Proposed new business taxes to pay for huge state worker payroll increases

Sen Doug Whitsett

by Sen. Doug Whitsett

Over the past several months, representatives of Governor Kate Brown and the progressive liberal Democrat Party majority have been quietly discussing new labor contracts with the State’s public employee unions. Not surprisingly, these labor negotiations, with some of the Democrat Party’s major political contributors, have not gone well for Oregon taxpayers.

It appears the negotiators who “represent the people” have conceded most of the unions’ demands, including annual cost of living increases, step increases and an entire extra day of paid leave. The increasing costs of other payroll expenses such as health insurance premiums, retirement contributions and paid leave contribute significant additional cost to these labor contracts.

Incredibly, the state negotiators did not determine, and apparently even failed to estimate, the future costs of the labor contracts prior to their completion. They still have not disclosed those amounts to Oregon taxpayers. What seems evident is that the negotiators find other peoples’ money too easy to spend.

Several weeks ago, I asked both the Legislative Fiscal Office and the Department of Administrative Services (DAS) to determine, or to even estimate, the long-term costs of these enormous expenditure increases. At the time, they were unable to make accurate predictions, explaining the labor contracts are complex, convoluted and difficult for even these fiscal experts to understand. They are continuing their efforts to accurately quantify my basic cost questions.

It is apparent the new four-year labor contracts will be very expensive for Oregon taxpayers. By my computations, the aggregate concessions made by state negotiators appear to increase total compensation between seven and nine percent per year. It is my understanding that the contracts leave open the potential for additional salary increase negotiations after the first two years. The outcome may well be a 30 percent or more increase in average state public employee total compensation by the fourth year. The full impact will be due and payable by the 2019-21 budget period.

Several years ago, the average Oregon public employee was earning more than $70,000 per year in total compensation, according to calculations made by DAS for my office. The number of public employees is capped at no more than 1.5 percent of Oregon’s population under state law. However, several significant categories of employees that appear to be subject to the terms of the new labor contracts are technically not state employees.

My own calculations are admittedly rough. However, I believe they represent “in-the-ballpark” predictions. I estimate the increase in compensation to state employees, and other quasi-state employees that may be subject to the terms of the new labor contracts, may well exceed $1.5 billion per year by the fourth year of the contracts. My estimate assumes no significant growth in the number of employees subject to the terms of the contract and no further negotiated salary increases.

Unlike our federal government, the State is prohibited by its Constitution from borrowing money to pay for ongoing operations. Escalating employee costs must be met by either increasing tax revenue or decreasing expenditures in other parts the budget. Decreasing budget costs appear to be anathema to most majority Democrats.

The immediate question demanding an answer is: How will the State pay the enormous costs of the new labor contracts?

Our Oregon, a political arm of the public employees’ unions, is working on that answer. Their solution is an initiative petition designed to raise as much as $5 billion per budget cycle, allegedly needed to pay for critical shortages in public services, by enacting a new tax on a supposedly wealthy minority of other Oregon taxpayers.

Initiative Petition 28 would increase state General Fund revenue more than 25 percent by enacting a 2.5 percent gross receipt tax on most corporations with Oregon sales greater than $25 million per year. This is not a tax on corporate profits. The tax is for the privilege of doing business in Oregon. It is an enormous new tax on gross revenue, due and payable, regardless of whether the company makes a profit.

The Our Oregon petition further attempts to convince voters the more than 25 percent increase in new General Fund revenue will be used to pay for public safety, education and services for senior citizens. However, no Oregon law can direct or bind the purpose for which future Legislative Assemblies spend General Fund revenue. In reality, the preponderance of the new money will be spent to line the pockets of their public employee union members.

The Initiative Petition represents a “must pass” issue for the public employees’ unions. Their recently negotiated 30 percent or more increase in compensation must be paid for with either new revenue or other budget reductions. Those rich new contracts will require a similar, significant reduction in the number of public employees, and of public services, in the event that the people fail to enact their massive new tax.

For that reason, Our Oregon is mounting a “full court press.” We may expect a veritable “blitz” of advertising aimed at misdirecting the public’s attention from their true purpose.

It is my understanding that signature collections on the petition are progressing beyond expectations. Their initiative is virtually certain to appear as a Ballot Measure in the November 2016 general election. Representatives of Our Oregon suggest their political polling demonstrates a broad majority of Oregonians will vote to enact their new taxing scheme.

We can only hope that Oregon voters will take the time to learn the real purpose of Our Oregon’s initiative. If they are successful, Oregon’s already stagnant economy will take another enormous hit from yet another exodus of Oregon employers.

Senator Doug Whitsett is the Republican state senator representing Senate District 28 – Klamath Falls

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Posted by at 05:00 | Posted in Initiative & Referendum, Public Employee Unions, State Taxes, Voting | 10 Comments |Email This Post Email This Post |Print This Post Print This Post
  • thevillageidiot

    is there anyone out there that still thinks the public employee unions do not buy politicians for the sole reason to increase power and money. as the public union employees pay increases so do the union dues as they are a percentage of wage. this also makes the PERS even more underfunded as the payout is also tied to salary prior to retirement. This union negotiation smacks of the guaranteed 8% return for Tire 1 retirees which by the way make up two thirds of the retirees. It will be another decade before this changes.
    The sales pitch for the tax increase is the easiest dupe of the public; save the children and senior citizens and oh by the way increase public safety.
    It is the biggest scam pulled on the sheeple of oregon.

    • Ardbeg

      Unions, Corporations, Wall Street all use their power, influence and money for their own benefits. You can’t attack just one leg of the stool if you really want to effect any change.

      • thevillageidiot

        Glad someone else gets it. for this article it was about the public employee unions. and it is the same in Oregon about businesses and/or associations buying politicians. Think Nike, Weyerhaeuser, dairyman association.

        • Eric Blair

          Yeah, but you’re not likely to find an systematic attack on corporations or Wall Street, except for oblique references to crony capitalism, on this site.

          • Ardbeg

            Unions often support Dems, the real reason the GOP goes after unions

    • HBguy

      You can be pretty sure that when Hammurabi decided to engrave his code on steles and place them around Babylon that the no bid contract went to an insider who had showered him with gifts and a nice week at a villa on the Euphrates river, fully staffed by servants and a harem.

  • thevillageidiot

    To Doug
    Why not start legislation to remove all elected and appointed officials from the PERS rolls and publicly supported benefits plans. straight salary only. and do not increase those salaries. become true public servants you claim to be.

  • Jack Lord God

    So in other words those negotiating with the unions are trying to figure out how much less all of us will have in order to buy votes. Any wonder why people are getting more and more disgusted with this process?

  • oregongrown

    Again, Senator Whitsett give us the straight truth. And it is that every single new tax dollar taken from Oregonians is going into the pockets of those on government payrolls. These new billions are going to pay the exploding PERS retirement swindle and expansion of benefits and pay scales across the board in government at every level. “It’s NOT for the children.” It is a massive money grab by the corrupt and powerful big government contingent in Oregon and the government unions.

    That IS the reason government unions have spent big and will continue to spend big on this initiative IP 28, to get this mega billion dollar tax increase. It is all to grow government even bigger and much more expensive so they can take more and more from working Oregonians. The Gross Sales component is going to drive business away from Oregon. No question about that. That’s math. There are 49 other states to do business in.

    How can anyone in Oregon actually still think that the Oregon Democrat is the party of “the people?” This is the party that has made Oregon toxic for business and has given us higher unemployment and less economic opportunities than any of the other states for the last 30 years.

    Just do one comparison: Oregon to Washington. Look at the last 30 years, and now tell me how Oregon compares to Washington. Washington has 9 Fortune 500 companies. Oregon has 2. WA has 16 Fortune 1000 companies. Oregon has 5. Washington has no income tax and it’s right next door.

    On top of all these mega billions in new tax grabs all going to bigger government, that same lobbyist, Our Oregon” has been hired to also get a new, much higher minimum wage passed.

    But look at those facts. The idiots in charge of Oregon actually compare the wealth in Oregon to Seattle and San Francisco. Except California has 54 Fortune 500 companies. So there is no comparison.

    There is no comparison to the business climate of Oregon and these other states. Oregon is sucking wind compared to so many other states.

    Big government and big union control is what is crushing Oregon. So many examples. Port of Portland terminal closure due to massive union corruption. All ignored by Big Government in Oregon. The list is long. The new Carbon Fuel tax- another half billion in new taxes, all going out of state. Not one dime will fix Oregon roads. Portland, the mecca for new taxes, many coming down the pike all guaranteed to drive business away and make Oregon even more toxic.

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