Oregon’s newly elected State Treasurer, Ben Westlund, has continued an unbroken string of bonehead ideas with his newest proposal to create a prepaid college tuition program.
You remember Ben Westlund. He is the Republican state senator, turned Independent, turned Democrat from Deschutes County. He’s the same Ben Westlund who, as a Republican Representative, lobbied the House Republican leadership hard to become co-chair of the powerful budget committee. He then sided with the Democrats to thwart attempts by the Republicans to provide a balanced budget without a tax increase.
He’s the same Ben Westlund who, when Sen. Bev Clarno (R-Bend) resigned her seat, appeared before the Deschutes County Republican Committee to lobby for their support for his bid to be appointed to fill Clarno’s seat. In the process, Westlund told members of the committee that he would “represent the Republican Platform better than the other GOP candidates.” Westlund got their support and promptly stabbed them in the back by proposing a $1.2B tax increase with Democrat Sen. Kurt Schraeder.
He’s the same Ben Westlund who joined Portland’s uber liberal Sen. Kate Brown (now Secretary of State Brown) in proposing to ignore the popular vote of Oregonians limiting marriage as being between one man and one woman. They sponsored legislation that gave all of the rights, duties and privileges afforded to married couples carte blanche to homosexual couples. Regardless of what you may think about those propositions, they sure as heck did not reflect the Republican Platform to which Westlund had pledged his fidelity.
But Westlund is agile if nothing else. When he realized that as a Republican nobody liked him and as an Independent nobody cared about him, he became a Democrat and now nobody trusts him. And for good reason. Not only did he sell his former colleagues out in budget negotiations and his constituency in Deschutes County but he misled Oregonians on his tax proposals.
Westlund promoted his sales tax proposal as “tax neutral” when in fact it increased tax revenues by $1.2B. When questioned about this seeming inconsistency, Westlund dismissed it by stating that the additional revenue would come from Oregon’s “underground economy.” For a proposed five percent sales tax to generate an additional $1.2B, one would have to discover an “underground economy” of approximately $24 Billion dollars. But Westlund has never been bothered by facts, or logic, or big spending or increased taxation.
His latest proposal for a “prepaid college tuition program” is vintage Westlund. The fault lies more in what he doesn’t tell Oregonians than in what he does tell them.
First, the Democrats have already demonstrated their incompetence in the administration of the Oregon College Savings Plan (OCSP) — the so-called “conservative investment plan.” Why any Oregonian would trust the state government to manage their funds is beyond me. There appears to have been little “due diligence” in selecting the fund from the standpoint of understanding its investment strategies and even less “diligence” is overseeing its strategies as the market evolved.
Second, typical of Democrats, they have another government solution to resolve the problems created by their last government solution. Never once do these Democrats stop to think that Oregonians could have, and would have, done a better job of managing these savings programs themselves if left to their own devices. In this instance the outcome of individual investors would have reflected their tolerance for risk. For those who were adventurous, they could have invested in equities and would have fared no worse than the OCSP — in all probability they would have fared better because they would not have left their money in the market for as long as Oregon’s Democrat State Treasurer. For those less adventurous, they could have invested in FDIC insured certificates of deposit and while they may have made only a small percentage return on their investment, they would not have lost 30+ percent as did Oregon’s Democrat State Treasurer.
And third, again typical of Democrats, they turned to a solution that has already proved disastrous to Oregon’s state budget — unfunded future liabilities. That is what Westlund is proposing. For each dollar invested, Westlund will guarantee repayment at a rate by which tuition rates increase at Oregon colleges. According to an Oregon University System Issue Brief, the average tuition increase from 2000 to 2009 is approximately $2070 or 55%. During the same period of time, the Standard and Poor’s 500 decreased by 566 points or 38.5%. Under Westlund’s plan, taxpayers would be forced to make up the difference between a 55% guaranteed return and a 38.5% market loss. Therein lies the “bonehead” in Westlund’s idea.
It’s not like we haven’t had experience in these types of programs. Remember the Oregon Public Employees Retirement System (PERS). That program guaranteed an annual return of eight percent or whatever the market produced whichever was greater and that the state would match that amount. The result of that boneheaded idea was a $13.5 Billion unfunded future liability as calculated at the beginning of the 2003 biennium. Through a variety of devices including bonding (in effect shifting) a portion of that future debt and improvement in the stock market most of the unfunded future liability disappeared prior to the most recent collapse of the market. But its back again and while there has not been a public disclosure of that unfunded future liability, it is most probably in the billions of dollars.
Now, Ben Westlund — the man charged with watching the health of Oregon’s finances — has proposed we do it again with this new unfunded future liability. Ah, but what the hell, it’s not his money, it’s only taxpayers’ money. Way to go Ben.