Bankruptcy for Government: Try It, You’ll Like It


Governor Kulongoski last week warned that the state was on the verge of a financial crisis. There were three things wrong with that announcement.

First, the governor failed to acknowledge either his role or the role of his Democrat party in creating this financial crisis. Second, he failed to identify and/or describe the underlying factors that brought about this crisis. And third, he failed to provide any direction for resolving the crises. What a guy.

The governor also failed to acknowledge the very real pain and suffering of everyday Oregonians brought about by the failure of his administration to lead in any meaningful way on any meaningful issue. Over 163,800 Oregonians have lost their jobs. The unfunded future liability of Oregon’s gold-plated Public Employees Retirement Systems (PERS) exceeds the biennial general fund budget and that doesn’t include the liability for bonds that were used to pay down the unfunded liability. Not a single program has been scrutinized for necessity, efficiencies or corruption. While increases for K-12 education continue unabated, Oregon’s children fall further behind their counterparts on a national level and even more so on an international level.

And don’t count on any “solutions” soon. Oregon is run exclusively by the Democrats — supermajorities in both houses of the legislature and every statewide office. The Democrats are financed by the Oregon public employees unions both directly with campaign contributions and indirectly with “volunteers”, “educational” mailings, and polling. There is simply no possibility that a party beholden to the primary beneficiaries of Oregon’s government excesses will ever find a solution — other than one tax increase after another.

So let’s try to rectify the shortcomings from Gov. Kulongoski’s acknowledgement of the pending financial crises.

First, whose fault is it? The fault lies solely with the Gov. Kulongoski and the Democrat controlled legislature. If you are the governor and your party controls both houses the responsibility for excessive spending lies solely at your feet. And please, don’t burden us with that baloney that it was a “bipartisan” effort because you were able to induce some soft-headed Republican’s vote by funding his or her pet project. That’s bribery not bipartisanship. And don’t blame the voters. You cannot spend extravagantly rewarding your financial arm — the public employees unions — and then cry crocodile tears over the lack of funding for schools, public safety and infrastructure and expect any different result. The voters were not given a choice over how you spent their money; they were only given a choice of losing services if they didn’t fund your excesses. Surely one of the lowest circles of hell is reserved for that kind of lying.

Second, what are the underlying causes of the financial crises? There are two — undisciplined spending and dominance of the public employee unions. In all likelihood the latter is the cause of the former. Outside of the members of the public employees unions, can anyone point to how he or she is better off in 2010 than in 2002 (the date of Kulongoski’s election as governor). I thought not and yet Oregon spent an additional $4.5 Billion dollars — an increase of 46.4%. No programs have been critically reviewed or audited. No programs have been tested for necessity or even efficiency. No programs have been adjusted to insure only those legally eligible are benefiting. And most importantly, no programs have been examined to see if they are improving — most critically the K-12 educational programs.

The performance of Gov. Kulongoski and his Democrat legislative colleagues as it relates to Oregon’s fiscal matters is the moral equivalent of giving the keys to your Corvette to a five-year old — he can reach the peddles but that’s about all.

And finally, is there a solution? Yes, it’s called bankruptcy.

But let’s not get hasty. Bankruptcy is really a process of last resort. We are probably going to learn a lot more about it given that three major California cities (Los Angeles, San Diego and San Francisco) now face the distinct possibility of filing for bankruptcy before the summer solstice. The preferred solution is for elected officials to act responsibly but that isn’t going to happen in Oregon — just like it is not going to happen in California. And in the end that leaves just bankruptcy.

In Oregon’s case here are some of the things that a bankruptcy proceeding could do:

1. Modify PERS, including modifying the benefits available to both current and future recipients and forcing public employees to pay for their own contributions to the system (this latter act would effectively reduce Oregon’s current payroll by six percent). The fact that Oregon’s Supreme Court (all beneficiaries of PERS) have previously ruled that you cannot modify or reduce PERS benefits is irrelevant to a bankruptcy court.
2. Modify current wage structures to force wage rates to more closely approximate private sector wages for comparable jobs. (A study by Oregon’s own Department of Employment indicates that public employees receive up to one-third more for comparable jobs in the private sector and that does not include their amped up PERS and healthcare benefits.
3. Modify the “work rules” in public employee union contracts to promote efficiencies. First among those would be the elimination of the provision agreed to by Gov. Kulongoski that prohibits outsourcing of any function currently performed by a public employee union member — regardless of savings or efficiencies.
4. Force reduction of the number of public employees to accommodate the current revenue projections.
5. Require a financial and performance audit of every government function and a ranking for elimination or modification.

But let’s understand also there is a substantial limitation to the power of a bankruptcy judge. The judge cannot simply sua sponte order any of the actions listed above. The judge can either approve a plan submitted that includes these items or refuse to accept a plan if they fail to contain any such items. In other words the outcome of a bankruptcy proceeding is not necessarily foretold and it, like most things today are subject to political pressures — note the bankruptcy proceedings for General Motors and Chrysler where the outcome was preordained by the ability of the federal government to withhold funds if it did not agree.

But given the inability of Oregon state government, or for that matter many of the local governments to bring the public employee unions to heel; I opt for bankruptcy — even with its inherent weaknesses and unpredictability. Certainly it couldn’t be worse than what Oregon has.

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Posted by at 06:00 | Posted in Measure 37 | 12 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jim Ray

    Hmmm, where have I heard that Oregon is Bankrupt and should “Declare it”? Hmmm?

  • Bob Clark

    Larry Huss is spot on in identifying government employee unions’ dominance over state and local governance in Oregon, and the consequent transfer of wealth from every day families to state and local government employees and their union bosses. And notice who it is who leads the undermining of citizens’ tea party efforts, a teacher who benefits from the current union dominated government.

    I would prefer the New Jersey governor’s proposed solution which is simply to raise the retirement age for government employees from the current typical 55 years of age to something more akin to social security ages of 62 (early reduced benefits) and 66 or 67 (full benefits). This would bypass the uncertain machinations of a bankruptcy court. A bankruptcy court would likely only deal with the most pressing issue of unfunded pension liabilities, and even if this. I hardly think items 3 through 5 would be touched. Another big problem of bankruptcy is its probable negative effect on state and local government credit ratings, raising interest costs for state and local government.

    Raising retirement ages to similar to social security receipients should I think sharply reduce unfunded pension liability, and also, probably reduce the hiring of new government employees with their consequent benefit costs. Chris Dudley actually favors state government workers paying a share of their health benefits. I think the electorate with proper presentation would see it fair to raise retirement ages and require government employees to pay a more typical share of their health care benefits.

  • retired UO science prof

    Now instead of talking about horsewhipping Governor Ted — was Larry trying to show us how to be good tea party activists? — he’s talking about “bankruptcy” as the solution to the state’s problems. I put the word in quotation marks not only because it is a direct quote, but also because legally the notion of bankruptcy for a State is very dubious — no such “procedure” (again a direct quote) for a State exists in law.

    I hope Larry’s thought processes were better when he was running Oregon Qwest. Maybe that’s why it was such a great company under his stewardship.

    If this is how Larry does “Catalysis”, let’s hope he never tries to become a chemistry teacher!

    • Rupert in Springfield

      >I hope Larry’s thought processes were better when he was running Oregon Qwest. Maybe that’s why it was such a great company under his stewardship.

      Well, however badly he did, he probably wasn’t as bad as Ted.

      Is Quest the worlds greatest company? Nope. but it isn’t on the brink of bankruptcy and threatening to drown us all in massive taxation as a result either.

      Will you hold the Democratic leadership of Oregon up to the same castigation you continually subject Mr. Huss to for his leadership of Quest?

      Of course not.

      You just don’t want to deal with the fact that we have had lousy leadership in Oregon, and that has been largely a Democratic responsibility.

      The fact that there has or has not been lousy leadership elsewhere doesn’t change that fact.

      • r UO sp

        Larry is supposed to be “catalyzing” change. All that proposing bankruptcy for the State of Oregon does is make his side look like fools at best, lunatics at worst, or both.

        The question is not whether Ted has been a great governor — I never have and never would say that. I didn’t vote for him (either time). Or the Republican, either, second time. (Did vote for Mannix). In fact, Ted’s performance is irrelevant to the question of where to go next.

        Proposing to horsewhip a popular 2-term governor and to declare State bankruptcy (whatever that means) is less than worthless. It just helps insure that we’ll have more of the Democrats.

  • Rupert in Springfield

    I think bankruptcy is pretty much going to wind up being the solution here. When it is done on by a state it will be called receivership, but it will amount to the same thing.

    Retired state workers who are already floating on their golden parachutes will probably be made reasonably whole. This is a national problem, Oregon might be in worse shape than most, but it is not peculiar to Oregon. My guess is that whatever funds will be needed to pay off these ludicrous retirement plans will be added on to the national debt.

    Will things change?

    Not on your life.

    Unions in the private sector are created for entirely different reasons than they are in the public sector. In the private sector unions form to be a check on management. Where there are no excesses of management and workers are doing well, there tends to be no interest in forming a union.

    This is entirely untrue in the public sector. Has anyone ever heard of public empolyees being historically abused by managment goons in the public sector? Of course not. Has anyone ever heard of government forcing its workers to work long hard hours with no overtime pay? Of course not!

    Unions form in the public sector for one reason – to deliver a block of votes in exchange for sweetheart contracts. Whereas management in the private sector has a counterbalance to unions demands, the profitability of a worker is only so much, thus compensation has a limit, in the public sector this does not generally apply. Politicians have no counterbalance to union demands as government does not have to run at a profit or even deliver a product with any fiscal restraint, it can charge whatever it wants and mandate you buy it.

    For these reasons, unionization of government employees should probably be looked at for the corrupting influence it is, rather than from the standard view of protecting workers rights.

    Whatever bailout, the future holds, be it receivership or massive taxation to deliver the bounty unions demand, the basic insestuous nature of the relationship between the politician and the union needs to be looked at.

    Would banning of unionization of government workers be a good idea?

    Most definitely. The wholesale butchering of state budgets to pay for ridiculous saleries is far more egregious a harm to society than any infringment on workers rights that state worker unions could have conceivably prevented.

  • Anonymous

    This would funny if it wasn’t so tragic. The citizens of Oregon get what they vote for and the result is high taxes, high unemployment and a diminished standard of living. Oregon is now just like California. All the high paying jobs are leaving the State and bankruptcy is at hand. The State of Oregon is like someone that uses their MasterCard to pay off their Visa bill.

    Until the voters in Oregon start electing politicians that actually know something about economics and finance nothing will change. Of course this won’t happen until the whole system collapses.

    • Yougotthatright

      Yup, the citizens voted in more taxes on businesses…let see was it bill 66 & 67 or what ever the numbers were! The small business owner actually creates most the jobs for Oregonians but instead of taking in another hole in the belt the taxpayers decided another tax was the answer to continue out of control spending. Yes PERS is out of control as is the employee unions in all of the states. They all say not out of my pocket make someone else pay, so who pays…the citizens that don’t belong to their unions.

      The state government officials must be held accountable for their actions and should all be voted out of office…do the people of Oregon have the guts to do that? Let’s hope so.

  • Nogero

    Does anyone know of a source link to the report by Oregon Employment Department that claims public employees earn one third more than private sector?

    I like the bankruptcy idea! Some city and county governments are near shut down trying to pay retirement benefits to early retired public employees who have taken second careers as “consultants”.

  • mowlsoila

    It’s an article about bankruptcy that is really good!! Thanks!
    I have the website that relate to foreclosure. visit me for sometime !!

    http://www.foreclosurequestionsguru.com/

  • C. Redfeather

    Citizens around the Country need to start dealing with reality. Oregon is not alone is terms of its dire fiscal situation and the causes of it. State and local governments everywhere are being financially run into the ground by their own employees, the unions that represent them and the politicans they elect. What is baffling is the failure of individual public employees to realize that their jobs and retirement benefits are hanging in the balance and their refusal to make any concessions whatsoever to stop the bleeding. Do they really believe that the supply of tax dollars to sustain the house of cards is endless or that whatever government they work for is “too big to fail?” Or maybe they are just too intimidated by union thugs to speak up. Oregon taxpayers are not captive citizens of the State. When they have had enough, they will pick up and leave – as many have already done. So just keep it up, folks, and the last public employee left can turn out the lights.

  • Kimi Isenberg

    Yes, Talk about Audits…Work Source of Oregon for one not to mention the UI State of Oregon has screw my Unemployment claim up and overpayed me twice I’m concerned to know if it will ever be staightened up. The number of Claim Specialist I talk to always have conflicting information so I really don’t know what to believe but at some point it will get straighten out and of coarse at my expense. Wow! What a State they go out of there way to over pay you in Federal Extention benefits and then go out of there way to give you the least amount of weekly benefit money after they make you file a new claim and over pay you on the new claim all because I work and made $1008 dollars in December of 2010. Yes well I guess if the State goes bankrupt we all have to:) This is the way to take care of people. I have been looking for work for over a year and have not been successful only a couple of temporary jobs but that is it. My new Claim after the New claim I was over paid on is going to be $115 dollars a week which is with out the $25.00 Federal Stimulus which I’m entitled to since my new claim should be back dated to March of 2010. Anyways to much to explain but it is a MESS and The State should definately be AUDITED ON ALL ASPECTS. Bankruptcy well I’ll probably be joining them so why not?

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