Representative Dennis Richardson:$177 Million Stimulus Package explained

Oregon’s $177 Million Stimulus Package:
Jobs Bill Or Boondoggle
By State Representative Dennis Richardson,

The severity of Oregon’s financial crisis worsens daily. In last week’s newsletter I stated the proposed shortfall to pay Oregon’s expenses through fiscal year-end, June 30, 2009, was $278 Million (the $140 Million promised payment to the Rainy Day Fund that will not be paid, plus $139 Million in budgeted expenses that must be cut before then). Now Oregon State Economist Tom Potowski is warning that Oregon’s financial condition is deteriorating much faster than expected when the December ’09 Revenue Forecast was published. Dr. Potowski candidly stated for the current 2007-09 budget that in addition to the December Forecast deficiency,

“”¦a further decrease of $300 to $600 million is possible. The risks are on the downside with decreases that could exceed $600 million.”

Thus, in addition to the $140 Million missed payment to the Rainy Day Fund, in the next five months, the current budget faces a $739 Million shortfall.

Oregon’s current financial crisis was inevitable. Back in the August 1, 2007 edition of this newsletter, entitled, “Oregon’s Revenues, Fees & Debt: Cycles for Boom & Bust” the following warning was given:

“Revenue forecasts will not always be so rosy and with the next economic downturn the state again will be forced to slash education, health services and other budgets. The spending spree inherent in the 2007-09 budget confirms the Oregon Legislature learned nothing from the 2001-03 economic recession and is destined to repeat the hardships it caused.”

Unfortunately, the anticipated economic downturn is now in freefall. These are times that will test the courage and core principles of every Oregon Legislator. Each must ask, “Will I learn from Oregon’s history or will I repeat it?”

In 2001-2002 Oregon found itself in a similar, although milder, economic crisis. Revenues were down, unemployment was rising, and Oregon was unable to pay the budget expenses for the final six months of the 2001-03 biennium. The Legislative leaders of that session solved the budget shortfall by quickly passing a measure resulting in $431 Million of debt that will not be paid off until 2013. In other words, the inability of the 2003 Legislature to balance its budget will result in $112 Million of debt payments in the current budget and $139 Million in the 2009-11 Budget. Such payments on long-term debt rob future Legislatures of the ability to use those funds for vital services, sometimes for decades. To me, it is irresponsible to continue strapping future Legislatures with burdensome debt resulting from a “buy now, pay later” attitude.

In the next five months we must deal with a jaw-dropping $739 Million shortfall, yet, instead of immediately facing this massive monster of our own making, the Legislature’s Joint Ways & Means Committee today passed the $177 Million Oregon Stimulus Package (Senate Bill 338 and Senate Bill 5562), which places our state even further in debt.

For those interested in details on the Stimulus Package, by reading the linked Press Releases for the Republicans and the Democrats, we can consider the opposing positions from both political parties. For an explanation of the Stimulus Package’s components we can read the linked Frequently Asked Questions from the Legislative Fiscal Office (understanding the proposed debt service will be about $17 Million per year for the final package), the list of State Agencies benefited, the list of Oregon universities benefited, and the list of community colleges benefited. We can also see how much will be spent in each Oregon county.

Every Oregon county gets part of this pie, but the pieces are not cut equally. To some, the difference between “important public works projects” and “pork” is whether the money is to be spent in one’s own District or someone else’s District. In truth, the proposed Stimulus Bill contains worthwhile public projects in every Oregon county, yet, these projects will be funded with long-term debt instead of planning and paying for them as line items in a standard biennial budget.

In short, this economic crisis is viewed as a government opportunity to borrow and spend more money. In this case the $177 Million will require approximate Annual Debt Service Payments of $17 Million per year for an average of 15 years. (Total approximate pay-back $255 Million.)

Instead of spending time and effort incurring debt that will saddle future legislatures for the next 15 years with a $255 Million pay-back, the Legislature should be focusing its attention on dealing with the $739 Million shortfall that threatens to crush Oregon’s agencies and services in the next five months. How we deal with the ¾ Billion Dollar shortfall places in jeopardy Oregon’s public safety, education, health care, and human services to the elderly, the children in foster care, the developmentally disabled, and every other population now depending on Oregon’s safety net services.

In my opinion, our leadership should be confronting and solving the immediate $739 Million short-fall, not using up credit by creating a short-term Jobs Bill with long-term debt and 15 years of multi-million dollar payments.

Today the $177 Million Oregon Stimulus Package passed the Joint Ways & Means Committee by a vote of 17 in favor and 4 against. Those opposing this Jobs-Bill-funded-with-additional-debt (Sen. Girod, Sen. Whitsett, Rep. Gilman and myself), believe strongly that:

1. We cannot borrow or tax our way out of this deep recession;

2. We should not dig Oregon into a deeper pit of debt during these perilous economic times, when a $739 Million shortfall in the current budget hangs over us like the sword of Damocles; and,

3. The “ends” of providing a few days, weeks or months of limited jobs on deferred maintenance projects do not justify the “means” of burdening future Legislatures with 15 years of additional long-term debt and depriving future Budgets of more than $255 Million required to repay it.

Maybe you agree with the majority of the Ways & Means Committee members that this extra $177 Million of debt is a good Jobs Bill. Maybe you feel it is ill-advised or maybe even a “Boondoggle.” Either way, it is your money that will be spent, and the final vote will take place early next week. If you would like to make your opinion known before your State Senator and State Representative take their floor vote, here is a list of Governor & Legislator Contact Information. Is it time you got more involved with how your money is being spent here in the Capitol? If so, the Bill numbers for the $177 Million Oregon Stimulus Package are Senate Bill 338 and Senate Bill 5562.
Sincerely,

Dennis Richardson
State Representative