Not So Tough Decision for Budget Reductions

Every time one suggests that state government live within its means, the big government proponents respond by asking where would you make the cuts. The proponents (primarily the public employee unions) of Oregon’s massive tax increase (which is being challenged by Measures 66 and 67) will use the same arguments. It’s a trick question for two reasons.

First, these people view “cuts” as anything less than the cost of the current service level increased by inflation and program growth. Thus, if you held government spending to the same as the previous biennium, they would view that as a 12-16% cut. Second, the budget and accounting systems of state government are deliberately Byzantine in order to obscure the actual amounts spent and the purposes for which they are spent. It is virtually impossible for the average citizen to garner enough information to make specific recommendations for reductions in spending.

Cutting budgets while painful should not be difficult. It is a necessary and routine fact of life for businesses and individuals when the economy softens or other setbacks are encountered. Apparently state government is the only entity which chooses to be immune from this reality.

When I was an executive for the telephone company we routinely went through this process — in difficult years we did it quarterly. It didn’t take months to accomplish — usually our responses were due within ten days. Oh yes, we had those executives who would focus their proposed cuts in a fashion that would cause the greatest discomfort to the customers in an attempt to avoid making reductions. However, the senior officers generally responded by informing those executives that if they could not make the reductions without harming customers, then the senior officers would find someone who could. It’s always surprising how creative someone can be when their job, rather than their empire, is at stake.

The combined tax increases under Measure 66 and 67 are about $733 Million. Rejection of those tax increases by voters will require the legislature to reduce the current budget by that amount. Following is a thumbnail sketch about how to accomplish that reduction.

Roughly eighty-five percent of the state general fund and lottery budget is spent on personnel. You cannot achieve budget reductions without reducing the number of personnel. Since the commencement of Gov. Kulongoski’s second term, the number of state government employees has increased by 2400. (In the meantime Oregonians have experienced the loss of approximately 130,000 private sector jobs.)

I am told by legislators that the “rule of thumb” is that $50,000 is the rough equivalent annual salary. Add to that the twenty-four percent surcharge for PERS (eighteen percent required by PERS plus the six- percent contribution by employees that the state has agreed to pay on their behalf) and that figure becomes $62,000. There is another 7.65% for FICA and Medicare which brings the total to $65,825. Add to that the approximately $1200 per month paid for the public employees Cadillac health insurance plan and the total now becomes $80,225. By rolling back the total number of state employees to the January 1, 2008 levels, the state budget can be reduced by $192,540,000. If the current state government administrators are unable or unwilling to make such reductions, then new administrators should be found who can and will.

In 2008, Gov. Kulongoski granted state public employee union members an additional five percent raise — a raise in addition to the bargained for annual raises and step increases. I am told that roughly sixty percent of the state employees are public employee union members. There are currently 77,300 people employed by state government according to the Oregon State Department of Labor. Reducing that number by 2400 employees as suggested above would leave 74,900. Of those, approximately 44,940 are public employee union members and thus were the “beneficiaries” of Kulongoski’s five- percent “gift.” Again, using the $50,000 figure, a roll back of the five- percent “gift” wage increase would reduce the payroll by $ 112,350,000. Add to that the twenty four percent for PERS (see above) and the 7.65% for FICA and Medicare (see above) and the reductions would total $147,908,775. I recognize that collective bargaining agreements prohibit these unilateral wage reductions but if the public employee unions are unwilling to accept them, then reducing their numbers by another 1,850 people will accomplish the same thing.

Those two actions cover about $340.4 Million annually — that is $680 Million for the biennium. Of the $733 million reductions required to meet the repeal of the massive tax increases in Measure 66 and 67, nearly ninety-three percent of it can be achieved by these two simple acts.

But let’s be on the safe side since the assumptions on the number of public employee union members and the average salary may not be exactly accurate. There are other avenues to pursue that can result in significant savings without adversely impacting Oregonians.

Oregon is overrun with illegal immigrants. They impose an enormous burden on the state’s education, healthcare and welfare budgets. By removing the incentives for people to enter the country illegally, you can have a dramatic impact on the budgets without reducing benefits to those that are here legally. Let me repeat that. By removing the incentives for people to enter the country illegally, you can have a dramatic impact on the budgets without reducing benefits to those here legally.

The Federation for American Immigration Reform (FAIR), utilizing a Pew Research study of United State Census Bureau statistics, estimates that there are about 125,000 illegal immigrants in Oregon. FAIR estimates that these illegal immigrants impose a cost of approximately $400 Million annually ($800 million for the biennium).

Arizona has adopted the toughest employer sanctions law in the United States. Employers in Arizona face the loss of their business licenses if they knowingly hire illegal immigrants. The results have been dramatic. Illegal immigrant advocacy groups acknowledge that huge numbers of the illegals have left Arizona and returned to their native lands. In twenty-one school districts in Maricopa County (metro-Phoenix) there has been a reduction of almost 6400 students. David Lane, a Mesa school-board member is quoted in the Arizona Republic as saying with regard to the decline in student population: “It’s not entirely unexpected with this immigration law that came on line January 1. . . I have a sense unless the court intervenes, more will leave at end of the school year.”
And it is a permanent reduction in spending that does not impact other students. A comparable law in Oregon would have similar impacts and those impacts would spread from school attendance, to healthcare provisioning to welfare payments. All permanent reductions without impact to those lawfully entitled to benefits.

So, forget about the doom and gloom that the Democrats, the state’s liberal newspapers and public employee unions forecast should the tax increases fail. There is no need to reduce benefits to the poor, the elderly, or the unemployed. There is no need to reduce funding per child for schools. And there is no need to reduce funding for law enforcement or prisons. There is more than enough by eliminating state government support for illegal immigrants and reducing the number of state employees and eliminating Kulongoski’s gift salary increase to absorb the $733 million reduction. And if Kulongoski and his administration cannot deliver these reductions without reducing benefits to Oregonians then perhaps voters should find some new managers that can.