GOVERNOR AND FELLOW DEMOCRATS STONEWALL REPUBLICANS’ JOBS INITIATIVE –
The Oregonian editorial board continues to pound away at Republican legislators and particularly House Co-Speaker Bruce Hanna. On Wednesday of this week the editorial board railed against Republican failure to rush through education and health care reforms pushed by the Governor. Today the editorial board expresses astonishment and outrage that Republicans are demanding action on their jobs package in return for action on the Governor’s health care and education initiatives. “Even in politics, friends don’t take friends hostage,” they write.
OK. Fair enough. But who is holding whom hostage? On Thursday the Governor “invited” business leaders to a press conference at which he plead for quick action by the legislature on health care and education. Are those folks going to stiff the Governor? Of course not. They understand that they have to get along with the guy who happens to hold the office. But let’s hope those who agreed to serve as props for the Governor’s show and tell have also picked up the phone and let the Governor know privately that there needs to be action on the jobs package as well.
The Oregonian describes GOP leaders as having “crashed Kitzhaber’s news conference.” So were not all business leaders invited? Bruce Hanna, Kevin Cameron and Tim Freeman are all successful businessmen and business leaders. Dennis Richardson is a successful lawyer who represents businesses. And these are business people who not only show up when the Governor calls a news conference or when they are looking for something from government, but also impose significant costs on their businesses by volunteering to serve in the Oregon Legislature. Of course, they are all from outside the Portland-Salem-Eugene power center, so perhaps that explains why they weren’t invited.
And the fact that these individuals and most other Republicans represent rural and small town Oregon gets to the heart of the apparent stalemate in Salem. The Oregonian expresses sympathy with Republican job initiatives, but says “it’s wrong and dangerous to pretend that this kind of legislation is of equal importance to creating a new accountability system for schools, or reforming an early childhood education system that every year leaves an estimated 18,000 Oregon kids unprepared to learn when they show up to kindergarten.”
Maybe it’s wrong if you live in the Valley and can’t see past the Cascades or the Coast Range. But if you live in eastern or central or southern or coastal Oregon, a dozen jobs here and a hundred jobs there make an enormous difference to the future prospects of your community. Although many urban Oregonians have persuaded themselves that rural Oregon can survive on tourism and the “new green economy,” the reality is that we live in a resource rich state and if we refuse to responsibly develop and use those resources we condemn many Oregon communities and Oregonians to continuing economic decline.
The effects of that decline are not confined to rural Oregon. They slowly, but steadily, trickle over the mountains and into Salem. Did anyone notice that the state economist’s revenue projections are consistently wrong on the high side? That’s a sad commentary on the sorry condition of the economy of the entire state.
Rather than condemn Republicans for holding hostage the Governor’s health care and education reforms, The Oregonian might more reasonably have asked why the Governor and his fellow Democrats are holding the Republican jobs initiatives hostage. Of course health care costs and education are important to the future of business in this state. But so too are jobs in the near term which will result from making greater use of the resources of the state. Oregon could be a national model for responsible development of state controlled resources – if only the Governor and Democrats were willing.
If the jobs package is of such limited importance relative to the health care and education reforms, why don’t Democrats happily accept them. According to The Oregonian they would be getting a lot in return for giving up very little. Though one has to wonder what it is they think they would be giving up by encouraging a little job growth.
So who’s holding whom hostage?@COPYRIGHT Northwest Free Press 2012. ALL RIGHTS RESERVED.
Right From the Start
The Oregon Supreme Court announced that 28,000 Public Employee Retirement System (PERS) beneficiaries must repay $156 Million in overpayments from 2000 to 2004. So, you’re thinking to yourself, has the worm turned? Have Oregon’s politicians, including those on the Oregon Supreme Court, finally decided that enough is enough and are going to rein in Oregon’s corrupt PERS system with its gold plated benefits and its domination by Oregon’s public employee unions?
If you believe that then you are as naïve as those Ivy League twits at the United States State Department regarding Iran and/or the Arab Spring.
Here’s the reality of the situation. Oregon’s Public Employee Retirement System is between $14 Billion and $16 Billion underwater. The future unfunded liability to Oregon’s public employees in excess of current investments is so large that it exceeds Oregon’s biennial general fund budget. Worse still is that, at the behest of the public employee unions, the Oregon legislature adopted a provision that requires that payments to the PERS system be made before any other money is spent. (Just for clarification purposes, that law was introduced, passed and signed into law when the Democrats – whose elections are financed primarily by the public employee unions – held super majorities in both Houses and their favorite governor, Ted Kulongoski, was in office.)
For taxpayers this means that before any service is delivered by the State of Oregon, current PERS obligations must be funded. And you thought that maybe some common sense had returned to Oregon’s political class.
But $156 Million is nothing to sneeze at. Okay, it’s only about one percent of the unfunded future liability but it’s $156 Million that PERS didn’t have yesterday. That is if PERS actually collects it and with the Democrats still in firm control of the governor’s office, and the public employee unions still in firm control of the Democrats, that remains questionable.
Even if you view this as a setback for the public employee unions, please understand that it is only temporary and, more importantly, anticipated. (You don’t spend twenty-five years funding a succession of Democratic gubernatorial races, and the resultant appointment of Supreme Court justices without gaining early access to which way the judicial winds are blowing.)
And the public employee unions are ready. Under the guise of their unified political arm – Our Oregon – the unions have taken a page from Bill Sizemore’s political playbook and flooded the initiative process with THIRTEEN separate ballot measures. (Actually, the public employee unions make Sizemore look like a piker based on his best performance of proposing only nine measures.) But, whereas Mr. Sizemore had to go out to the general public to find signatures and funding for his efforts, the public employee unions with their nearly $130 Million biennial warchest – collected for them by the State of Oregon and its political subdivisions – have more union members than signatures required to qualify for the ballot. Mr. Sizemore would take six to nine months to collect signatures while the public employee unions can do it in less than a week as the union stewards walk through the government offices importuning their members at work. What a system!!
If this wasn’t so deadly serious it would be almost amusing about how stacked the deck is. Even more amusing is the name chosen by the public employee unions for their unified political efforts – Our Oregon. Now you might think that was chosen to suggest that they were protecting Oregon from external attacks but nothing could be further from the truth. Our Oregon means “their Oregon” – the public employees unions own it – at least they own state government. They own it, they paid for it, and by God they are going to make sure that it does exactly what they want for the foreseeable future.
When Mr. Sizemore overwhelmed the initiative process with nine measures, his thoughts were two-fold: one, it will cost the public employee unions so much to fight all nine measures that they won’t be able to fight effectively in legislative and statewide elections; and, two, with so many measures on the ballot one or more might slip through. While Mr. Sizemore correctly identified the public employee unions as the major opposing political force, it is doubtful that he, like everyone else, understood the depth of the resources available to the public employee unions.
In addition to the $130 Million available to Oregon’s public employee unions from mandatory member dues each biennium, the unions have all of the vast resources of their sister public employee unions on a state and federal level. The national public employee unions move money to and between states to support and oppose political issues. Mr. Sizemore could have offered 90 measures and still would not have exhausted the resources available to the public employee unions.
And the most pernicious among the thirteen Our Oregon initiatives are Measures 42 and 43 which embed in the Oregon Constitution the right of public employee unions to utilize the payroll checkoff system for their political activities. While the unions widely criticized Mr. Sizemore for trying to burden the Oregon constitution with matters better left to the legislature, those same unions apparently think its just fine to embed their issues in the Constitution.
Despite all of the warts, flaws and questionable activities of Mr. Sizemore, Oregon’s public employees unions and their unified political arm, Our Oregon, with their enormous financial and manpower advantage, make Mr. Sizemore look like an unsullied virgin.
The Jury Is Back: Oregon’s Measures 66 & 67 Were A DisasterDecember 5th, 2011 by Bill Valentine
Rarely can you convincingly “prove” anything to anyone about the economy. Economics is a social science, not a natural science like physics, chemistry, and biology. The Scientific Method doesn’t work with the social sciences. There aren’t real-life opportunities to test economic theories in a vacuum, and cause-and-effect is virtually impossible to substantiate. That’s what makes economics so interesting. That we’re still debating the effectiveness of Roosevelt’s New Deal, and Keynesianism, and Supply Side theory, and so on, shows how little consensus there is around the central ideas that make up the study of the macro economy.
However, there are rare times when an argument can be supported deductively—if not in total, then at least persuasively so. Allow me to put forth one such argument, and let you arrive at your own conclusion based on the direct evidence now at hand. And it regards the impact of Oregon’s recent tax experiment.
In 2009, the Legislature of the State of Oregon put forth changes to state tax law to address its yawning deficit (later taken to the voters as Measures 66 and 67). Measure 66 raised the personal income tax on the state’s highest-earning individuals to as much as 11% for 2009-2011, and then by a lesser amount going forward . Measure 67 raised corporate income tax rates, and imposed a vastly increased minimum “excise tax”—a schedule based on revenue for corporations that don’t have earnings.
Supporters said M66/67 would help balance the budget, prevent cuts to valuable services like education, health care assistance, and public safety, and thus make Oregon a more attractive state for people and businesses to locate.
In reality, what it really meant to its key proponents was preventing scrutiny of compensation arrangements and employee benefits for unionized workers which continue to put an ever increasing amount of the strain on state and local budgets in Oregon. The funding for the pro-66/67 message at the time came almost entirely from the state’s inordinately powerful unions via their thinly veiled 501(c)(4) advocacy organizations. Proponents vastly outspent opponents and their message got out.
The rest of the nation watched with curiosity to see if a state would be able to raise taxes in the throes of a recession. Oregon did not disappoint. On January 26, 2010, voters passed both measures, and they applied retroactively back to the beginning of 2009.
So, how has Oregon fared in the wake of these new tax increases?
Let’s start by addressing the primary objective of the tax increases: balancing the budget to prevent having to cut spending on services. Not only did Oregon not solve its deficit problem through the additional tax revenue, things have gotten worse. By the latest count, Oregon will be more than $3.5 billion dollars in deficit for the current 2011-2013 biennium.
Measures 66/67 failed to raise the money they were supposed to. Measure 67 raised $249 million, versus $261 million, during the last biennium—a $11 million shortfall. It’s expected to fall another $29 million short for the current biennium versus projections.
More alarmingly, Measure 66 proceeds haven’t come close to what they were supposed to. Over the last budget cycle, Oregon raised nearly one-third less from Measure 66 taxes ($349 million vs. $504 million ) than was projected. The latest estimates project that we’ll raise just above half of what was originally projected for the current biennium.
All in, taxes raised from M66/67 will be $356 million short – about three-fourths of what was expected for the current and past biennia.
So what happened to the missing $356 million? The Wall Street Journal has some ideas. In an article from December of last year titled “Ducking Higher Taxes – Oregon’s vanishing millionaires”, the Journal points out that vanishing millionaires are a well documented phenomena. When Maryland instituted its own “millionaire tax” in 2008, one-third of that state’s millionaire households vanished.
Where might Oregon’s millionaires have vanished to? It’s pretty clear a lot went to our neighboring state to the north. The Department of Motor Vehicles (DMV) in Washington state publishes data on the driver’s licenses issued to, and surrendered by, citizens in Washington, by state.
For example, if an Oregonian takes up residence in Washington, they surrender their Oregon driver’s license and are issued a Washington one. And if a Washingtonian does the same in Oregon, that information too is tracked by Washington DMV. It’s an imperfect measure of state migration, but I think it’s a pretty good proxy.
I recently downloaded the data, and found that for the decade ending in 2008, there had been an average of 1.9 people moving to Washington from Oregon for every one going in the other direction. Check out 2009. Oregonians flooded Washington, with 4.5 people moving north for every one moving south!
Unfortunately, when individuals with financial capital relocate, they also take their intellectual capital with them. 98% of Oregon’s companies are small businesses and they rely to an extent on the intellectual and financial capital of successful types, the likes of which are increasingly calling the Evergreen State their home.
Interestingly, not long after Oregon passed M66/67, Washington tried its own “millionaire tax” (Initiative 1098) and it was shot down two-to-one.
The loss of people and money to Washington, and other more tax-friendly states, is what’s known as an “externality” and an “unintended consequence” that I believe can be directly tied to M66/67—there are no other reasonable explanations for the exodus in 2009.
But outmigration isn’t the only unfortunate development for Oregon, post-M66/67.
Supporters of the tax hikes made the case that we needed to pass them to improve the perception of the state to outsiders. Surely a state that was willing to raise taxes in a recession to support services was one that should draw people and businesses. Let’s set aside the “giant sucking sound” from people flowing to Washington, and take a look at some prominent surveys and rankings of states.
Upon the passage of M66/67, the Tax Foundation dropped Oregon eight spots on its list of states ranked by business climate, citing the referendum as its reason for doing so.
More recently, Kiplinger released their ranking of states by tax-friendliness for retirees. Oregon has the dubious distinction of now being named the fourth most tax-unfriendly state in the nation for people considering where to retire.
This past June, the American Legislative Exchange Council (ALEC) released the fourth edition of its annual Rich States, Poor States report. This report ranks the states along such metrics as income tax rates, property and sales tax burdens, recently enacted tax policy changes, debt service as a share of tax revenue, and public employees per 1,000 residents and more. Oregon ranks 43rd, down eight spots since 2008.
Setting others perception of us aside, Oregon ranks 38th by unemployment rate and 47th by “un- and under-employment” rate, a sad footnote to the whole deal.
So as we head into 2012, Oregonians find themselves living in an apparently less desirable state, with one of the worst employment situations, the fifth worst spending problem in the country, and no real reform proposals on the table.
Hopefully, the recognition of the failure of Measures 66/67 will prove sufficient to prevent a reincarnation of similarly ill-fated attempts to solve a spending problem with an revenue solution.
 Starting in 2012, taxable income above $125,000 (single filers) and $250,000 (joint filers) is subject to a new, permanent marginal rate of 9.9%.
 Source: Oregon Legislative Revenue Office
 U6 – total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.
Oregon legislature, under the “leadership” of former House Rep Dave Hunt, devastated Oregon small businesses with this job crushing new tax. Hunt now wants to bring his “leadership” to Clackamas County (the Dems in the house clearly invited him to leave any leadership role in the House).
As usual, we common folks are held hostage by the “government class” who spend their days idly drifting about the public watering trough, at taxpayer expense of course. The Oregonian reports….
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2/8/11 This proposed bill has been forwarded to the House Education Committee, Oregon State House of Representatives. Contact YOUR representative to urge that this be moved from committee to the floor for a vote.
House Education committee MEMBERS
Rep. Jason Conger (Republican-OR) Vice Chair
Rep. Michael Dembrow (Democratic-OR) Member
Rep. Lew Frederick (Democratic-OR) Vice Chair
Rep. Sara Gelser (Democratic-OR) Co-Chair
Rep. John Huffman (Republican-OR) Member
Rep. Betty Komp (Democratic-OR) Member
Rep. Julie Parrish (Republican-OR) Member
Rep. Matt Wingard (Republican-OR) Co-Chair