Author: cascade policy institute

Too Late to Fix PERS by Fooling Oregonians

By Scott Shepard

Governor Kate Brown’s task force, assigned to find ways to cut Oregon’s yawning unfunded PERS pension liability, is approaching its November 1 reporting deadline. Governor Brown is relatively new at her job, so perhaps she can be forgiven for hoping her PERS task force can produce magical founts of free money. But it can’t.

The Governor wants proposals to cut the admitted pension deficit of about $25 billion by 20 percent ($5 billion). Even if the task force managed this feat, the recognized debt would only return to its 2015 level, before the PERS Board started inching the assumed rate of return down from its long-standing eight percent figure toward more plausible figures. If the Board shifted to an assumed rate that matched risk with the certainty of payment obligations, unfunded pension liabilities would approach $50 billion.

Oregon taxpayers simply cannot—and will not—pay this tab. Oregon is not wealthy or highly populous. Raising an extra $50 billion—or even 25—is likely impossible. Taxes would have to rise and services decline to the point that businesses and families would begin to flee the state. This would spark a vicious cycle. Fewer taxpayers would be taxed even more to pay a fixed, unpayable bill, creating more incentives for emigration, until the state inevitably declared defeat. While this might sound apocalyptic, it’s not far-fetched: Puerto Rico has already slid into this vortex, and Illinois may become the first American state to fall into default and possible federal receivership.

Governor Brown’s task force efforts cannot thwart this process. She has charged it to find “out-of-the-box solutions” for raising these $5 billion. But no such ideas, out of any box whatever, can come without cost to taxpayers. Some ideas recently floated include increased “sin” (e.g., alcohol and tobacco) taxes. Those who don’t drink or smoke might think themselves off the hook, but they’re not. These increases, if not dedicated to PERS payments, could (and probably would) go to other purposes, like funding the state’s perennial non-pension budget deficit.

The same is true of all proposals floated. Money spent one way can’t be spent in others. Raiding the rainy day fund would force tax increases during the next economic downturn, increasing the pain of the next recession. Raiding the workers’ compensation fund would increase fees to employers, which would increase the costs of goods and services and decrease wages. Selling government property for pensions would mean that property is not available for public use or to sell for other purposes.

Governor Brown knows this. When she seeks “out-of-the-box” funding increases, the constraint she seeks to escape is really our knowledge that taxes are rising, public assets are shrinking, services are being curtailed, and our options are closing around us.

The only viable answer to Oregon’s pension and budget crisis is to reduce pension benefits for government workers. They enjoy more generous wages and benefits than those of comparable private-sector workers. Older government workers also earn benefits for every hour of work that are far higher than those earned by their younger peers.

The legislature first must shift all government workers, for work not yet performed, to the lower benefit structure that serves as a permanent cap for newer public employees. A 2015 Oregon Supreme Court opinion* fixed a long-term Court error by recognizing that the state can take this basic, equitable step to put all employees on the same basis for work not yet completed.

Then it must make use of another implication of that 2015 decision: that the Supreme Court has wrongly suppressed a set of amendments added to the Oregon Constitution in 1994 that, if followed, would have averted this crisis. The legislature should pass legislation to facilitate the equitable adjustment of excessive pension payments made for more than 20 years on the basis of the Court’s error, and fast-track review of the legislation to the Court.

Finally, the legislature should move all government employees into the type of 401(k), defined-contribution retirement plans that are the only sort available to most taxpayers.

It is far too late for panels tasked with finding ways to fool the public. Oregon’s pension crisis requires fair but real pension payment adjustments. Nothing else can succeed.


* Moro v. State, 357 Or. 167 (2015).

Measure 8 (1994), incorporated at OR. CONST. art. IX, § 10–13.


Scott Shepard is a Salem lawyer and law professor and author of an academic study on Oregon state pensions published August 1, 2017 by the Mercatus Center at George Mason University. He is also an Academic Advisor to Cascade Policy Institute in Portland. A version of this article appeared in The Portland Tribune on September 28, 2017.

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Portland’s latest attempt to centrally plan transportation patterns is backfiring

By Jessica Miller

Portland has a longstanding history of attempting to socially engineer people’s transportation patterns, and the “Better Naito” project is no different.

In 2015, a group of students from Portland State University created the idea of “Better Naito” as their capstone project. From April 28th until September 30th each year, Portland planners intend to enhance the lives of pedestrians and bikers along the Waterfront by reducing car capacity from two lanes to one on SW Naito Parkway and transforming one lane into an open area for walkers and bikers. The project was implemented and paid for by the Portland Bureau of Transportation (PBOT), Portland State University (PSU), Better Block PDX, and $350,000 from the Portland City Council.

Advocates of “Better Naito” claim that “[f]eedback from the public was very positive,” but there is more to the story. After receiving copious amounts of negative feedback from business owners who see fewer shoppers, employees who experience longer commutes, and shoppers who can’t reach desired downtown destinations, the Portland Businesses Alliance created a petition to the Portland City Council in opposition to “Better Naito.” They claim the project is “harmful to our city’s economy and extremely disruptive to commuters.”

It’s no surprise Portland’s latest attempt to centrally plan commuters’ lives is backfiring, but that hasn’t stopped advocates from making the project annual. To voice your opinion on “Better Naito,” visit the Portland Business Alliance’s online petition.


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

 

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Oregon's New Health Care Taxes Are Unjustifiable

By Lydia White

Soon after the Oregon Legislature passed a bill expected to generate $550 million of tax revenue to help pay for Medicaid, the state found nearly 45% of all Medicaid recipients are currently ineligible to receive health care benefits.

The bill imposes a sales tax on health insurance premiums and hospital revenue that will be borne by Oregonians. For example, 217,000 people in the individual market and over 11,000 college students who buy their own health insurance are among the hundreds of thousands of Oregonians who will pay. Local Oregon school districts will pay some $25 million and community colleges will likely be forced to raise tuition costs, all because of these new taxes.

If the state hadn’t awarded Medicaid benefits to over 37,000 unqualified people, costing $191,000,000, wasted over $300,000,000 on the failed Cover Oregon insurance exchange website, or spent an additional $166,700,000 on another failed IT system, even proponents of these new sales taxes would have had a hard time justifying them.

Fortunately, Rep. Julie Parrish (R) and two other state legislators are gathering signatures to refer these taxes to the ballot at what might be a January special election. They need almost 59,000 voter signatures by October 5th to qualify for the ballot.

To help hold Oregon’s political leaders and health care bureaucracies responsible, download and sign a petition at StopHealthCareTaxes.com.


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

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Oregon’s new minimum wage law will hurt the people it aims to help

By Lydia White

Just prior to Oregon’s July 1 minimum wage* increase from $9.75 to $11.25 (Portland Metro Area), a team of researchers from the University of Washington produced a study, published by the National Bureau of Economic Research, that measures the effects of Seattle’s $13 minimum wage. In just nine months, Seattle wages rose substantially, from $9.47 in 2014, to $11 in 2015, to $13 in 2016 (an increase of 37.3%), and again to $15 on the first of this year.†

Unique to this study is a data set collected by Washington’s Employment Security Department which tracks hours worked in addition to earnings, making this particular study the first of its kind. Washington and Oregon are among four states that track these data.

The study‡ found that the city’s mandates resulted in 5,000 fewer jobs around Seattle. The average low-wage employee saw 3% higher hourly wages, but 9% fewer hours worked, resulting in a net loss of $125 per month. For low-income households especially, an annual loss of $1,500 is significant.

Jacob Vigdor, one of the study’s authors, said, “Traditionally, a high proportion of workers in the low-wage market are not experienced at all: teens with their first jobs, immigrants with their first jobs here.”

Wages are prices, or market signals, that indicate the value of labor productivity employees create. Low-skilled, low-paying jobs provide the opportunity to acquire knowledge and experience they were previously without, setting up workers for their next, potentially higher paying jobs. Henry Hazlitt, author of Economics in One Lesson, wrote:

“The more the individual produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid. Real wages come out of production, not out of government decrees.”

The least skilled are further disadvantaged when artificially high price floors are implemented. As described in the UW study, when the cost of employing a worker exceeds the value that worker creates, employers are forced to reduce hours or eliminate positions within their business by laying off employees, who are often replaced by automation. These alternatives harm low-wage employees.

Additionally, employers are less likely to take a chance by hiring an unskilled worker and instead will search for only the most qualified candidates. Since teenagers are naturally less skilled due to lack of work experience, these policies create higher youth unemployment. A study last December by Cascade Policy Institute examined these and other “unintended consequences” of the minimum wage on youth.

Instead of, or in addition to, cutting costs of labor, employers increase prices of their goods or services. Consumers may choose to forgo such products or reduce their levels of consumption, in turn decreasing the need for labor. When the price of goods inevitably catches up to the employee’s higher wages, they find the purchasing power of their earnings has diminished.

Furthermore, large businesses can more easily absorb wage increases by operating within thinner profit margins or relocating to a region with a lower minimum wage. Local mom-and-pop stores don’t enjoy that same flexibility and must close their doors. With less competition, larger businesses have more power to raise prices.

When economists warn against the costs associated with the minimum wage, it’s not to protect greedy capitalists; it’s to protect both the worker and the small business owner from being priced out of the market.

For the benefit of all Oregonians, political leaders should learn from our northern neighbors and create an environment that doesn’t punish low-wage workers and the businesses that employ them. They can start by repealing the state’s onerous minimum wage law.


*Oregon’s and Washington’s minimum wages vary depending on region, population, benefits, tips, and business size. The minimum wages discussed here refer to those of Seattle and the Portland Metro Area.

†The latest 2017 increase was not included due to incomplete data.

‡The study used a “relatively conservative” $19 per hour low-wage threshold to account for the spillover effect of “miscoding jobs lost when they have really been promoted to higher wage levels….”


Lydia White is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in The Coos Bay World on July 10, 2017.

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Critiquing Minimum Wage Laws Is About Protecting the Working Man (or Woman)

By Lydia White

A team of researchers from the University of Washington produced a study, published by the National Bureau of Economic Research, that measures the effects of Seattle’s minimum wage requirement of $13 per hour.

The study* found that the city’s mandates resulted in 3% higher hourly wages, but 9% fewer hours worked. As a result, the average low-wage employee lost around $125 per month. For low-income households especially, an annual loss of $1,500 is significant.

Jacob Vigdor, one of the study’s authors and a professor at UW, said, “Traditionally, a high proportion of workers in the low-wage market are not experienced at all: teens with their first jobs, immigrants with their first jobs here.”

Low-skilled, low-paying jobs provide the opportunity to acquire knowledge and experience, setting up workers for their next, potentially higher-paying jobs. The least skilled are further disadvantaged when artificially high price floors are implemented. Employers instead search for only the most qualified candidates, leaving more teens jobless, as Cascade Policy Institute’s study on the effects of the minimum wage on youth reported last December.

When economists warn against the costs associated with the minimum wage, it’s not to protect greedy capitalists; it’s to protect the worker from being priced out of the market.

For the benefit of all Oregonians, political leaders should learn from our northern neighbors and repeal the state’s onerous three-tiered minimum wage law.

*The study used a “relatively conservative” $19 per hour low-wage threshold to account for the spillover effect of “miscoding jobs lost when they have really been promoted to higher wage levels….”


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

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President Trump’s Environmental Agenda: An Insider’s Perspective

Cascade Policy Institute Hosts Lunch with Special Guest Speaker Myron Ebell

President Trump’s Environmental Agenda: An Insider’s Perspective

President Trump’s administration has begun to implement a long list of campaign promises on energy, climate, and environmental policy. Taken together, these policies represent the most ambitious attempt to deregulate energy production and consumption ever undertaken.

But is deregulation possible?

Myron Ebell will speak at Cascade Policy Institute’s June 9 luncheon event

at Ernesto’s Italian Restaurant in Portland.

Ebell led the Trump Presidential Transition’s agency action team for the Environmental Protection Agency. He will discuss how the President’s deregulatory agenda is proceeding and its prospects for getting the economy going again after a decade of stagnation.

Reservations are required. Get yours today!


Myron Ebell is director of the Competitive Enterprise Institute’s Center for Energy and Environment, which is one of the most effective advocates for Free Market Environmentalism. He also chairs the Cooler Heads Coalition, an ad hoc coalition of 28 nonprofit free market and conservative groups that question global warming alarmism and oppose energy-rationing policies. CEI and the Cooler Heads Coalition led the successful decade-long fight to defeat cap-and-trade legislation.

From September 2016 to January 20, 2017, Mr. Ebell led the Trump Presidential Transition’s agency action team for the EPA. His involvement in the transition led to public protests and marches in several cities in America and Europe. In one of countless fundraising emails and letters from environmental pressure groups, Michael Brune, president of the Sierra Club, wrote that “Myron Ebell is…one of the single greatest threats our planet has ever faced.”

A native of Baker County, Oregon, where he grew up on a cattle ranch, Mr. Ebell earned degrees at Colorado College and the London School of Economics (where he was a student of the renowned political philosopher Michael Oakeshott) and did graduate work at the University of California, San Diego, and at Peterhouse, Cambridge University in philosophy, history, and political theory.

For complete information and to reserve your tickets, click here.

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Oregon Land Board Should Take the Deal

By Lydia White

At a time when Legislators threaten to slash government services to cover a $1.6 billion budget shortfall, Governor Kate Brown and Treasurer Tobias Read plan to make things worse.

Next week, the State Land Board will meet to consider selling 84,000 acres of the Elliott State Forest to Lone Rock Timber Management for $221 million. If the sale is approved, all the money would be invested in the Common School Fund, generating billions of dollars in earnings for K-12 schools.

Governor Brown, who supported the sale in 2015, now wants the state to buy out the Elliott for $100 million by issuing bonds. Taxpayers would pay back the principal and interest for the next 25 years, at a cost of $120 million or more.

But the Land Board has a constitutional obligation to produce revenue for Oregon schools by either managing the Elliott for a profit or selling off dead assets. Forcing taxpayers to buy an asset they already own, plus forgoing $121 million in additional funds from a willing buyer and millions more when factoring in compound interest, would violate the Board’s fiduciary trust.

Fortunately, the Oregon School Boards Association, one beneficiary of the Common School Funds, expressed intent to sue if the Land Board refuses to “fulfill its fiduciary duties.”

The Board has a firm offer of $221 million. They should accept it.


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

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Challenges to Free Expression and Academic Integrity on Campus

Join Cascade Policy Institute for an evening with special guest Dr. Jacqueline Pfeffer Merrill,

Monday, May 8, 2017 at the Crowne Plaza Portland-Lake Oswego, from 6:00-7:30 pm.

 

With a constant stream of headlines about campus disruptions and lightweight curricula, alumni are rightly concerned about the erosion of academic freedom and the decline of academic standards on American college campuses.  The evening’s presentation will spell out why the trends are so worrying and ways in which some intrepid college leaders, college trustees, and alumni donors are showing how to stand up for academic excellence and intellectual openness that the public demands.

Dr. Merrill is executive director of the Fund for Academic Renewal, a program of the American Council of Trustees and Alumni, which works with donors to create and monitor high-impact gifts to colleges and universities. ACTA is an independent, nonprofit organization committed to academic freedom, excellence, and accountability at America’s colleges and universities.

A dessert buffet with coffee and tea will be served.

There is no charge for this event, but reservations are required in advance.

If you have friends, family, or colleagues who may be interested in learning more about Cascade, please invite them as our guests.

For more information, and to reserve tickets, please click here.

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New Report Analyzes Fiscal Impact of Proposed Oregon Educational Opportunity Act

— Education Savings Account (ESA) program awaits Senate action

April 13, 2017

Media Release

FOR IMMEDIATE RELEASE

Media Contact:
Steve Buckstein
503-242-0900
steven@cascadepolicy.org 

PORTLAND, Ore. – Cascade Policy Institute today released a review and evaluation of a universal Education Savings Account (ESA) program for Oregon. Senate Bill 437 would cover all K-12 students and is awaiting a hearing in the Senate Education Committee. SB 437 is also known as the Educational Opportunity Act: The Power of Choice.

ESAs deposit a percentage of the funds that the state otherwise would spend to educate a student in a public school into accounts associated with the student’s family. The family may use the funds for private school tuition or other approved educational expenses such as online learning programs, private tutoring, community college costs, higher education expenses, and other customized learning services and materials. Funds remaining in the account after expenses may be “rolled over” for use in subsequent years, even into college.

Empirical research on private school choice finds evidence that private school choice delivers benefits to participating students—particularly in the area of educational attainment.

Currently, Arizona, Florida, Mississippi, and Tennessee have active ESA programs that are limited to particular groups of students such as those with special needs. Nevada passed a near-universal ESA bill in 2015, but it is yet to be funded. Last week, Arizona lawmakers passed a new ESA bill that will open their state’s ESA program to all Arizona children, phased in over the next few years.

A fiscal analysis of Oregon’s SB 437, as introduced, finds that it would have a net fiscal impact on the state and local school districts of approximately $200 million. This net impact can be reduced—and turned into a net cost saving to state and local governments—by adjusting the annual amount deposited into the ESAs. The program would “break even” at an amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students. These are the dollar amounts suggested in an Amendment to SB 437.

Cascade founder Steve Buckstein notes, “While vouchers may be considered the rotary telephones of the school choice world, Education Savings Accounts are the smartphones of that world. They offer many more opportunities for families and students, and introduce competitive forces into education finance, which may help keep costs down.”

The full report, Education Savings Accounts: Review and Evaluation of a Universal ESA in Oregon, can be found online here.

Founded in 1991, Cascade Policy Institute is Oregon’s premier policy research center. Cascade’s mission is to explore and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. For more information, visit cascadepolicy.org and schoolchoicefororegon.com.

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How Portland’s Inclusionary Zoning Policy Makes Development Less Affordable

By Lydia White

The City of Portland’s inclusionary zoning* requirements have turned a once-gushing housing development market into sludge. This was predicted by nearly everyone outside the central planning bureaucratic bubble.

In a rush to beat a February 1st deadline, developers submitted permits for 7,000 units in less than two months. Since then, that number has dropped by 1033%. Combined with other onerous mandates, inclusionary zoning has pushed developers to build in Portland’s surrounding suburbs. Developers aren’t doing so out of greed; they cannot feasibly finance projects within city limits.

Incentives provided by the city aren’t enough to supplement the costs of inclusionary zoning units. Portland-based Urban Development + Partners estimates that an “affordable rate” building costs over $300,000 more than its value, which is the primary number banks and investors use to determine a project’s viability. Eric Cress, a principal with Urban Development + Partners, says, “You can’t finance that [inclusionary zoning projects]. The financing world does not accept anything that costs more than its value.”

The unfortunate, yet not unforeseen, consequence of inclusionary zoning is that some low-income households benefit, while the policy serves as an informal gentrification program suffered by other residents. If Portland’s city planners want to help people afford housing, they should repeal inclusionary zoning requirements and let developers increase housing supply in a free and open housing market.

*Portland’s inclusionary zoning policy requires developers with 20 units or more to make 20% of units “affordable” at 80% of median family income, or 10% “affordable” at 60% median family income.


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

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