Bend Bulletin: Oregon in Peril report misses point

Pew “˜peril’ report misses the point
The Bend Bulletin
Editorial, November 13, 2009

By now, most Oregonians are probably aware of our state’s inclusion in another “worst of” list. This one, compiled by The Pew Center on the States, examines economic conditions and related policies in nine states that approach the gold standard for mayhem set by our neighbor to the south. It’s called “Beyond California: States in Fiscal Peril.”

Such reports follow a basic script, and this one’s no different. They quantify conditions, which in Oregon’s case consist largely of eye-popping unemployment, combined with a massive drop in state tax collections. They describe the policy framework that creates and exacerbates these problems. Oregon, for instance, relies too heavily on the volatile income tax, sends unanticipated tax revenue back to the public by means of the kicker, and allows citizens to shape public policy through initiative and referendum. And, finally, they at least tacitly support policy changes that would mitigate the biggest problems. The Pew folks focus with particular distaste on the kicker and voters’ ability to second-guess their betters, er, their elected representatives.

The Pew report gets a lot of things right. The state’s tax structure is crazy, and for years we’ve supported the creation of a sales tax, combined with a reduction in the income tax. Direct democracy, meanwhile, can certainly create budget problems. Measure 11, the notorious tough-on-crime initiative, set appropriately painful minimum sentences for violent criminals. But it also inflated spending on prisons and created its own set of victims, personified locally by David Black.

Ultimately, however, the Pew report completely misses the point, which is why Oregon voters often make decisions that might strike East Coast policy wonks as inappropriate. Somebody who knows nothing about Oregon might read “Beyond California” and conclude that we’re all just dumb. But the view from inside the state is quite different. Where Pew provides shallow analysis of the big picture, Oregonians witness, year after year, the steady accumulation of policies and behavior that simply wouldn’t appear on the Pew Center’s radar. In other words, they know their own environment.

Consider the business energy tax credit (BETC), a vast expansion of which the Legislature approved on the strength of deliberately low-balled cost estimates. The credits ultimately reduce the size of the state’s general fund, which pays for schools. But that hasn’t stopped the governor from promoting it or savvy entities from using “” and abusing “” it.

Thus, the BETC has pumped millions of dollars into “green” projects that have flopped. And its pass-through option has allowed government agencies, in essence, to swipe future general fund dollars to pay for hybrid cars, efficient lighting and so on. The BETC is the perfect combination of bad faith and bad policy.

The Pew report notes that the governor, among others, believes “that one sector of Oregon’s economy, green energy, offers hope.” It even mentions a 2008 campaign visit by Barack Obama, who expressed his admiration for a Bend alternative energy firm. But it glosses over the incredible costs Oregonians are paying for green-energy jobs. While Pew calls tax credits like the BETC “generous,” most Oregonians would call them expensive and the manner of their expansion dishonest.

Public discontent is due, also, to the generous (to say the least) and virtually untouchable benefits enjoyed by public employees. The Public Employees Retirement System, despite reform attempts in 2003, will continue to give medium- and long-term public employees lavish pension benefits for years. And even as it does so, PERS is expected to cost employers “” cities, school districts and so on “” more and more in coming biennia. As more money goes into PERS, less will be available to provide actual services.

Meanwhile, as reported in The (Eugene) Register-Guard earlier this month, Oregon’s 50,000-plus state employees pay nothing “” not a cent “” for their health insurance. Partly as a result, these health plans number among the nation’s most expensive.

Public employees defend such benefits zealously, and taxpayers are helpless to change them. But they can oppose tax hikes, and they do. That’s why the Legislature’s hikes on businesses and high-income individuals have been referred to the ballot, and that’s why so many people expect them to fail.

Oregonians know that government services they use will suffer as a result. But those who work in the private sector “” whose employers would pay the new taxes “” also recognize the profound disconnect between their world and that of public employees. Many private-sector workers have taken deep pay cuts, accepted numerous furlough days and made other sacrifices recently. In part, these cuts are simply the cost of continued employment for themselves and their colleagues. But just as importantly, they allow their employers to cut costs without unduly compromising service. That’s what competition does.

All too often in the public sector, however, service is the first thing to go. There are, of course, token sacrifices “” deferred cost-of-living increases, a handful of unpaid days spread over a couple of years. But most public agencies, whose employees are represented by powerful unions, preserve employee compensation and benefits at the expense of service levels. Why do you think Redmond’s schools now operate on a four-day week?

The Pew report bemoans the fact that “the electorate, which has repeatedly rejected higher taxes, could leave the legislature with a new hole, $733 million deep, in its two-year budget …” But those tax hikes would increase one of the highest personal income tax rates in the country, and they would further the state’s reliance on a volatile revenue source. No wonder Oregonians are loath to send more money to Salem.

Voters in Oregon aren’t dumb, as the Pew report suggests. They’re jaded, disgusted and frustrated, and direct democracy is their mode of expression. If public officials want more of their money, perhaps they should try earning their trust.