Another Massive Tax Increase Is On Its Way

Oregon’s massive $733 Million tax increase apparently isn’t enough. Not if you are to believe a series of news reports.

First, a recent article in the Oregonian by Harry Esteve noted:

“Oregon, like other states, is facing the end of one-time stimulus spending and snail-paced economic growth. State economists and budget analysts project a $2.5 billion shortfall for the 2011-13 budget and a $1.7 billion hole in 2013-15.

“Without federal help, that would mean more tough choices lie ahead for Oregonians about raising taxes again or cutting state spending.”

And that was before the recent announcement regarding Oregon’s Public Employees Retirement System (PERS). This week, Dennis Thompson, Jr., of The Statesman-Journal reported:

“There’s another budget crisis brewing in Oregon.
* * *
“The crisis will come in the form of huge increases in the amount of money that employers must pay into the Oregon Public Employees Retirement System. PERS has to increase the contributions to make up for investment losses that occurred during the stock market free-fall of 2008.
* * *
“The increase will cost Oregon governments participating in PERS a total of more than $1 billion in additional employer pension contributions, according to information provided by PERS after public-records requests from the Statesman Journal. To cover that expense, cuts to classrooms, parks, libraries and myriad other community services will have to be considered. Some local governments might lay off workers.”

Now you need to add to that equation the notoriously inaccurate revenue forecast system used by the Oregon Legislature. The revenue forecasting methodology utilized by the state assumes revenue growth from any given point in time. When actual revenue collections fail to meet the last projection, the projection doesn’t turn downward, rather the “start point” is reduced and the same growth curve is applied to the lowered base. Given that Oregon’s revenue forecast has failed to meet projections for at least six quarters one would think that a forecast based upon “continued growth” in revenue would be suspect.

At the conclusion of the 2009 legislative session the state budget included a projected $233.8 Million surplus which would serve as a contingency if anticipated funds fell short. By September of 2009 the revenue forecast had fallen to $13.436 Billion and the “surplus” had dissipated to $94.8 Million. In December there was a further erosion as the revenue forecast fell to $13.393 Billion and the “surplus” shrank to $79.2 Million. The most recent forecast reduced revenue projections by another $182 Million and basically wiped out any remaining surplus.

In all probability by the time the legislature meets again in 2011, the revenue forecasts will have eroded further and the increased costs of PERS will result in a projected deficit of closer to $4 Billion than $2.5 Billion.

In another article in The Statesman-Journal, the impact of the additional PERS costs was noted:

“School districts are expected to be among the hardest hit by pension rate increases on the horizon.

“Pension rates are based on payroll, and the majority of district general fund budgets “” as high as 80percent to 88 percent locally “” pay for payroll-related costs.
* * *
“On average, school districts are paying 5.3 percent of payroll costs into the pension system in 2009-11, or about $310 million. The cost is expected to more than double. In 2011-13, school districts are expected to pay an average of 11.6 percent of payroll costs, or $731 million.
That’s an increase of $421 million over a two-year period; for perspective, that’s about the cost of employing 2,500 teachers for two years. The average cost of employing a public school teacher in Oregon, including benefits and federal payroll taxes, was $82,788 in 2008-09.

And to add insult to injury the 2009 legislature, backed by their financial donors — the public employee unions — adopted legislation to ensure that public employees get every last dime they can from the PERS system — including overpayments due to computing errors by the PERS administration. The net effect of that requirement is that PERS will have to hire a minimum of 13 new persons — 13 more public employees, – 13 more members of the public employees unions.

There it is folks. Another massive projected deficit for the state of Oregon. A substantial portion of it caused by the crown jewel of the public employees unions — PERS.

Oregonians now face yet another tax increase and this time all of Oregon’s citizens will face an increase because there simply is not enough revenue that can be generated by taxing business and “the rich.” Private sector jobs will continue to decline. Large businesses will continue their outward migration either by expanding elsewhere or, in some instance actually moving their operations. Small business will continue to fail. But the public employees unions will continue to be rewarded with increased salaries and benefits regardless of the financial health of those who must pay for their largesse. And that includes those who must pay the taxes and those who will see bear the brunt of reduced services.

Welcome to the Californiazation of Oregon.

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Posted by at 06:00 | Posted in Measure 37 | 33 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Steve Plunk

    We need to face the fact that service levels must and will decline. The blame rests squarely on the shoulders of an inattentive legislature, public employee unions, and public employees themselves. They have bankrupted us while reaping undeserved benefits. They have cried poverty while gouging us of our hard earned money. They have no remorse for what they have done and will be doing to this state, the citizens of this state, and the children of this state. They have no shame.

    • eagle eye

      Steve, haven’t you forgotten someone? I mean the public?

      Aren’t they the ones that refuse to vote in curbs on union electioneering?

      Doesn’t the public, through its local elected officials, make most of the deals with public employees?

      I mean, for example, why don’t you guys in Medford, if you think you’re getting ripped off by the way the rest of the state does things, just refuse to pay teachers more than you think they’re worth? If you think their pension, medical etc. benefits are too high, why not just adjust their salaries accordingly?

      • Steve Plunk

        Eagle, I understand your point. What about those salaries and benefits? The fact is the public elects people to do the job they want but seldom do those elected fulfill their promises. My experience with local government and schools districts is they all expected the state legislature to address PERS. Each small jurisdiction had no power to reform PERS by themselves no matter how much they might have wanted. Also most of the pay and benefit recommendations came from the staff itself and the elected officials trusted them. They always seemed to play the game of paying just above average to get the very best help. The problem was that darned average kept growing from everyone playing the game.

        The other reason the public is the more innocent party is the way emotions are played by the public employees. Cut teacher pay? Kids would come home crying. Think of the children! Police and fire personnel? Why those are modern American heroes. Ever notice when public funds are cut it’s always those groups that are on the block first? That’s how they play us. It’s not the planning tech III that’s going to lose a job but a cop on the beat protecting the citizens they threaten to fire. The public is also starved of information about these things. Do you think our local paper or any paper publishes the full salary of each public sector position along with it’s associated benefits and costs? Of course they don’t. The entities themselves consider that somewhat private information and are reluctant to give it out. They have to but they don’t make it easy to get.

        Public policy should be determined with logic plus a small amount of emotion. It’s now determined with mostly emotion because the public sector knows that’s what works for them. At least until we’re so broke the scheme collapses.

        Ultimately the public will pay the price for the years of excess in government while those who violated the trust will walk away untouched. My involvement in local government has taught me many things but most importantly it taught me government cannot be trusted. It is an beast with no morals and no conscience. It is a beast whose number one goals is it’s own survival and well being. It’s not always the fault of those who work for it but simply the nature of such an organization.

        • eagle eye

          Here was my response under another article (when the Larry Huss piece mysteriously disappeared):

          I’m quite serious: if local school districts, etc. really think they’re not getting their money’s worth, especially with the coming PERS cost increases, they should throw down the gauntlet and offer total compensation in line with what they think is reasonable. And take the consequences, including probably strikes. That has happened in Lane County within memory (Eugene schools, Lane Transit District). If Eugene can do it, so can Medford. Stop moaning about things and do it!

          By the way, it’s not necessary to violate anyone’s privacy to come up with the data on salaries and benefits. Certainly not the aggregate data — averages and the like — and even individual salaries can be left anonymous. I can see why people wouldn’t especially appreciate having their salaries plastered with their names on the internet, but that is completely unnecessary.

      • Rupert in Springfield

        >Aren’t they the ones that refuse to vote in curbs on union electioneering?

        This comment is hilarious given that it totally illegal to do that.

        What makes it really hilarious is the Supreme court just struck down this sort of thing. BO even made a point about it in the SOU. Scolding the Supremes in a SOU was considered a big deal so it was all over the news. Guess you missed it.

        Fact is there has been precedent after precedent striking down state laws against union spending on elections. The Supremes strike down of McCain Feingold provisions for that was just the latest example.

        • eagle eye

          Good, then maybe Bill Sizemore will stop trying. And if there’s nothing that can be done about it short of a constitutional amendment — I mean overturning the 1st amendment — then learn to deal with it.

    • Ron Glynn

      Steve, my man, please stop blaming all the public employees for the PERS problem. “The blame rests squarely on the shoulders of…public employees themselves.” My, you paint with a very wide brush. I was hired in 1976 to work for the State of Oregon. At the time, I was told I would pay 6% into PERS for 30 years and come out the other end with a pension of 60% of my final monthly paycheck. Along the way, people in charge made a series of stupid mistakes which has lead to the PERS disaster. Is that my fault? Hell, No! I worked hard chasing criminals around for the government and I deserve every single penny I get from PERS.

      Your kind of talk just creates more hatred of people getting PERS checks. I retired in 2003(I know less than 30 years) and there was an enomous amount of ugliness going on about PERS. My wife and I moved 250 miles from Portland to start a new life. I told my wife, “Don’t tell anyone that I am getting PERS. Tell them that I am a retired drug dealer and that way they will not hate me as much.” After things died down, I felt comfortable telling people I was getting PERS. Now a new round of anger about PERS has started up. Oh well, I guess we will have to move and start over again.

      • Steve Plunk

        Ron, my man, when discussing public policy issues it becomes necessary to paint with a broad brush. You can edit my statement for effect if you wish but clearly I place blame on more than the employees themselves. The public employees need to admit they have been part of the problem and continue to be.

        Here in the private sector I’ll be lucky to retire at 67 with 60% of my final salary so don’t expect any sympathy from me. Did you ever think there are reasonable reasons for people to be angry at PERS retirees? The schools are going broke, the counties are going broke, and the state is going broke thanks to PERS. As I said those responsible will walk away untouched so perhaps a little shame for pension gluttony is the price you will all have to pay. I wasn’t blaming the retirees in 2003 like I am now so hiding your income source back then was not because of my doing. People have seen this as government excess for years.

        If you believe you deserve every penny you get then it would make sense to step up and defend your belief rather than talk of moving and hiding. Again I would remind you that’s the way public policy is discussed, up front, to the point, no punches pulled.

        • eagle eye

          Steve, here’s how to retire at whatever % of your current income you desire: put a large enough % of your total income away in retirement plans. That’s how public employees (and other people with very good pensions do it): they take a large fraction of their total compenstion in the form of pension contributions made on their behalf. They often don’t like having to do it that way, but they have no choice. In that respect, you have more freedom than they do.

          • Steve Plunk

            That’s not correct. PERS is a defined benefit plan not a defined contribution plan. What they put away and what it earns is immaterial to the promised benefits. Few private pensions work that way. I have seen many public sector workers retire young enough and with a high enough pension to completely use up any money put away while they worked. That’s exactly why PERS is failing and the government must now make up shortfalls from their general funds. We are hurting the citizens and children of today because our elected leadership did not plan they way you suggested. The sad thing is everyone knew it was faulty from the start. The Legislature, the unions, and the public employees. They were all party to a scam on the public.

          • eagle eye

            Not exactly correct in all details on PERS, but let that pass. Except I will say this: what is socked away into PERS depends pretty much on what it takes to pay the benefits, defined or not. So money is being socked away to cover the pension benefits. That is how you have a fat pension, sock away enough.

            You were bemoaning your poor retirement prospects. My general point is correct: sock away enough, and invest it wisely, or luckily, take your pick — like those PERS members who put their money in the variable account when the stock market was booming — and you, too can have a fat pension.

            Anyhow, the people to angry with are not the PERS retirees — most of whom knew little or nothing of the machinations going on with PERS — but with the people who were responsible for creating the mess. Like, in part, the voters who voted in the officials.

            What good does it do to be angry about past mistakes? I am plenty unhappy about a lot of things that have been done in Oregon, but I don’t go around seething at the people who made them that way.

          • Larry

            Okay Eagle, please try and understand the difference between defined benefit and defined contribution plans. Huge difference, and it really hurts your credibility to see you display your ignorance so proudly. I mean, really: Eagle says: Except I will say this: what is socked away into PERS depends pretty much on what it takes to pay the benefits, defined or not. That comment is in reply to this comment from Steve Plunk: PERS is a defined benefit plan not a defined contribution plan. What they put away and what it earns is immaterial to the promised benefits.

            Please Eagle, read this 10 times: PERS is a defined benefit plan not a defined contribution plan. What they put away and what it earns is immaterial to the promised benefits.

            Okay, moving onward.

            Eagle says: Anyhow, the people to (be) angry with are not the PERS retirees — most of whom knew little or nothing of the machinations going on with PERS — but with the people who were responsible for creating the mess. Like, in part, the voters who voted in the officials.

            I disagree, but hey, maybe I am wrong and you are right. Let’s assume that. It’s the voters fault, not the poor ignorant sheeple Teachers. Okay, but now that the tax payers are trying to reign in excessive pay packages and benefits, we should try and do that locally (you argued previously). Do that locally, and I agree with you. But as school districts try and do that piece-meal locally, the teachers threaten and then actually do strike. The public caves in to this extortion, because they have to go to work for a living and can’t stay home with Johnny for 4-12 weeks while the teachers strike. You suggestion of reigning in costs at the local level does not work. PERS has to be solved at the state level. And ig has to have an effort much larger than Gov Kulo’s effort in 2003. If not, the whole state will suffer, including the teachers, both those who will be laid off and those whose benefits will be cut.

          • eagle eye

            Look, pal, I know very well the difference between defined contribution and defined benefit.

            By the way, you mean “rein”, not “reign”.

            As for dealing with things at the local level — absent further statewide change in PERS (because there isn’t the political will, or because it’s illegeal), and absent a statewide push to crack down on the unions, e.g. take away their right to strike, make big cuts in pay/benefits — local is what you’ve got. Like it or not.

            Can’t take a strike? Well, this isn’t a game for weenies. In Eugene, as I mentioned, both the teachers and the transit workers have gone on strike. So, come to think of it, did SEIU at UO years back. It can be done.

            Absent a statewide will to forbid strikes by public workers, and absent a statewide will (and probably a legal means) to change PERS any further than Ted K. already has accomplished, what else is there but local action?

            I’m quite serious. Let the Plunks of Oregon, in relatively conservative areas like Medford, show the rest of the state how to handle this.

            Otherwise, you’re just going to have to take whatever the state serves up, including the courts.

          • Steve Plunk

            Eagle, I see it as disingenuous to say the people should have known about the machinations of PERS and changed it through their elected officials yet you characterize the PERS retirees as wholly innocent/ignorant to the mess. It’s the other way around in my opinion.

            Please understand I didn’t come here to complain about my retirement. My statement was a retort to Mr. Glynn’s lamentation concerning his retirement troubles of having to hide the source. I think the PERS retirees sometimes need a dose of reality. Private sector retirement is not how financial services company commercials portray it.

            The state is the big player in PERS not only in terms of PERS covered employees but also in lawmaking power through the legislature. It is at the state level true reform must begin. Asking a small school district to lead the way is unrealistic.

            Remember, this is a place where we share ideas, experiences, and even complaints. I realize I may complain a lot but that’s because I save my happy thoughts for friends and family. Perhaps we can someday sip a beer and exchange our happy thoughts about Oregon.

          • eagle eye

            the point is that people voted for officials who were supporters of generous public pay and benefits. To some extent, however modest, the public is responsible for the officials they elect.

            The real fault, in my opinion, lies not with the voters (primarily) or the public employees (primarily) but with the responsible people who should have been making better decisions, and those (like in the press, the Republicans perhaps, the conservative organizations) who should have been watching what was going on.

            In my opinion, actually, blaming either the workers or the voters is largely unfair, and at this point, completely futile and unproductive.

          • Larry

            “Look, pal, I know very well the difference between defined contribution and defined benefit.”

            Great, pal, then correct your incorrect statements in previous comments, like this one: “Except I will say this: what is socked away into PERS depends pretty much on what it takes to pay the benefits, defined or not.”

            As Steve already clarified for you: “That’s not correct. PERS is a defined benefit plan not a defined contribution plan. What they put away and what it earns is immaterial to the promised benefits.”

            Let me try and dumb it down from Steve’s lofty words: “what is socked away into PERS” is the contribution. PERS is a defined benefit plan, regardless of what is socked away or not, the PERS folks get the defined benefit.

            By the way, you mean “illegal”, not “illegeal”.

          • eagle eye

            Sorry, but

            “what is socked away into PERS depends pretty much on what it takes to pay the benefits, defined or not.”

            is exactly the case. The rates are set (every two years I believe) to reflect what it takes to make the system able to pay its obligations. That’s why rates went down for the current period, and why they’re going up in the future.

          • retired UO science prof

            Your general point is quite correct. I was in three pension plans in my career. The first a defined contribution plan at the first university I worked at. The employer put in 9%, I had to put in I think 5%. Then when I moved to UO, the defined benefit PERS plan. When I started, it was something like 9-10% of my gross salary was paid into PERS by the employer, and there was the 6% “pickup”, also paid by the employer (with the understanding that this was in lieu of salary). Finally, I dropped out of PERS and into a defined contribution plan again. Originally that was paying in about 16% of my gross salary, later it went higher because of the notorious PERS 8% guarnatee. (The way it worked was, contributions that would have gone into PERS instead went dollar for dollar into my private pension plan).

            The point of all this being: if you want to have a good pension like mine, have ample money going into your pension plan(s). The portion the employer pays, count as income on top of your salary.

            eagle you make an interesting point, if I understand: not everyone in a situation like mine is thrilled about having so much go into pension. At certain times of life — trying to buy a house, paying college tuition, etc. I might have much preferred having a higher salary and a smaller pension contribution. But looking back, I’m glad I was forced to have so much going into pension. Especially since, like most people in my situation, I started in the pension plan relatively late, and didn’t especially want to retire early, either.

          • eagle eye

            Prof, explaining how to have a pension is probably a waste of time with most of these guys, most people. The notion of not spending all your available income, of actually doing with less and putting enough away for retirement is totally quaint nowadays. Tell people that they can have a pension if they choose to live in a smaller house, or do without football season tickets, or a new car every 5 years, or without spending half their disposable income on beer and cigarettes, or countless other things, and they go crazy. The fact that you have (or had) a job where you’re forced to do this is irrelevant — it infuriates them, in fact.

  • skippy

    Interesting that that no business owners are willing to go on record about leaving the state. Business taxes in Oregon are the 5th lowest in the country and Oregon state has no sales tax. Most businesses moving to another state would pay sales tax with estimates of up to 35% in business expense because of the sales tax. Moving a business is disruptive and expensive.

    According to Bloomberg (March 26) 70% of the tea party backers want a federal government that fosters job creation. Ingrained programs like Social Security and Medicare are actually supported by nearly 60% of the Tea Partiers because most of the followers are white and old and utilizing the government programs.

    Offer a common sense solution Huff. We’re waiting.

    • eagle eye

      The tea partiers support social security and medicare because they are white? Isn’t that kind of a racist argument? Or is that the point, to engage in some race baiting? And while we’re at it, are you saying that non-whites don’t support these programs?

      Anyhow, what does all of that have to do with Oregon’s state finance problems?

    • Not You Pal

      News Flash Skippy! – Thanks for diplaying your complete ignorance about sales taxes. Sales taxes are paid by the CUSTOMER – NOT the business. And given Oregon’s 9% state income tax rate, you have to buy a lot of high dollar items to even come close to the amount of money idiots like you pay to Salem every April. (That is ASSuming you even have a job!)

      Oh – and keep on spewing garbage about Oregon’s “LOW TAXES” on businesses. Are you even remotely aware that most small businesses pay personal income taxes, Public Transit Taxes, City and County Income Taxes, and various license fees for alarm permits and fire inspections?

    • Anonymous

      “Business taxes in Oregon are the 5th lowest in the country…”

      You had to pull this out of your a**. Have you ever run a business?

    • Rupert in Springfield

      >Interesting that that no business owners are willing to go on record about leaving the state.

      Interesting but of course totally untrue.

      The last time you brought it up, I posted a list of four who were leaving the state due largely to measure 66/67.

      I reposted it again when dartagnian brought it up.

      Look it up – Portland Business Journal Feb 12 2010. I’m tired of reposting the list every time this nonsense pops up.

      >Security and Medicare are actually supported by nearly 60% of the Tea Partiers because most of the followers are white and old

      You get a bump in SS simply by being white?

      Why I had no idea.

      Oh who cares about taxes and state spending. Can you tell me why the only racist comments, like the one you made here, are only from the left? Id really like an answer to this one, because it is almost every month we see one of you guys with pumping the racist bilge water like this garbage.

  • Bob Clark

    The older Tea party folks have been bled by medicare and social security taxes most of their lives so I don’t think you can blame them for wanting their money back. Tea Party folks probably would support transitioning away from the empty promises of medicare and social security in favor of individual saving plans backed by a safety net for those not good at investing.

    As for Oregon, reduce government employment and the giant government employee union sucking sound will moderate. One more reason for warming to Sarah Palin and the Tea Party.

  • Jim Ray

    I’ve said this for several years; The State of Oregon, largely due to PERS, is bankrupt. Until the powers that be Man Up, face the music, and declare bankruptcy they have NO other choice than to fleece us weary taxpayers until we are broke too.

    Common sense dictates we (Oregon) start over by being honest now. Declare the truth, Bankruptcy!

  • Jan

    The state will have to join the private sector in lay offs. They need private sector employees to pay public sector employees. The legislators have kicked the problem down the road time and again. They have reached the end of the road, lay offs and addressing PERS can no longer be put off.

  • valley p

    Steve P writes: “It’s not the planning tech III that’s going to lose a job but a cop on the beat protecting the citizens they threaten to fire. ”

    Portland laid off about 60 people from their planning staff last year, and did not lay off any cops or fire fighters.

    Bob writes: “The older Tea party folks have been bled by medicare and social security taxes most of their lives”

    The “older” folks, tea party and otherwise, paid nowhere near into these programs what they will take out. The “younger” folks, tea party and otherwise may have a legitimate beef since Reagan greatly increased their (our) taxes and raised their retirement age. And then he and 2 other Republican presidents spent the money collected on other government programs.

    • Steve Plunk

      Read my post valley p. I said they threaten to fire the cop and fireman in order to garner emotional support. You have to read things in context my friend. I’m explaining why citizens are at a disadvantage in the whole mess.

      Portland had 60 extra planning staffers?

      • valley p

        I think the number was around 60. They became “extra” when the real estate market crashed and people stopped building things and/or planning to build things. Most planning & building departments are fee financed rather than general fund financed, so once demand and funding dry up then yes, people who were busy are no longer so and become “extra.”

        Doesn’t that blow the myth that public sector employees never get laid off? Happens all the time actually.

  • ScatCatPDX

    No job offers or contracts recently I may be bankrupt homeless*.
    Thanks Oregon.
    The only thing goods is the tax will effect everybody, we should not oppose it, what is good for the rich is good for the 50%+ that voted for measures 66 and 67.

    *if it happens I be a drffiter and make my way out of state.

  • Anonymous

    What’s with the California hate. Looks like you Oregonians did a good enough job screwing this up on your own. Seems to me that most state employees are native oregonians. Your Californians are working in high-tech, high-pay jobs. Instead of blaming a boogey man for your problems, look in the mirror.

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