Rep. Dennis Richardson: Special Session Review

Oregon Special Session””Final Week:
Pay the Tab and Go Home

On Friday, the Oregon 2008 Special Session adjourned. The end of every Legislative session is marked by one or more complex budget bills, and this Special Session was no different. During the final hours of the session, three budget bills surfaced. They all came to the floor, were debated and passed by near unanimous votes. They may have marked the end of this special session, but their consequences will be felt for years to come.

Senate Bill 5556 is the omnibus budget bill. The attached summary of SB 5556 is three pages of line items and they can be confusing. To put Oregon’s budget into perspective, as of December 2007 our current 2007-09 State General Fund and Lottery Budget had forecast an “ending balance” of $243 million for the end of the biennium. The State promised to contribute $140 million to the 2007 “Rainy Day Fund” from that ending balance. That promised deposit to fund the “Rainy Day Fund” has now disappeared into thin air. With the March Forecast’s economic downturn, the ending balance was reduced by $188 million, which lowered the revised ending balance to only $55 million, before the Special Session’s SB 5556 expenditures.

Out of the remaining $55 million SB 5556 is spending $13 million,

“¢ to restore funding to the “Big Look Committee (statewide land use evaluation task force),
“¢ to recruit addition troopers for the Oregon State Police,
“¢ to pay for tougher penalties for property crime convicts,
“¢ to provide funding for two community health care delivery grants, and
“¢ to cover the costs of a dozen additional expenditures.

Now that all has been said and done, and the Special Session’s final gavel has fallen, there is a new forecast for the 2007-09 biennium’s ending balance. It is now only $42 million.

So what is the financial condition of Oregon’s economy? The answer depends on who you talk to. The optimists point to the fact that Oregon has continued to have more new jobs in every quarter since May 2003. The pessimists point out that Oregon’s housing starts dropped 11% in 2006 and another 17% in 2007, with no housing sector recovery in sight. Add to housing woes the record highs in petroleum and natural gas prices, doubling and tripling of the price of corn and wheat, and the manipulations of the Consumer Price Index, and it is obvious that Oregon, like the rest of America, is in a recession. The coup de grâce for our economy is the tightening of credit requirements. Last year Oregonians spent more money than they earned. The difference reflects the number of people living on credit, either from home equity or credit cards. With fewer refinances and home sales and increased restrictions on consumer credit, there will be less consumer spending and the downward spiral of the economy will only intensify. Although an optimist by nature, I am also a realist and with so many negative indicators, I join the growing number who believe Oregon is in the beginning stages of a recession, and we need to be making long-term plans accordingly.

For Oregon, all eyes will be on the June 2008 Revenue Forecast. If the June and September Forecasts indicate greater reductions in state revenues for the biennium, either the Governor will require across-the-board cuts in spending or our Legislature will be called back into session and this time it actually will be for an “emergency session.”

Senate Bill 5555 is the Capital Construction Bill. Although the summary of SB 5555 shows several millions being expended for airport construction and the state’s data center conversions, the only General Fund being spent is the desperately needed $929,000 for Group Home expenses for developmentally disabled individuals.

House Bill 5100-A is the “Bonding Bill.” It provides three types of long term debt.

First, HB 5100 provides for $113 million of Certificates of Participation. Our founding pioneers knew the dangers of allowing the government to incur debt during times of peace, so in Article 11, Section 7 of the Oregon Constitution they told government officials they could not, “”¦in any manner create any debt or liabilities which shall singly or in the aggregate with previous debts or liabilities exceed the sum of fifty thousand dollars”¦.” For decades Oregon (as well as several other states) has found this constitutional limitation too restrictive, so to avoid having to go to the voters for permission to incur debt, alternatives have been devised that ignore Oregon’s Constitutional limitation on public indebtedness. Certificates of Participation (COP’s) are the government’s way to circumvent Art. 11, Section 7. COP’s get around the Constitution using what are known as “legal fictions.” The COP’s legal fiction goes something like the following: Since the state uses a two year budget, any debt that does not bind the state beyond its two year budget is not considered a “debt or liability.” Therefore, a Certification of Participation (although it is understood to be and is intended to be a long-term debt), will not be considered a “debt or liability” so long as the state has the power to nullify the understanding at the end of each biennium. Notwithstanding the state’s legal right to terminate the debt every two years, if the state were to do so, it would be a violation of its “understanding” that the COP is in fact a long-term (generally 5-25 year) debt and the state would severely damage its credit rating by violating the COP understanding. If the payments on the COP’s were stopped the lenders would own the capital improvement being funded with the debt. In short, COP’s are legal and are a fiction””they legally circumvent the Constitutional limitation against in “any manner” creating “any debt or liability” above $50,000. The attached summary of HB 5100 itemizes an additional $113 million COP’s. Although the items listed may be needed and justifiable, the Legislative and Executive branches should either comply with the intend of the clear and concise wording of the Oregon Constitution or ask the voters for a Constitutional Amendment that would raise the debt limitation amount.

Second, in addition to the $113 million of COP’s, HB 5100 authorizes $200 million of “Article 11-F(1) Bonds.” These bonds are authorized in the Oregon Constitution for “higher education building projects.” HB 5100 enables the University of Oregon to construct a new state-of-the-art sports arena with the authorization of $200 million in construction bonds. The U. of O. is expected to repay the $200 million in debt from the University’s revenues and contributions. (No one asked if the cost of game tickets will increase to cover payments on the new $200 million sports arena.) Anyway, the U of O asked for the state to approve these bonds and HB 5100 gives the requested authorization.

Finally, HB 5100 authorizes $7.5 million of Article 11-G Bonds. These bonds will enable the completion of OIT’s partially completed Health Center. The Klamath Falls OIT campus needs this additional $3.5 million. In addition, Clatsop Community College will receive $4 million in bonding authority for its projects.
At the end of every session, each legislator must decide how he or she will vote on the final budget bills. I read and carefully considered the provisions of SB 5556, SB 5555 and HB 5100. Each of these budget bills has allocations that are good for Oregon. Not one of them is perfect, but, once again I am reminded that “politics is the art of the doable,” and as minority member of this Legislature, I have done all that I can.

To my constituents and the good citizens of Oregon, I can only say, I have reviewed thoroughly the components of each bill. I have studied out each issue and I have exercised my best judgment in deciding how to vote for each piece of legislation. I take seriously our system of representative democracy and my place in it. Once again, it has been an honor to represent you, my readers, the citizens of District 4 and the State of Oregon. I hope I have represented you well.

Dennis Richardson
State Representative