2013 Oregon Legislative Session: Budget, Jobs, PERS

Rep. Dennis Richardson

Now that the dust has settled and the political spin doctors have moved on, it’s time to review the key issues of the 2013 Oregon Legislative Session: the State Budget, Oregon’s Jobs and the Economy, and the Public Employee Retirement System (PERS) Crisis.

2013-15 State Budget and the Call for More Taxes.  Last March we saw the contrast between the Democratic leaders’ Co-Chairs’ Budget and the Republican Leadership Budget proposals The contrast was dramatic.

For the 2013-15 Budget, the Co-Chairs proposed spending the entire $1.7 billion in additional forecasted revenue. In addition, they sought an additional $275 million in tax increases, delayed a $350 million payment to the PERS fund at a total cost to taxpayers of $1 billion in additional interest costs and lost investment revenue, and proposed substantial undisclosed cuts in programs.

The Republican Leadership proposal provided a spending increase of 6% to allow for inflation and population growth and would have balanced the State Budget without tax increases, without undisclosed reductions and without increasing the PERS debt.

The final 2013-15 State Budget signed by the Governor resulted in a $2 billion, 13% increase in revenue without the tax increase sought by the Democratic leaders and the Governor. Despite incredible political pressure, the House and Senate Republicans refused to provide the votes required to raise taxes on Oregonians.

Currently, notwithstanding nearly $2 billion of additional revenue in 2013-15 over the 2011-13 biennium, Governor Kitzhaber continues to seek a possible Special Legislative Session for the purpose of passing undisclosed PERS changes and raising taxes.  Such a Special Session will only be called if enough Republican legislators agree to join the Democrats in voting for unnecessary tax increases. If this happens, I will not be one of them.

To summarize, not only is the growth and cost of Oregon government unsustainable, its current trajectory harms all Oregon citizens, especially the poor.  Raising taxes and fees on businesses results in increasing prices on products and services.  When prices go up, Oregon seniors and others living on fixed or low incomes suffer the worst consequences.  Some of Oregon’s most vulnerable citizens are forced to decide whether to pay for food or to pay for their life-saving medicines.  Instead of more tax increases, Oregon needs more taxpayers. Good paying jobs for Oregon’s unemployed workers would provide them.

Oregon’s Jobs and the Economy.  Although job creation was a top issue before the 2013 Session began, six months later, when the session ended, there had been NO meaningful legislation passed that would significantly help Oregon’s economic growth and result in good-paying, permanent jobs for Oregon workers.

Since 1996, Oregon continually has languished with an unemployment rate higher than the national average.  Recently released July 2013 unemployment figures show the gap is increasing.  The national average (7.4%) decreased while Oregon’s unemployment rate (8%) increased. Oregon’s veterans at 9.2% unemployment, have an even harder time finding a good job.

Oregon has lost 72,100 jobs (net) since December of 2007.  By way of comparison, Washington, Idaho, Montana and Alaska all have unemployment rates that are below both Oregon and the national average rates.

The level of unemployed Oregonians is at a crisis stage in certain places and populations.

In Oregon’s rural counties the lack of jobs and the resulting high unemployment rates are reminiscent of the Great Depression.  Curry County has a 10.6% unemployment rate and is facing insolvency. Josephine County has 11.3% unemployment and has laid off all but one patrol deputy.  The danger to our fellow Oregonians in these depressed counties, caused by years of economic decline and high unemployment, is quite undeniable.  Josephine County Sheriff Gil Gilbertson recently commented in a Medford Mail Tribune article on the plight in Josephine County:

“We are buried,” [Sheriff Gilbertson] said. “Burglary has increased 1,594 percent over the last year. Auto theft has increased 1,714 percent. Theft increased 1,435 percent. Domestic assault, 1,100 percent increase.”

In Portland, according to the most recent Census data, the unemployment rate among young African American men is a staggeringly high 35%.  These young men, often from single-parent homes, desperately need opportunities for training and good jobs.  In Portland schools the African American graduation rate is only 50% and for Native Americans it is only 30%. Statewide only 2/3 of Oregon high school students graduate with their classmates.

Without skills and a good education, what kind of future do these youth have? The state’s failure to attract job-creating entrepreneurs, innovators and small business employers is perpetuating Oregon’s economic decline.

In short, as Oregon’s already far too high unemployment rate climbs, many of our neighboring states and elsewhere in the nation have lower unemployment rates and better economic recoveries.

Fixing PERS, the futile quest.  During the 2013 legislative session Senate Bill 822 was the only PERS reform bill signed into law by the Governor, and it passed the House and Senate without a single Republican vote.  Why was a “PERS reform” bill totally rejected by Republican legislators who for years have been clamoring for true PERS reform? Because SB 822 and its accompanying Budget Note actually worsened the PERS crisis.  Consider the following from my April 12th newsletter on how SB 822 will cost Oregon taxpayers an additional $1 billion merely to avoid making a $350 million PERS payment during the next two years:

Defer $350 Million. SB 822 defers payments on $350 million owed to PERS on its current unfunded actuarial liability (UAL). SB 822 merely ‘kicks a $350 million can down the road.’ The additional costs to Oregon taxpayers for deferring $350 million will be $500 million in lost investment earnings that would instead result in $500 million in additional debt payments by PERS employers:

a. $500 million of Lost Investment Earnings. Taking a “credit card holiday” will deprive the PERS Fund of its assumed 8% annual investment yields on the entire $350 million. Thus, by failing to pay $350 million when due in 2013-15, Oregon taxpayers will lose $1.4 billion in investment earnings over the following 20 years–$500 million more than the $900 million that will be earned on the $350 million in PERS payments amortized over the same 20 year period.

b. $500 million of Additional Debt Pay-Back Costs. Because of the $500 million in net lost investment earnings that will result from delaying investment of the $350 million payment due in 2013-15, Oregon taxpayers will pay $850 million in debt service payments over the subsequent 20 years 500 million more than the $350 million originally due PERS in 2013-15.

******The media ridicules SB 822 as “PERS-Lite”. Across the state, Editorial boards deride the weak Democratic approach to PERS reform. The Oregon School Board Association (OSBA) implores real PERS reforms, and not the flaccid excuse for real PERS reform contained in SB 822.

No issue more clearly demonstrates the essence of partisan politics in Oregon today than the strong-arm tactics used to ram through Senate Bill 822.

How is this happening? The public employee unions continue to exercise near-dictatorial control in the Legislature on all matters that affect their union members, especially relating to public employee retirement benefits. Consider the facts:

1. Most PERS members pay zero toward their retirement benefits; if they paid just the average of what is paid by public employees in other states, it would free up hundreds of millions of dollars for education, public safety and Oregon’s most needy seniors and children.
2. Most PERS members pay zero or no more than 5% toward their health benefits; if they paid just the average of what is paid by public employees in other states, it would free up hundreds of millions of dollars for education, public safety and Oregon’s most needy seniors and children.
3. Democratic State Representative Greg MacPherson, a statesman and scholar who championed the Democratic PERS reform plan in 2003 that became PERS Tier 3 (OPSRP), was defeated in the following Primary Election by a candidate supported by the unions.  Many believe MacPherson’s subsequent bid for Attorney General was cut short by union opposition and money. There is an implicit threat to any Democratic legislator who challenges the public unions on PERS: Support reform and suffer the same fate as Rep. MacPherson.

Conclusion. What is the driving force behind the passage of SB 822’s anemic response to the PERS crisis?  The answer is contained in a series of initials—OEA, SEIU, AFSCME.”

There you have it. The key issues of the 2013 Oregon Legislative Session were (1.) the State Budget, (2.) Oregon’s Jobs and the Economy, and (3.) the PERS Crisis.

Although nearly 800 bills were signed into law  by the Governor, the on-going cry for a Special Session tax increase, the inability to pass meaningful legislation to benefit the economy with permanent, family-wage-paying jobs, and the failure to solve the PERS crisis because of fear of public employee union reprisals all contributed to a disappointing legislative session in 2013.  Since the short 2014 session is likely to be focused on political positioning by the Democratic leaders and the Governor, the best chance for effectively addressing Oregon’s three key issues will have to wait until the next full session convenes in 2015.

In short, state government’s growing costs and burdens and its deference to the coalition of the status quo do not solve Oregon’s problems — they exacerbate them.