Oregon’s Economic Decline Results Are Showing in Tax Revenues

Right From the Start

According to Reuters, The National Governors Association in cooperation with the National Association of State Budget Officers reported that revenues to state government continue to increase albeit at a rate slower than a peak in the second quarter of 2001. On average, the states saw a growth of 4.1 percent. The report indicates that this makes nine straight quarters of growth.

Of the forty-seven states providing information, only six reported revenue declines. As can be expected California led the way with Oregon trying desperately to match the race to the abyss. In Oregon, this decline occurred despite the substantial tax increases engineered by the state public employee unions under Measures 66 and 67.

The dominant political thought in Oregon eschews economic growth in favor of government primacy. Liberal Democrats, supported and encouraged by their financial arm in the public employee unions, focus exclusively on the funding of growth in government. When the economic downturn began in 2008, Governor Ted Kulongoski was clueless as to what might be done to ease the economic decline that would eventually cost Oregon 152,000 private sector jobs.

Worse yet, Mr. Kulongoski was not only clueless, he was oblivious to everything but the impact on preservation of growth in state government. While 152,000 Oregonians were losing their jobs in the private sector, Mr. Kulongoski was increasing the number of state employees by 4,500. While those Oregonians fortunate enough to still have a job were seeing wage freezes, benefit reductions and working hours reductions, Mr. Kulongoski, whose senior administration officials were riddled with former public employee union officers, gladly handed out raises (sometimes twice yearly) and acceded to substantial increases in benefit costs. Other than his obsession with heavily government subsidized “green jobs” Mr. Kulongoski issued not a word, a proposal or even an actual recognition of the underlying problem.

At one point during the final year of Mr. Kulongoski’s administration a reporter had the temerity to ask what the administration would do about the unemployment rate which, at that time, was stuck well above ten percent. The spokesman for the administration stated that there was nothing they could do and they would just have to wait for a recovery. The answer reeked of both ignorance and ambivalence. Mr. Kulongoski had neither a plan nor any intention of spending time to try to build a plan. It was basically a “not my problem” response.

In marked contrast, however, with the state facing a decline in revenues because businesses were failing and private sector jobs were being lost, Mr. Kulongoski began to move heaven and earth to ensure that revenues increased to meet the insatiable appetite of the public employees unions and the growth-in-government Democrats. (I was going to say the growth-in-government wing of the Democrat Party but that is pretty much a pervasive view of those in control of the party – including the public employee unions who fund their elections.) Mr. Kulongoski did actively support and campaign for Measures 66 and 67 which were to have the effect of removing $735 Million dollars annually from the private sector and transferring it to the public employees in the form of salary and benefit increases. That $735 Million represented money that would otherwise have been available to create, grow and retain private sector jobs.

Gov. John Kitzhaber returned to office on the assurance that only he could rein in the power of the public employee unions and their burgeoning cost to state government – a cost that was resulting in a reduction in government services so as to feed the insatiable appetite of the public employees unions for more members, higher salaries and gold-plated benefits. His results are abysmal.

In his first negotiations with the unions Mr. Kitzhaber gave up a one and one-half percent basic wage increase plus a four to five percent annual “step” increase. Public employees will now have to pay $600-$900 annually for their healthcare – that is about five percent of the annual cost of those benefits. That requirement was more than offset by the wage increases and in the case of some workers, the state actually paid up to $480 of that $600-$900 through a “wage supplement. Nothing was done on public employees gold-plated pension benefits and the state continues to pay BOTH the full cost of benefits AND the public employees statutory six percent “contribution.” Nothing was done about work rules including the provision that the state cannot outsource a function if it was ever performed by a union member.

Mr. Kitzhaber, like his successor/predecessor Mr. Kulongoski, is wholly beholden to the public employees unions. Their priorities are his priorities without reservation. His priorities are their priorities so long as they result in more public employees, higher wages, greater benefits and restrictive work rules.

Mr. Kulongoski wasted the money delivered to him under the federal stimulus program on salary increases and increases in the cost of benefits for public employees. Mr. Kitzhaber did the same with tax increases under Measures 66 and 67. Benefits to the poor, to the sick, to the handicapped all suffered in order to maintain a bloated bureaucracy and the greed of their unions. Increases to schools were used to enhance salaries and compensation for existing teachers rather than addressing classroom ratios, new textbooks or other educational tools.

Even though annually taxes and fees increase there still remain insufficient funds to feed the insatiable appetite of the public employee unions. And there is a reason. Oregon’s economy fails to grow. Without a growing economy revenues to Oregon government will remain flat or decline – oh yeah, that’s where this column began. Oregon is one of only six states where tax revenues continued to decline.

When the history of Oregon’s lost decades is written the blame will be laid squarely on its public employees unions and the liberal Democrats they directed.

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Posted by at 05:00 | Posted in Economy, Gov. Kitzhaber, Gov. Kulongoski, Public Employee Unions, State Budget, State Taxes | 4 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Rupert in Springfield

    Ted Kulongoski was many things, but knowledge of even the most rudimentary of economic principles was not something I think even his supporters would have argued. When the economy was declining and tax revenue along with it, Ted issued his famous line that he was “surprised” that tax revenue would fall under such circumstances. This is about the equivalent of being “surprised” that a baseball does not tend to fly up into your face when you drop it, but to Ted this sort of thing was arcane knowledge.

    It is good to remember history. In 2008 when Obama won election the left was all a twitter. The margin was large so they could afford to be honest about their intentions. For business this was not good and this was rapidly made clear with the measure 67 campaign the following year. Small business was the enemy and this was made quite clear in the union ads supporting the measure.

    In 2010 unions threw their support behind Kitzhaber. They knew his talk of reigning in unions was nonsense, and we all knew it too. As far as state government is concerned, unions run the show and will continue to do so for the foreseeable future.

    Now, with the presidential election coming up we hear a bizarre conglomeration of absurd suppositions and a basic ineptness of rudimentary economic understanding that is unparalleled in my lifetime. The president clearly has no idea how jobs are created, thus we hear statements like the presidents reiteration of Harry Reids infamous inanity: the private sector is doing fine state and local government is what is in trouble. We hear absurd phoney intellectualism pondering who even creates jobs, is business even responsible at all for creating jobs?

    What needs to be understood is that when considered as a totality, from the White House on down to Oregons governorship, we have people who really have no understanding, nor experience, in job creation or basic economics. Kitzhaber is a smart man. His original concept of OHP was pure genius. However he also is totally beholden to unions and will sacrifice whatever economic inspiration he may have to that end.

    Oregon will therefore follow, not lead, in terms of economic recovery. Should Scott Walkers solution, which seems to have worked well for Wii take hold nationally look to Oregon to be one of the last to try such method. Should Romney win the presidency, look to a state by state movement away from government expansion and union payroll padding with Oregon at the far rear of that pack.

    The current situation is this, union contracts have been cleverly negotiated, are perfectly legal, and are rapidly bilking Oregonians of an amount of money on an individual compensation basis that is far out of line with the individual compensation of the private sector worker. No one very much disputes this. That union supporters can essentially argue that these contracts are out of line, but the rip off of the taxpayer was negotiated fair and square so thus the rip off should continue is a good indication of how far we have to go to change that dynamic. It’s a very long ways.

  • MrGreenJeans

    People are not stupid. They will do what it takes not to get robbed. This explains Oregon’s situation, just like it does New York, Illinois, etc.

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