Category: Commentaries

School Choice Leads to Student Success

By Kathryn Hickok

Parents know a solid education prepares their children for life, and that path begins in grade school. But many Oregon families are trapped in public schools that don’t meet their kids’ educational needs. While families with greater means can move to neighborhoods with public schools they like, or pay twice for education by opting for a private school, lower-income families often don’t have those options.

And those families’ children are at the greatest risk of not graduating from high school. According to the National Association of Education Progress, only 33% of Oregon fourth-graders tested “proficient” in reading in 2017. Our state continues to have the third-lowest graduation rate in the country. Nearly half the children born into poverty will stay in poverty as adults. Changing those outcomes requires a solid early education leading to graduation and employment.

This spring, the Children’s Scholarship Fund-Oregon program sponsored by Cascade Policy Institute is celebrating twenty years of giving low-income parents more choices in education, so their children can have a better chance. As director of the Children’s Scholarship Fund-Oregon, I’ve watched how partial tuition scholarships, funded by private donors in our community, have changed the trajectories of our students’ lives, sparking their passion for learning and helping them fulfill their potential.

One of the Children’s Scholarship Fund-Oregon’s first scholarship recipients described her experience this way: “My parents…wanted my brother and me to be placed in an environment where we would be academically challenged and be able to succeed….What [the Children’s Scholarship Fund has] given me is so much more than money; you have given me opportunity, confidence, faith, and trust that life has meaning, and that I am meant to succeed no matter what obstacles come my way.”

Every child should feel that way, and with school choice they can.

In 1998, philanthropists Ted Forstmann and John Walton wanted to jumpstart a national movement that would support low-income parents wanting alternatives to faltering government schools. Pledging $100 million of their own money, Forstmann and Walton challenged local donors across the U.S. to match their gift and help them offer 40,000 low-income children the chance to attend the tuition-based schools of their parents’ choice. That challenge became the Children’s Scholarship Fund and a national network of independently operating private scholarship programs for K-8 children.

But instead of 40,000 applicants, the Children’s Scholarship Fund heard from 1.25 million low-income parents nationwide. Here in Oregon, parents of more than 6,600 children in the Portland tri-county area applied for 500 available scholarships. Forstmann and Walton found out quickly that low-income parents were desperately seeking a quality education they couldn’t find in their local public schools.

They believed that if parents had meaningful choices among educational options, children would have a better chance at success in school. Twenty years of data have proven this true. Studies of college enrollment and graduation rates of scholarship alumni have shown that, despite coming from socioeconomic backgrounds associated with lower rates of college enrollment, Children’s Scholarship Fund students enroll in college at an average rate that is similar to or higher than the general population.

In other words, education in private grade schools is closing the achievement gap for kids from less advantaged backgrounds.

Ted Forstmann was known to say, “If you save one life, you save the world,” and “if you give parents a choice, you will give their children a chance.” Thanks to Forstmann, John Walton, and private donors in Oregon and 18 other states who have supported low-income parents in their quest for a quality education, more than 166,000 children have been a given that chance through scholarships worth more than $741 million. By offering parents the opportunity to choose which school best fits their child’s needs, the Children’s Scholarship Fund puts the power of education back in the hands of parents, where it belongs.

Kathryn Hickok is Executive Vice President at Cascade Policy Institute, Oregon’s free market public policy research organization. She is also director of Cascade’s Children’s Scholarship Fund-Oregon program, which provides partial tuition scholarships to Oregon elementary students from lower-income families. A version of this article was originally published by the Pamplin Media Group and appeared in The Gresham Outlook on April 24, 2018.

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TriMet Shows Pension Reform Is Possible

By Scott Shepard and John A. Charles, Jr.

The Oregon legislature recently adjourned its 2018 session and once again took no action to reduce the long-term financial obligations of the Oregon Public Employee Retirement System. Conventional wisdom in Salem is that significant pension reform is impossible, so we should just quietly accept our fate that the PERS crisis will lead to layoffs at public schools and other service providers.

The conventional wisdom is wrong.

The Portland regional transit district, TriMet, is not part of PERS and has been slowly reforming its pension program since 2002. As a result, 100 percent of all new employees are now in 401(k)-style pensions that have no long-term liabilities for employers. These are referred to as “defined-contribution” pensions in which monthly payments are made by management into personal accounts owned by employees. Once those payments are made, the employer has no further financial obligations.

This stands in contrast to “defined-benefit” programs like PERS in which employees are promised various levels of retirement payments calculated through arcane formulas that leave management clueless about the major level of funding obligation they’ve agreed to.

The advantages for taxpayers of moving public employees into defined-contribution pensions is now evident in the actuarial projections done for TriMet. According to the most recent valuation, estimated annual benefit payments for TriMet defined-benefit pensions will peak in 2034 at $74.6 million, then drop to $24 million in 2060 and $6 million by 2072. They will hit zero by the turn of the century.

This was not something that TriMet did casually. Management was forced into it because of decisions made in the 1990s that caused long-term retiree obligations to explode. The TriMet Board realized that changes were necessary and voted to move all new, non-union hires into defined-contribution pensions after 2002.

Resistance from the bargaining unit kept TriMet from moving its new unionized workers to defined-contribution plans for another decade, by which time a citizens’ committee had issued a report declaring TriMet “on the brink” of disaster. During a protracted negotiation with the union in 2012, TriMet CFO Beth deHamel testified at a binding arbitration hearing that unless changes were made, “TriMet could be forced to default on its pension obligations or its other financial obligations in the future.”

Union leadership eventually agreed to move all new members to defined-contribution pensions by 2013. As a result, the number of active employees still accruing defined-benefit pension benefits fell from 1,580 to 1,460 during 2016. Last year, the unionized workers’ defined-benefit account reached nearly 80 percent funding; and the long-term, unfunded pension liability dropped by nearly $50 million.

The defined-contribution plan to which TriMet moved new workers has been recognized as one of the best in the country. It features low costs, high returns, and a guaranteed employer contribution that is paid irrespective of employee matching contributions.

TriMet’s pension reform offers a valuable guide to the Oregon legislature on how to contain and reverse the spiraling PERS disaster. The unfunded liabilities for PERS have grown from $16 billion to more than $25 billion in less than ten years.

Some reduction in PERS benefits will have to happen, and all parties will benefit from an orderly transition while there is still time. The state should emulate TriMet by moving its employees from defined-benefit to defined-contribution plans as soon as possible.  However, the legislature will be obliged to make bigger changes than would have been required years ago. It will have to move all current workers, whenever they were hired, to defined-contribution plans for all work performed after the date of the effective legislation.

The sooner this is done, the less painful later steps will be. As former TriMet General Manager Neil McFarlane noted recently, solving a pension crisis “doesn’t get any easier with passing time.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. Scott Shepard is a lawyer who recently authored a new case study of TriMet’s pension reform for Cascade Policy Institute. The study, “Following in TriMet’s Tracks: Defined-Contribution Pensions a Necessary First Step to Oregon’s Fiscal Health,” is available here. A version of this article originally appeared in The Portland Tribune.

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WES at 9: Time to Admit the Mistake

By John A. Charles, Jr.

February marked the nine-year anniversary of the Westside Express Service (WES), the 14.7-mile commuter rail line that runs from Wilsonville to Beaverton. Sadly, there was little to celebrate.

In the first few years of operation, ridership grew and it was at least plausible that WES eventually could become a productive transit line. However, average daily ridership peaked in 2014 at 1,964 daily boardings, then dropped in each successive year. During fiscal year 2018, WES ridership has averaged only 1,668 daily boardings.

A central problem is that WES never had a clear mission; it was always a project in search of a purpose. At various times the train was promoted as: (1) a congestion relief tool for Highway 217; (2) a catalyst for so-called “Transit-Oriented Development;” or (3) a way of providing “another option” for travelers. None of these arguments make sense.

During legislative hearings in Salem, representatives from Washington County claimed that WES would take 5,000 motor vehicles per day off of nearby highways. But WES is not even capable of doing that because it only runs eight times (each direction) in the morning, and eight more times in the afternoon. Unlike traditional commuter trains pulling eight or nine passenger cars, WES travels only in one-car or two-car configurations. The train stations themselves are so short that even if TriMet started running eight-car trains, most passengers would have no way to get on or off.

During its best hours of performance, the total number of passengers traveling on WES is less than 0.5% the number of motorists traveling on Highway 217/I-5 at those same hours, so there has been no congestion relief.

Moreover, WES crosses more than 18 east-west suburban arterials four times each hour. On busy commuter routes, such as Highway 10 or Scholls Ferry Road, each train crossing delays dozens of vehicles for 40 seconds or more. Since the train itself typically only carries 50-60 passengers per run, this means that WES actually has made Washington County congestion worse than it was before the train opened.

WES has not been a catalyst for “transit-oriented development” and never will be because the train stations are a nuisance, not an amenity. The noise associated with train arrivals was always underestimated and is not likely to induce new residential construction.

As for the hope that WES would provide “another transit option,” there were already two TriMet bus lines providing over 4,000 boardings per day in parallel routes prior to the opening of WES. Commuter rail simply replaced inexpensive bus service with a massively subsidized train.

Several key statistics summarize the problems with the train:

  • WES was originally projected to cost $65 million and open in 2000. It actually cost $161.2 million and opened in 2009.
  • TriMet projected an average daily ridership of 2,500 weekday boardings in the first year; actual weekday ridership was 1,156. It grew over time to 1,964 in 2014, but dropped to 1,771 in 2016 and 1,668 in 2018. Since each rider typically boards twice daily, only about 850 people actually use WES regularly.
  • The WES operating cost/ride is roughly five times the cost of average TriMet bus service.

Ridership and Cost Trends for WES

2009-2018

(inflation adjusted, 2015 $)

2009 2010 2011 2012 2014 2016 2018 % Change since 2014
   
Avg. daily boardings 1,156 1,313 1,571 1,700 1,964 1,810 1,668 -15%
Operating cost per ride $27.41 $24.46 $20.43 $18.39 $15.85 $13.55 $16.73 +6%
Cost/

train-mile   

$54.70 $54.12 $53.30 $53.79 $51.12 $53.82 $60.56 +18%
Cost/

train hour

$1,180 $1,166 $1,171 $1,180 $1,109 $1,178 $1,307 +18%
Average subsidy/ride $26.18 $23.00 $19.01 $17.64 $14.36 $12.07 $15.30 +7%

In June 2016 TriMet staff persuaded the Board to approve the purchase of two used rail cars to expand the WES fleet. The estimated cost for the purchase was $1.5 million, plus $500,000 more for retrofitting.

TriMet claimed that this purchase was necessary to satisfy the “expected demands for growing WES service.” That demand was a fantasy.

WES is destined to be a one-hit wonder―an expensive monument to the egos of TriMet leaders and Westside politicians. Taxpayers would be better served if we simply canceled WES, repaid grant funds to the federal government, and moved the few commuter rail customers back to buses.

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

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TriMet Shows That Public Pension Reform Is Possible

By Scott Shepard and John A. Charles, Jr.

The Oregon Legislature is currently meeting, and the conventional wisdom is that reform of Oregon’s overly generous Public Employee Retirement System (PERS) is impossible. According to Governor Kate Brown, we signed contracts with public employee unions, a deal is a deal, and we should just quietly accept our fate that the massive cost of PERS will lead to layoffs and service cuts at schools and other service providers.

There is another way.

The Portland regional transit district, TriMet, is not part of PERS and has been slowly reforming its pension program since 2002. As a result, 100% of all new employees are now in 401(k)-style pensions that have no long-term liabilities for employers. These are referred to as “defined-contribution” (DC) pensions in which monthly payments are made by management into personal accounts owned by employees. Once those payments are made, the employer has no further financial obligations. The eventual pension payouts will be a function of the market performance of whatever investments are chosen by individual employees.

This stands in contrast to “defined benefit” (DB) programs like PERS in which employees are promised various levels of retirement payments calculated through arcane formulas that leave management mostly clueless about the level of funding obligation they’ve agreed to. In many cases, those liabilities turn out to be much larger than expected.

The advantages for taxpayers of moving public employees into DC pensions is now evident in the actuarial valuations done for TriMet. According to the most recent valuation, projected annual benefit payments for TriMet DB pensions will peak in 2034 at $74.6 million, and then steadily decline to $6 million in 2072. They will hit zero by the turn of the century.

This was not something that TriMet did casually. Management was forced into it because of decisions made a decade earlier that caused long-term retiree obligations to explode. TriMet Board members are appointed by the governor. In the early 1990s, Governor Barbara Roberts and TriMet General Manager Tom Walsh wanted public approval of a massive expansion of TriMet’s light rail empire and the tax funding to pay for it. They feared that controversy about a union contract could endanger public support.

In their efforts to avoid strife, in 1994 they granted expensive concessions to the Amalgamated Transit Union Local 757 (“the ATU”) on behalf of its represented employees. Loren L. Wyss, the long-serving president of TriMet, objected and his battle with Walsh became public. In back-channel communications with Gov. Roberts, Walsh made it clear that either he or Wyss needed to go. In August 1994, Wyss met with Gov. Roberts, where he submitted his resignation.

As later explained in The Oregonian,

“…the contract just approved by Tri-Met union employees will protect all its members from additional contributions to their pensions for 10 years. It will also guarantee 3 percent minimum wage increases in the future…every single dollar of health, welfare, dental and vision plans will be paid for by the public employer; [and] the retirement age will decline to 58 within 10 years….”

The die was set for cost escalation. In the decade from 1994 to 2004, salaries and wages increased 72 percent; annual pension costs went up 160 percent; and the cost of health care benefits rose 116 percent. These increases plus stagnant revenues in the latter half of the period resulted in a tripling of unfunded pension liabilities, from $38 million in 1993 to $112.4 million in 2002.

Fred Hansen followed Tom Walsh as General Manger; and he moved new, non-union hires into DC pensions after 2002. This was a first step towards fiscal sanity. Resistance from the ATU kept TriMet from moving its new unionized workers to DC plans for another decade, by which time a citizens’ committee of Portlanders had issued a report declaring TriMet “on the brink” of disaster.

During a protracted negotiation with the union in 2012, TriMet CFO Beth deHamel testified at a binding arbitration hearing,

“TriMet’s union defined benefit plan would be placed on critical status and under federal oversight if it were a private pension plan subject to ERISA.” She also stated that unless something was done to shore up the plan, “TriMet could be forced to default on its pension obligations or its other financial obligations in the future.”

Union leadership eventually agreed to move all new members to DC pensions by 2013, while protecting existing members from reform. As a result of this delay, the union workers’ DB fund remained only 59 percent funded in 2013.

Nevertheless, the trends were now moving in the right direction. The number of active employees still accruing DB pension benefits fell from 1,580 to 1,460 from 2016 to 2017 alone. In 2017 the unionized workers’ DB account reached nearly 80 percent funding, with unfunded liability falling by nearly $50 million in a single year.

Neil McFarlane was TriMet General Manager during that era. He commented recently, “The shift [to DC pensions] has been a success. TriMet is paying more than the required annual contribution every year right now” because the system is closed. “We will be fully funded within the next few years: five to ten for the union plan, fewer for the non-union.”

The DC plan to which TriMet moved new workers has been recognized as one of the best in the country. It features low costs, high returns, and a guaranteed employer contribution that is paid irrespective of employee matching contributions. As a DC plan it does not create open-ended, unpredictable public liabilities to be paid by generations as yet unborn.

TriMet has not fully banished the ghosts of unsustainable employee-benefit promises past. It still faces a massive and escalating unfunded liability driven by health care costs, known in accounting jargon as “other post-employment benefits,” or OPEB. The health care benefits that TriMet granted away in the 1994 contract debacle have been described as “universal health care into the afterlife.”

The description is only a minor exaggeration, as the plan offered TriMet’s unionized employees health care without premiums and with mere $5 co-pays, and benefits that ran not only throughout retirement, but to the employees’ spouses and dependents for fully 16 years after the employees’ deaths. Total unfunded liability for OPEBs reached an astonishing $769 million dollars in 2016.

Compare: State Paralysis on PERS 

TriMet’s pension reform efforts offer a valuable guide to the Oregon legislature on how to contain and reverse the spiraling PERS disaster. The unfunded liabilities for PERS have grown from $16 billion to more than $25 billion in less than ten years, even with the far-too-optimistic 7.2 percent assumed-savings rate (i.e., discount rate) in place. Were the rate adjusted down to its actuarially appropriate level, PERS’ unfunded liability would explode to $50 billion or more at a stroke.

Even at the current recognized rate, funding status has fallen below 70 percent, even while mandatory payments to PERS by government employers have passed 26 percent of payroll.

Municipalities are laying off workers, depleting public services, and raising fees in order to fund the present level of recognized PERS unfunded liabilities. Some reduction in pension benefits will have to happen, one way or another. All parties will benefit from an orderly effort to reform benefits while there is still time. 

The Way Forward

The state should follow the tracks laid by TriMet by moving its employees from DB to DC plans as soon as possible. As TriMet has demonstrated, this move will begin to stanch the fiscal wounds that have been inflicted by a generation of recklessly overgenerous pension benefit promises.

Unfortunately for everyone, PERS reform has been hamstrung for more than 20 years by a wayward state Supreme Court, which has thwarted previous attempts at thoughtful change with erroneous interpretations of the federal Contract Clause. The legislature will be obliged to make bigger changes than would have been required years ago. It will have to move all current workers, whenever they were hired, to DC plans for all work performed after the date of the effective legislation.

While this reform will be significant, it also will be deeply equitable. Right now, older workers are receiving higher benefits for each hour worked than ever will be available to younger workers. This isn’t fair, and it may violate civil rights laws: Younger workers are more diverse than their older peers, which means that benefit reductions that affect only new workers have a disparate impact on women and minorities.

The reform will also pass constitutional muster. As the Oregon Supreme Court finally recognized in its Moro decision, correcting its long-held error, the legislature may change any benefits for work not yet performed, even for current employees.

The Oregon Legislature can and must follow TriMet’s example. The sooner this is done, the less drastic any later steps will be. According to TriMet General Manager McFarlane, solving a pension crisis “doesn’t get any easier with passing time.”

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free-market research center. Scott Shepard is a lawyer and was a visiting law professor at Willamette University during 2016. This essay is a summary of a case study of TriMet’s pension reform written by Mr. Shepard for Cascade Policy Institute. The full report is available here. This essay was originally published in the February 2018 edition of the newsletter “Oregon Transformation: Ideas for Growth and Change,” a project of Third Century Solutions.

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TriMet Needs a Broader Definition of Diversity

By John A. Charles, Jr.

TriMet has been recruiting a new General Manager for the past six months. At its January meeting, the Board announced the name of the leading contender and offered the public a chance to ask questions.

Before the questioning began, however, an executive search firm hired by TriMet summarized the recruiting process. Celia Kupersmith of KL2 Connects said that more than three dozen applications had been vetted, and a significant number of them were women or racial minorities. A black woman was one of three finalists.

However, the top applicant was Doug Kelsey, a white male currently employed by TriMet.

Many activists in the audience criticized the process. They complained that TriMet had proceeded too quickly and with not enough transparency. In particular, they were upset that virtually all applicants requested privacy in order to protect the jobs they already had. Soon thereafter, the TriMet Board announced that it would delay a final hiring decision while it reassessed its process.

Many of TriMet’s critics have a naïve view of the business world, and it shows in the self-contradictory nature of their demands. They want a deep pool of talent, rich with ethnic and gender diversity, but they also want a very public process. The two goals are mutually exclusive. Complete transparency means most qualified candidates will not apply.

They also have a narrow concept of “diversity.” Race and gender are just two attributes the Board should consider. What about intellectual diversity?

TriMet has been working off the same philosophical playbook for over 35 years. The focus has always been two-fold: (1) building a network of low-speed, low-capacity light rail lines; and (2) maintaining “labor peace” by agreeing to wage agreements that include expensive retiree benefits. That vision is looking very stale these days.

TriMet’s ridership is in a steady decline. It peaked in fiscal year 2012 and ridership has dropped in each of the last three years. Only 2.4% of total travel in the Portland region takes place on transit, making it irrelevant or even a nuisance to most taxpayers.

Light rail has lower ridership today than before the Orange line to Milwaukie was built. During FY 2017, boarding rides per-hour on MAX reached the lowest level since light rail opened in 1986.

TriMet’s financial position would be unsustainable were it not for massive and growing subsidies. During the past two decades, TriMet has promised so much to employees in the form of pensions and post-employment health care benefits that the agency now has unfunded liabilities of nearly $1 billion.

At the TriMet hearing in January, I asked Mr. Kelsey whether he saw any possibility that TriMet’s next light rail project—a multi-billion line to Bridgeport Village—might be canceled under his leadership, given the problems stated above. He responded that light rail was still a very important part of TriMet’s planning and he was not about to abandon it.

That answer concerned me because TriMet seems wedded to an outdated business model. Both in Portland and elsewhere, ridesharing companies such as Uber and Lyft are steadily eroding the market share of both regulated taxis and transit operators. This trend will only accelerate as autonomous vehicles become a reality.

Over the next 20 years, shared driverless cars likely will revolutionize the transit industry. Capital-intensive light rail and streetcar systems will face rising costs with declining ridership, creating a fiscal death spiral.

TriMet and its executive search consultants have done a commendable job of recruiting a diverse field of CEO candidates when measured by race and gender. What is lacking is a broader concept of “diversity” to include new ways of thinking about transit.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in The Portland Tribune.

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Four Strikes and You’re Still Out: Oregon’s Ongoing Quest to Centralize Education Policy

By Steve Buckstein 

In 2015 Oregon state government killed off what should have been the last of three big education reform efforts since 1991. Each promised to solve the unsolvable: namely, figuring out how a one-size-fits-all public Kindergarten-through-high-school virtual monopoly system could educate all Oregon students and launch them onto a lifelong path of educational and career success.

First came the Education Act for the Twenty-First Century in 1991. With its Certificates of Initial and Advanced Mastery (CIM and CAM), it aimed to produce “the best educated citizens in the nation by the year 2000 and a work force equal to any in the world by the year 2010.” After it failed, the Quality Education Model arose in 1999 and is still limping along primarily to justify arguments for spending billions of additional taxpayer dollars to achieve the successes no such plan can deliver.

In 2012 Oregon made its third big reform effort. The Oregon Education Investment Board (OEIB), headed by its creator, Governor John Kitzhaber, promised to centralize education policy more than either of the two big reform efforts it followed. Kitzhaber concluded that those previous reforms simply didn’t control a broad enough swath of the education spectrum to work. Kindergarten through 12th grade simply wasn’t a grand enough vision. So, his OEIB effort sought to control everything from pre-Kindergarten through graduate school. But by 2015, “…the ease with which lawmakers…agreed to dismantle it reflects the widely shared view that the board did more wrong than right in its three-plus years of operation.…” This would have been the perfect time to adopt the “three strikes and you’re out” concept for Oregon’s education policy efforts.

The fatal flaw in all these reform efforts was that they relied on “smart” people centralizing control over educational policy and decision making. As I discussed in “Forced Participation: Public Education’s Fatal Flaw” and “The Oregon Education Investment Board: Top Down on Steroids,” centralizing control over education policy and forcing students to attend schools chosen for them by others are destined to fail because they fly in the face of one of America’s most cherished values: choice. Parents don’t appreciate politicians, bureaucrats, or experts making decisions for them about what is best for their children. Advise? Sure. Command? No way.

Today, rather than call a halt to this inevitable string of big reform failures, the Oregon legislature is embarking on what may turn into a fourth “impossible mission” to achieve student success in our public school system. Members of the Joint Committee on Student Success will spend this year traveling around the state asking everyone they meet what constitutes success in their communities. They will then return to the marble halls of the State Capitol and recommend that every school be mandated to do “what works” somewhere—of course, at a higher cost to taxpayers than they are paying today.

Rather than wait years to judge this latest big reform a failure, it is time to try another path: the school choice path. Of source, school choice is in conflict with the command-and-control efforts that are central to the big reform efforts Oregon has tried since 1991.

Instead, the school choice path allows students and their families to chose where and how they get the educational opportunities that our advanced society is now capable of providing. No longer would students be required to attend schools based on their ZIP codes. No longer would the tax dollars Oregonians pay to educate students be spent only in schools built by local governments and populated by public employees.

The school choice path recognizes that different children learn in different ways. They learn at different paces, too. And, they no longer need to be assigned to one brick building for years and years, only to be moved by the system into another building when they reach a certain age or grade level.

Today, most families, even low-income families, have the tools they need to explore the many educational options available for their children. They want to pick and choose from a wide assortment of options: from traditional neighborhood schools, to public charter schools, to private schools, to online learning, to home schooling.

The school choice path is being carved out in other states much faster than it is here in Oregon. The latest and most versatile school choice programs being enacted elsewhere are Education Savings Accounts. Unlike vouchers, which only let parents pay for private school tuition, ESA funds may also be used for other approved educational expenses, such as online learning programs, private tutoring, community college costs, and other customized learning services and materials.

Also, while voucher funds all go to private school tuition or are lost to the families, funds remaining in ESA accounts each year may be “rolled over” for use in subsequent years, even into college. This creates incentives for families to “shop” for the best educational experiences at the lowest cost, as well as incentives for schools and educational programs to price their services as low as possible.

On the school choice path, if a school fails students it doesn’t get more money, it gets less as students leave and take their allocated money with them to other schools. This is the path that finally will put students first.

Before Oregon’s fourth education reform strike inevitably fails and takes a further toll on students and taxpayers, let’s decide to take another path—the school choice path.

(This Commentary is an update of a 2012 Commentary, “Three Strikes and You’re Out: Replacing Top-Down Education Control with School Choice.”)

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

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Why Health Care Should Not Be Defined as a “Fundamental Right”

By Steve Buckstein

The Oregon House of Representatives has voted for HJR 203, which would add a section to the Oregon Constitution making health care a “fundamental right” of every Oregonian. If passed by the Senate, Oregon voters will be asked in November to put this language in our Constitution:

“It is the obligation of the state to ensure that every resident of Oregon has access to cost-effective, medically appropriate and affordable health care as a fundamental right.”

Cascade Policy Institute board member Michael Barton, Ph.D. and I testified in opposition to earlier versions of this legislation. Dr. Barton gave us a history and philosophy lesson, explaining how the American government was founded on the principle that government does not grant rights, it simply protects our inalienable rights such as those to life, liberty and the pursuit of happiness. He explained that our rights define what we are free to do without interference; they are not goods or services that others must provide for us. He expounded on these concepts in his 2006 Cascade Commentary, “Right to Health Care Violates Individual Rights.”

While I object to defining health care as a right on a philosophical level, on a political level I understand that government tries to grant such positive rights all the time. In this case, passing this constitutional amendment will make some people feel good. It may say that we care deeply about the uninsured; but it only gives intellectual lip service, if that, to the matter of future costs.

More and more people will say, “I have a right to not care about the costs, because I have an unqualified right to health care.”

Define health care as a fundamental right, and cost control will go out the window. Witness Oregon’s public school system, where education is supposedly “free” and yet taxpayers are asked to pay more and more for little (if any) improvement in real quality. As in education, health care innovation will become mired in bureaucratic process.

And who will have the task of controlling the economics? Is the Oregon legislature going to assume responsibility for that? An elegantly composed commission? A superhuman future governor? Or do we assume private insurance companies will simply figure it out?

A key argument against this proposal is the recognition that a “fundamental right” to health care would seem to trump everything else in the Oregon Constitution. If the legislature comes up with a plan to make good on this “fundamental right,” what happens when voters reject the new taxes needed to pay for it?

Since neither education, transportation, criminal justice, nor any other state government service is defined as a “fundamental right” in our Constitution, then funding for these services might be cannibalized to fund the one “fundamental right” in that document, health care. But voters won’t be presented with this reality when marking their ballots in November. This potential clash of essential services may make for strange bedfellows in future election battles. Will the teachers union, for example, want to lose funding to the health care providers?

The unintended consequences of this proposal are almost endless. But that’s the way the game is played for now, and the next inning will play out in the Oregon Senate before the end of this short legislative session. Stay tuned….

(This article is an update on a legislative post, published here, regarding an earlier version of this legislation which was considered in 2008.)

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

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Oregon Parents Deserve to Be the Voice for Kids’ Education Options

By Bobbie Jager

For the second year in a row, Oregon has reported the third-lowest graduation rate in the country. With a four-year adjusted public high school graduation rate of 74.8% (2015-16), Oregon only beats Nevada and New Mexico, according to the National Center for Education Statistics.

The typical response to this kind of bad news is for teachers unions and legislators to claim that taxpayers are “underfunding” public schools; and that’s why so many kids don’t make it to graduation. But Oregon already spends more on K-12 education than 33 other states. According to the National Education Association’s Rankings & Estimates report for 2016 and 2017, revenue per Oregon student in Average Daily Attendance is nearly $14,000, including local, state, and federal funding. That puts Oregon more than four percent above the national average in school spending.

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Bobbie Jager, Oregon’s 2012 “Mother of the Year,” is a parental choice advocate and the School Choice Outreach Coordinator for the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was originally published by the Pamplin Media Group and appeared in The Portland Tribune on January 25, 2018.

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Innovative Technology Can Reduce Tobacco Harm and Save Oregonians Tax Dollars

By Steve Buckstein

To eventually end cigarette use in America, rather than rely on tobacco taxes, public service announcements, and restrictions on cigarette use, we might look toward innovation. New technologies hold out the promise of ending deadly cigarette use altogether. The biggest impediment standing in the way is the federal government.

That might soon change, however, as the Federal Food and Drug Administration (FDA) is considering approval of a tobacco product that relies on battery-powered heat, instead of fire, to deliver aerosolized nicotine-containing vapor. The distinction is important because, as the late Professor Michael Russell wrote, “people smoke for the nicotine but they die from the tar.”

Traditional options for quitting tobacco use have included nicotine patches, lozenges, and gum, which have relatively low success rates. New “heat-not-burn” technology is proving promising at getting smokers around the world to quit cigarettes in favor of heated tobacco products known as IQOS, sometimes referred to as “I Quit Ordinary Cigarettes.” Using an electronic device to heat a small piece of tobacco without fire or combustion is the purest form of an electronic cigarette. Currently available in nearly three-dozen countries—including Italy, Switzerland, Japan, Germany, and Canada—these products have helped nearly four million adults quit smoking.

According to a recent article in The Economist, “Britain’s Committee on Toxicity recently found that people using heat-not-burn products are exposed to between 50% and 90% fewer ‘harmful and potentially harmful’ compounds compared with conventional cigarettes.”

Such harm reduction could save not only many American lives, but billions of American tax dollars. Between Medicaid, Medicare, and Veterans Affairs, conventional cigarette use may cost American taxpayers more than $100 billion per year.

The Oregon Health Authority (OHA) estimates that some 7,000 people die annually from cigarette use; and harm reduction could help reduce the costs associated with our growing Medicaid program, known as The Oregon Health Plan. Thirty-eight percent of adults on Medicaid smoke cigarettes—more than three times the percentage of Oregonians insured by other providers who smoke. Also, the OHA believes the cost to taxpayers for tobacco-related Medicaid health care is substantial.

If Oregon smokers transitioned to less harmful alternatives, whether by quitting entirely or by switching to a product like IQOS, that would be a win for both public health and public tax expenditures.

In 2009, President Obama signed the Family Smoking Prevention and Tobacco Control Act, a law that gave the FDA authority to regulate tobacco products in the United States. It went further and created a process for introducing new tobacco products that might be less harmful than cigarettes and even created a process for obtaining FDA approval to market those products as such. Permission to sell IQOS and market it as less harmful to adults is what the product’s makers are currently seeking from the FDA.

The FDA has noted that modified-risk tobacco product provisions “may be valuable tools in the effort to promote public health by reducing the morbidity and mortality associated with tobacco use, particularly if companies take advantage of these provisions by making bold, innovative product changes that substantially reduce, or even eliminate altogether, either the toxicity or addictiveness of tobacco products, or both.”

The Tobacco Products Scientific Advisory Committee will meet January 24 to discuss IQOS and make a recommendation to the FDA regarding approval of the product. It should examine the science and consider the importance of providing adult smokers with an alternative to cigarettes, because innovation and consumer choice may prove to be a great incentive to finally quit. The rest of the world has already embraced this technology, and the FDA should also.

Steve Buckstein is Senior Policy Analyst and Founder at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in The Bend Bulletin on January 17, 2018.

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Poll Shows Voters Are Smarter Than Politicians Think

By John A. Charles, Jr.

In November the regional government, Metro, released the results of a new public opinion poll of 800 registered voters living in the tri-county region.

One of the questions was, “In a few words of your own, what is the most important change that could be made to improve the quality of life in the Portland region?”

The top three responses were: dealing with the homeless/poverty (25%); affordable housing (17%); and traffic congestion (14%).

Environmental issues tied for last place (2%), and global warming did not even make the list.

This is roughly the opposite of what we frequently hear from many of the political talking heads. Listening to them, one would think that environmental Armageddon is upon us, especially because Donald Trump is President.

For instance, the top legislative priority for Senator Michael Dembrow (D-Portland), who chairs the Senate Environment Committee, is a bill he hopes to pass in early 2018 that would create a $700 million/year tax on carbon dioxide by establishing a convoluted industrial regulatory program. The ambient environment would not be improved one bit by this tax, but all of our basic necessities—food, clothing, shelter, and energy—would become more expensive.

Sen. Dembrow’s biggest supporter on this issue is Governor Kate Brown, who recently flew to Bonn, Germany to hobnob with celebrities at a United Nations conference on global warming. The two of them are convinced that if they can make energy more expensive, we’ll all use less of it and the world will be saved from “global warming.”

Most voters intuitively know that this is a scam. The term “global warming” doesn’t even have a useful definition. Voters know that the pain-versus-gain equation of global warming taxes is heavily one-sided: the “benefits” of reducing fossil fuel use are highly speculative (and may not exist at all); long-term (potentially thousands of years away); and global in nature. Yet the costs will be known, immediate, and local.

As the Metro poll shows, there is very little grassroots support for this kind of punishment.

It’s not surprising that homelessness, housing, and traffic congestion rank as the top three issues in the Metro poll because these are problems most of us confront daily. They are also things we can take action on.

Unfortunately, government itself has caused much of the mess, so voters will need to think carefully before signing on to more tax-and-spend programs. Almost every time regulators intervene in real estate markets, the result is some combination of less housing production and higher housing prices.

Take the most obvious intervention: urban growth boundaries. Since 1980, the population of the Portland metro region has increased by about 78%, but the available land supply for housing has only gone up by 10%. Making buildable land artificially scarce and thus more expensive is not a winning strategy if you’re trying to provide more housing.

But lack of land is just the start. After you add in ubiquitous farm and forestland zoning, extortionist system development charges, tree protection ordinances, inclusionary zoning requirements, prevailing wage rules on public housing projects, and numerous other interventions, the result is that we have a serious shortage of housing.

Even the government is trapped in government regulation. Last spring the Portland City Council approved spending $3.7 million to purchase a strip club on SE Powell Boulevard near Cleveland High School. The City plans to tear down the building and build 200 to 300 units of low-income public housing on the 50,000-square-foot property. City officials have admitted that it will take two years just to obtain the necessary permits for the redevelopment.

If it takes this long to get the permits for one of Mayor Ted Wheeler’s top priorities, imagine the delays facing a private sector developer.

The housing woes in such cities as Portland, San Francisco, New York, and Seattle are mostly self-inflicted. Housing supply is lagging demand because we’ve created so many barriers to housing construction. Removing those barriers should be a top priority for the state legislature when it convenes in February.

Global warming legislation does not even deserve a hearing.

John A. Charles, Jr. is President and CEO of the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was published by the Pamplin Media Group and appeared in The Portland Tribune.

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