Fiscal Conservatism, the Kicker, and Oregon

“All hail the kicker. It has no basis in logic, fairness or sound long-term economic strategy, but it does one hell of a job turning the house lights up on the state’s theatre of the absurd.”
– Steve Duin (Tuesday, June 6, 2006)

I’ve never understand why the Oregonian, it’s columnists and it’s editorial section fail to understand where Oregon’s fiscal conservatism comes from.

Continually there seems to be a criticism of any ballot measure, policy, or person that seeks to either constrain the spending of our state or return unspent tax monies to the voters. Usually, as above, the criticsim revolves around a perceived lack of reason or failed logic to why a reduction in government money is something that benefit Oregonians.

The above quote from Steve Duin does a great job showing a point of view which guides the tax policy coverage of the Oregonian. One that fails to understand why tax reform activists do what they do, voters vote how they vote, and why many political liberals in Oregon’s legislature and governor’s office don’t get the belief system of what it means to be fiscally conservative. This statement also shows the consistent bias of Oregon’s print media.

The logic of the kicker is simple.

Taxes are a social compact between tax payers and government to fulfill for necessary public services. (I’ll save the debate for what is necessary for another day as this is a whole other ball of political discourse). These taxes paid are projected and if the money budgeted for our state’s services is met the remaining excess is returned to the tax paying public.

The state asks for a budget, the Legislature passes this proposed budget and any excess is rightfully returned to those who provided it. Very similar to a business that is overpaid for a service and that is ethically obligated to refund the excess payment.

Thie kicker is a longstanding fiscal policy of Oregon’s Constitution. Originally provided for by a ballot measure, it was further evolved from a kicker tax deduction into an actual kicker tax-return in the form of cold hard cash. But right there, when the government starts handing back unspent money. Thats were the Oregonian can’t understand why. It is just beyond the paper’s ability to conceive that there would ever be such a thing as excess money in the state’s budget.

On the political spectrum there are two extreme ends as it relates to fiscal policy. Those that believe government can do no wrong (the fiscally liberal) and those that believe government can do no right (the fiscally libertarian). Liberals are those that believe no government expense can possibly be looked at as waste. Those exposed as bad apples squandering the public resource are just one more cost of an adequate government and therefore do not excuse a reduction in state spending (this being the service based budget approach currently applied by our state). And those on the libertarian side believe that there is no such thing as a good government program. The libertarian would argue that anything a public entity can do could the private sector can do it better for less (this usually being the perspective covered by the media when discussing tax related ballot measures).

Then there is a broad range in between – the fiscal middle ground. Most of which would identify itself as “fiscally conservative.” This fiscally conservative majority are those that pass ballot measure after ballot measure, vote down light-rail, and oppose stop-gap taxes. They are also the key to any tax reform package being proposed by any politician. Even more important regardless of their party affiliation they don’t trust government to spend their money as well as they do. (Hence they also connect any form of tax reform that isn’t an additional control on government expenditure to be a new tax – that’s why sales taxes fail every time in Oregon)

Many feel that if government fulfills it proposed budget it’s leaders should return the difference as the remaining revenues are owned by those who created this wealth. The level of service determined is where the debate rages.

On the left there is a call for “service based budgeting” which determines an assumed level of service based on a guaranteed amount of funding. If government can’t succeed, the argument goes, its solely the size of the budget that causes the failure or lack luster performance. This of course makes an easy argument always for more money. At any time every shortcoming of any program is directly linked to a need for more spending (and therefore an elimination of the “needless” kicker).

Contrast this with those on the right who desire to establish a “results based budget” which requires a certain level of service checked by a requirement that the voters become consulted before more money is budgeted. It assumes some basic economic principles such as all things being equal the cost of government should move lockstep in combination with the population served and cost of living inflation. In the middle of a biannum budget period the Legislature must ask for permission (or at least publicly fight) in order to raise the state’s budget (or an admitance that the state is out of money).

In the event that the kicker is taken back to fund government a public dialouge is immediately started as the public begins to ask why. As the argument goes, if government spending exceeds inflation then government is expanding its mission beyond the agreed social compact. In many circles those on the right accuse their government of holding basic services hostage in order to allow for above inflation mission creep of government’s scope.

This battle rages over a middle ground of fiscally conservative voters. Voters who want government to be frugal, spend only what it needs, and be responsible in returning the excess. The kicker is an invention devised to serve this middle ground as a constituency that seems fickle at the polls but is consistent when it comes to the fiscal policy of our state.

The kicker is fair and it makes sense as a tool to engage the public in the debate over how and where Oregon spends money. The fairness of the kicker is that Oregon recognizes that government is beholden to the people it is charged with representing. The long-term economic strategy is simple; voters have incentive to watch their government and government has a need to spend only what it requests as reasonable. Beyond this there is also the fact that without the kicker talk about a rainy-day fund would likely be just that – talk.

There is no problem facing Oregon that cannot be solved with more daylight, more public awareness, and more involvement. Without a clearly transparent government no reform will ever happen as confidence is to low in our executive and legislative branches. The kicker is one of the few tools that short-circuits any attempt to play shell games with the budget. It guarantees one form of transparency and that is an expectation that the Oregon’s economy should always grow faster than government’s immediate needs. When that doesn’t happen the voters begin to watch closer just as the legislature begins to nickle and dime the very voters denied their kicker. Like a flashing yellow caution light – thats what a denied kicker really becomes to the voting public.

So All Hail the Kicker! It’s logic, it’s fairness, and it’s long-term role serving Oregon and it does one hell of a great job turning a spot light on what our government does with its revenue.