon Supreme Court. A version of this article originally appeared in The Portland Tribune on February 23, 2017.

Read Blog Detail

75th Anniversary of Roosevelt Order a Sober Reminder to Defend Constitutional Liberties

By Lydia White

On Monday, government offices were closed in honor of Presidents’ Day. Americans enjoyed a break from work and school, and some championed historic Leaders of the Free World.

But, just one day before, few observed a Day of Remembrance for abominable actions committed by a still-celebrated President.

Seventy-five years ago, Franklin D. Roosevelt issued Executive Order 9066. The order evicted nearly 120,000 citizens and nationals of Japanese descent from Oregon, Washington, and California. Men, women, and children were forced to abandon their homes and businesses simply because of their ethnicity.

Many victims, over half of whom were U.S. citizens, were rounded up and relocated to temporary internment camps. Stables, including Portland’s own Pacific International Livestock Exposition, were converted into living quarters. Most victims were shipped to long-term incarceration camps, where they stayed for four years until the war concluded. All were subjected to bitter hostility, even upon returning home.

During the hysteria of war, racism swept the nation. The duress caused by international tensions led citizens and political leaders alike to choose security over liberty, destroying thousands of innocent lives in the process.

On Presidents’ Day, we should celebrate the achievements of our past leaders. But let us not forget the atrocities committed by Presidents past, and work diligently to prevent present and future leaders from further violating civil liberties.


Lydia White is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

Read Blog Detail

Land Board Votes to Sell Elliott State Forest

By John A. Charles, Jr. 

On February 14 the Oregon State Land Board – comprised of Governor Kate Brown, Treasurer Tobias Read, and Secretary of State Dennis Richardson – voted 2-1 to sell 82,450 acres of the Elliott State Forest to a consortium of private parties led by Lone Rock Timber Management Company. The agreed-upon sale price is $220.8 million; and the net proceeds will be placed in the Oregon Common School Fund (CSF), an endowment for public schools.

This parcel is a small part of the Oregon Common School Trust Land portfolio of 1.5 million acres of lands that must be managed by the Land Board to maximize revenue over the long term for the benefit of public schools.

For many years the Elliott was a money-maker, but environmental litigation steadily reduced timber harvesting to a trickle. For the last three years the Elliott has actually lost money, which prompted the Board in August 2015 to vote unanimously to sell the Elliott and put the proceeds into alternative investments.

As a long-time Board member, Gov. Kate Brown repeatedly voted to sell the forest, but in December 2016 she changed her mind and announced her intent to use state bonding capacity to buy a portion of the Elliott and keep it in public ownership. Treasurer Ted Wheeler and Secretary of State Jeanne Atkins agreed with her conceptually, but no formal vote was taken and both of them have since left the Board.

At the meeting earlier this week, Gov. Brown made a motion to terminate any further negotiations to sell the forest, despite the fact that Lone Rock and its partners had spent at least $500,000 putting together a good-faith offer in response to the Land Board’s sale protocol. Her motion never received a second.

New Treasurer Tobias Read indicated that he was uncomfortable walking away from the offer at the last minute, and that the legal doctrine of “undivided loyalty” to Common School Fund beneficiaries – public schools – compelled him to sell the money-losing forest. Secretary of State Dennis Richardson concurred and the Governor was out-voted.

Cascade Policy Institute has been urging the Land Board to sell the Elliott since 1996, when the forest was valued at roughly $800 million. It was evident to us that over the next several decades, environmental lawyers would treat the Elliott like a legal piñata and file continuous lawsuits to prevent timber harvesting. That is exactly what happened, turning this vibrant forest into a net liability by 2013.

Cascade published a number of technical papers demonstrating that over virtually any time period and under any reasonable set of assumptions, Oregon schools would be better off if the Board simply sold the forest and put the net proceeds into stocks, bonds, and other financial instruments. These papers were ignored by multiple generations of Land Board members, including John Kitzhaber, Ted Kulongoski, Jim Hill, Phil Keisling, Randall Edwards, and Kate Brown.

Many editorial writers are urging the Land Board to “hit the pause button” on this sale, but the fact is the Board has been “pausing” since at least 1995. As timber harvest receipts steadily declined over the next several decades, Oregon wasted more than $3 million trying to negotiate a so-called “Habitat Conservation Plan” with the federal government that would shield Oregon from further litigation. Such an agreement was never reached.

In a report paid for by the Department of State Lands in 2015, experts found that the failure to sell the Elliott in 1995 – as recommended by a Department of Forestry consultant – had cost public schools $1.4 billion in lost earnings over a 20-year period.

Gov. Brown’s last-minute effort to buy back timberland the public already owns was poorly thought out. Most of the media observers – who tend to favor public ownership – have apparently overlooked the fact that any revenue bonds sold by Oregon would have to be paid off by profits generated on-site. Since the Elliott has been steadily losing money under public management, it’s unlikely that anyone would even buy such bonds.

Although selling the Elliott was the right thing to do, we will never know if the public received fair market value because the Land Board refused to take competitive bids. In 2016 the Board established a price of $220.8 million based on multiple appraisals, and no one was allowed to offer a higher amount. Clearly, this was a bizarre way to sell a valuable asset and demonstrates how Kate Brown, Ted Wheeler, and Jeanne Atkins consistently abdicated their fiduciary responsibilities in favor of a political agenda to retain public ownership.

Treasurer Read and Secretary Richardson deserve credit for moving forward with the sale. Neither of them wanted to do it, but they understand that they have an obligation to current and future public school students to add value to the Common School Fund.


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

Read Blog Detail

Car Ownership Is Not a Crime

By John A. Charles, Jr.

A bill has been introduced in the state legislature that would impose a $1,000 ownership tax every five years on automobiles more than 20 years old.

Fortunately, leaders of the Republican Party quickly denounced it; and without bipartisan support the bill has no chance of passage. The chair of the House Revenue Committee, Rep. Phil Barnhart of Eugene, has announced that the bill is dead.

The fact that this legislation was even introduced points to a conceptual problem shared by many lawmakers: They think that owning a vehicle is undesirable and should be taxed.

But owning a car imposes no cost on the public; it’s the use of the vehicle that we should be concerned with.

As one legislator told me many years ago, “I own four cars—but I only drive one at a time!”

Since we do need money for improved roads, any transportation tax should focus on road use. One option would be to lower the cost of vehicle registration in exchange for a small increase in the gas tax.

Motorists deserve all the roads they are willing to pay for. Raising the gas tax would give drivers a chance to vote with their tires for a better road system.


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

Read Blog Detail

Parental Choice Champion Betsy DeVos Confirmed as U.S. Secretary of Education

By Steve Buckstein

Opponents of Betsy DeVos tried everything they could to keep her from becoming U.S. Secretary of Education. In the end, she was approved by the Senate on Tuesday with Vice President Pence breaking a 50-50 tie vote.

In addition to arguments that she is wealthy (which she is) and that she never attended public schools (which she didn’t), opponents feigned shock that she had the temerity to argue that educating children takes precedence over protecting and funding public schools that may not meet their needs.

Perhaps her opponents’ biggest error is thinking that private schools are not providing “public education.” But they are. Many Americans recognize that meeting the educational needs of children trumps meeting the financial needs of the adults who work in public school buildings.

Public education means educating the public—or it should. Students don’t suddenly stop being part of the public just because their parents believe they will be better educated in other than their local public school building.

Betsy DeVos believes that public funding of education shouldn’t be limited to schools dominated by public teachers unions. She may not be a friend of those unions, but she is a friend of children who may need those funds to help them learn somewhere else. She has, and will advocate for school choice programs including charters, vouchers, and Education Savings Accounts that allow those children to take their public education funds to the schools they and their families—not the government—choose.


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

Read Blog Detail

Policy Picnic – February 23, 2017

Please join us for our monthly Policy Picnic led by

Cascade Policy Institute’s

Research Associate Lydia White


The Seen and Unseen World of Solar Net Metering

Environmentalists claim residential solar energy is the solution to fulfilling our energy needs, but they often overlook its unintended consequences. Looking through the lens of Frédéric Bastiat’s “That Which is Seen, and That Which is Not Seen,” Lydia will address the flaws of solar net metering. The “Seen” paints a rosy picture of sustainable green energy captured by our greatest renewable resource, the sun. But, the “Not Seen” reveals the unreliability and unaffordability of net metering and the inequity this program creates.

Admission is free, but reservations are required due to space limitations. You are welcome to bring your own lunch; light refreshments will be served.

Reserve your free tickets here.

Cascade’s Policy Picnics are generously sponsored

by Dumas Law Group, LLC

dumaslawlogo 80percent

Read Blog Detail

“Facing Reality” Report Offers Solutions to Governor Brown’s $1.7 Billion Budget Hole Without Raising Taxes

FOR IMMEDIATE RELEASE

Media Contacts:

Steve Buckstein (503) 242-0900

Jeff Kropf (541) 729-6229

PORTLAND, Ore. – Cascade Policy Institute and Oregon Capitol Watch Foundation jointly released a new report Wednesday, entitled Facing Reality: Suggestions to balance Oregon’s budget without raising taxes. The report offers practical solutions to fill Governor Kate Brown’s estimated $1.7 billion budget hole without raising taxes.

Facing Reality is the third budget blueprint in a series: In 2010 and 2013 Cascade Policy Institute and Americans for Prosperity-Oregon published Facing Reality reports that offered state legislators an opportunity to “reset” state government using the time-tested principles of limited government and pro-growth economic policies.

“Oregon has over one billion dollars more to spend than the last budget but is still nearly two billion short because Governor Brown’s budget continues out-of-control and unsustainable spending,” said Jeff Kropf, Executive Director of Oregon Capitol Watch Foundation. “It’s time to face the reality that raising taxes will never provide enough money to build the fantasy utopia envisioned by the Governor and current legislative leadership. There is no free lunch, and new taxes are only going to hurt the poor and the middle class.”

Facing Reality outlines $1.3 billion in reduced spending in seven specific areas which, coupled with small across-the-board agency reductions, equals $1.7 billion, enough to fill the Governor’s estimated budget hole and removing the need to raise taxes.

“Keep in mind that even with our Facing Reality budget reductions, the state of Oregon will still be spending more money than the previous budget,” said Steve Buckstein, Senior Policy Analyst and Founder of Cascade Policy Institute. “The reality the Governor and the legislature must face is that the bill for years of overspending is coming due, and raising taxes that hurt the economy is not the answer. Reducing how fast spending grows is the sustainable way forward.”

This third Facing Reality report offers politically possible solutions to meet the needs of Oregonians. It still gives most state agencies more money to spend, but without enacting new taxes being proposed by the several dozen tax increase bills introduced for consideration in the 2017 legislative session.

Here are the seven specific budget reductions proposed in Facing Reality:

Solution Impact
PERS—$100,000 cap $135 million
Department of Administrative Services—halt additional hiring $120 million
Medicaid—opt out of ACA expansion $360 million
Cover All Kids—reject expansion $55 million
Department of Human Services—targeted reductions $321 million
Department of Human Services—cash assistance reforms $160 million
State School Fund—reject Measure 98 $139 million
Total $1,290 million

For agencies not identified for specific reductions in the report, across-the-board reductions of about three percent from Governor Brown’s budget would eliminate the shortfall she identified. If this plan were implemented, none of the tax and fee increases outlined in the Governor’s budget would be necessary.

Buckstein and Kropf note, “Most Oregonians must face their own family budget realities every day. Facing Reality is a good-faith effort to hold our state government to the same budgetary realities. We look forward to working with state legislative and executive branch leaders to help implement such realities in 2017.”

Read the full report here: Facing Reality: Suggestions to balance Oregon’s budget without raising taxes

Founded in 1991, Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity.  Oregon Capitol Watch Foundation is a 501(c)3 charitable educational foundation dedicated to educating Oregon citizens about how state and local governments spend their tax dollars by researching, documenting, and publicizing government spending and developing policy proposals that promote sound fiscal policies and efficient government.

###

Read Blog Detail

Renewable Energy Certificates Don’t Turn on Your Lights

By Allison Coleman

Over the past two decades there has been a large push for environmental policy initiatives.

Unfortunately, some of these policies do nothing for the environment. The sale of so-called “green power” by electric utilities is one example. More than 60 Northwest utilities market green power products to consumers through monthly subscriptions, in which consumers think they are buying electricity from clean and renewable sources. Utilities promote these at different levels, ranging from platinum to silver, depending on the amount a customer spends.

However, customers are not actually buying renewable energy. Instead, they are buying “Renewable Energy Certificates” (RECs), which simply offer them the bragging rights associated with renewable power produced somewhere. The electricity may be sold to a homeowner in Montana, while the REC associated with that power is sold to a consumer in Oregon.

The REC itself is not a unit of electricity. In fact, it doesn’t even exist; it’s just an electronic number.

From 2011-2015, Multnomah County spent $230,000 on RECs. In 2016, the City of Beaverton spent $29,282. In 2015, Metro spent $104,539.

Every dime of that money was wasted. Taxpayers received no green power, or power of any kind.

Individual consumers are free to spend their own money on worthless junk. Elected officials spending tax dollars should be held to a higher standard.


Allison Coleman is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization. 

Read Blog Detail