Will the Legislature Raise Your Taxes?

At the conclusion of the second quarter of this year, Oregon’s state economist determined that Oregon has slipped into another recession (two consecutive quarters of decline in the gross domestic product — GDP). That means that the actual recession began for Oregon at the beginning of the year. Despite that fact, Oregon’s unemployment rate remained about even with the national unemployment rate and housing prices remained relatively stable.

But all of that is over now. Oregon’s unemployment rate has soared to 6.5% putting it ahead of the national rate of 6.1% and ahead of its neighboring states with the exception of California (now a third world nation) and Nevada which has watched its predominant building industry collapse. Even Arizona (5.6%) and Colorado (5.4%), both of which have suffered a much more dramatic effect from the housing industry collapse, have substantially better unemployment rates.

Worse yet, according to Oregon’s Employment Department, the year over year losses of employment have occurred in those segments with the traditionally highest paying jobs. Manufacturing lost 10,000 jobs or 4.8%. Construction lost 11,300 jobs or 10.2%, and the usually stable Trade, Transportation, and Utilities sector lost 2,100 jobs or slightly less than 1%. Twenty-three thousand, three hundred good paying jobs are gone.

But fear not, Oregon’s Government sector grew by 9400 or 3.7%. Oregon’s minimum wage sector (Leisure and Hospitality) grew by 3500 jobs or 2.9%.

In November of 2007, Gov. Kulongoski stated that the current tax structure in Oregon would provide “sufficient revenues for the foreseeable future.” What he meant is that, using the straight-line growth rate that the Oregon government types use to project revenues, it appeared that Oregon’s tax coffers would be overflowing. (The methodology never takes into account actual economic conditions but rather uses a ten-year average increase applied to whatever point of revenue collections that currently exist.) However, given that the “storm warnings” were out all over the nation regarding the housing crises, the increasing cost of fuel, and the looming credit crises, Kulongoski’s pronouncement was premature and downright foolish. But then if your measure of “well-being” is how the government is doing as opposed to how its citizens are doing, such naïve conclusions are understandable.

Now, by most estimates, state government is $2 Billion in the hole for the next biennium. That figure is calculated by using the “current service level” methodology which assumes that all of the programs currently provided by the government will continue and their costs will be adjusted for inflation, programmed salary increases and growth in the number of benefit recipients (and corresponding growth in the number of employees need to serve that growth). No new programs are included even though the governor has proposed several.

And last week’s headlines in the Oregonian were less than reassuring that the governor and his Democrat allies in the legislature have yet appreciated the situation. The first shoe was the announcement that state government “needed” another 1,000 employees to staff the new mental health facility being constructed. No explanation was offered as to why replacing one building with another would require an additional 1,000 employees — 1,000 public employee union employees.

And following shortly on the heels of that pronouncement was an article detailing the outlandish payroll increases for Democrat appointees in Kulongoski’s administration (several of whom are former public employee union officials) and the public employee unions. The average increase for executives in the state government was 33% (every state executive office is controlled by Democrats). The average increase for the public employee union members is to be 13-16% (this comes on the heels of two successive raises in the last year — one negotiated and one a gift from Kulongoski). And those raises do not include the handsome and corresponding increases in the cost of healthcare and retirement benefits for those state workers.

Those raises for public employees stand in stark contrast to the average wage increase of 4% for all Oregon workers in 2006 and 2007. (The 4% figure is artificially high because it includes public employees and their dramatic wage increases — the actual figure for non-public employee workers — those who still have jobs – is closer to 3.5%.)

In a recent magnanimous gesture Kulongoski rescinded a 3.2% pay raise for agency directors which represents the cost of living adjustment portion of the massive 33% increase noted above.

However, no such rescission was made for the members of the public employees unions whose massive contributions of dollars and “free” volunteers fuel the campaigns for every statewide Democrat candidate and virtually all of the Democrat legislative races.

And there we have the essence of the whole story. While Oregon’s hardworking employees are limping along with significant job losses and minimal salary increases, the Democrat state government, owned and operated by the public employee unions continue uninterrupted increases in the number of public employees and salary increases at four times those enjoyed in the private sector.

One might conclude that the best employment opportunity in Oregon is to work for state or local government and they would be right. Government employees used to trade job stability for wage inferiority. In Oregon that is no longer the case. Government jobs now pay more than comparable jobs in the private sector and that does not include accounting for superior benefits.

One might argue that government employees also pay taxes, but even at Oregon’s top rate, they only contribute 9% of what they take out. There is a tipping point at which the cost of government will exceed the ability or willingness of citizens to pay. In many sectors, Oregon has already reached that point and the drain of good paying jobs is likely to continue.

But don’t expect state government to recognize the problem that it is creating. Oregon now has a state government that operates for the primary benefit of the public employee unions and they are not likely to cede control anytime in the near future.

So the question of whether the legislature will raise your taxes, joins the litany of the obvious:
ï‚· Is the Pope a Catholic?
ï‚· Does a bear poop in the woods?
ï‚· Will the legislature raise your taxes?