Rep. Richardson’s Capitol Update: 1/12/07

Oregon’s 2007 Legislative Session–Let the Spending Begin

A Governor’s recommended budget is like creating a child””it’s kind of fun to conceive, but there’s a tremendous amount of work to do afterwards. Oregon’s “Governor’s Recommended Budget” (GRB) for the next biennium is a record setter. Now the real work begins. The GRB is based on a revenue forecast that is 20% higher than the current budget. What would life be like if you were given an additional 20% of your personal income to spend over the next two years?

Unfortunately, to obtain a 20% increase in revenues the Governor wants the following four additional revenue sources: 1. Raise the Tobacco Tax ($182 million); 2. Create a new tax on auto insurance policies ($25 million); 3. Increase corporate filing fees ($85 million); and 4. Retain the corporate kicker ($275 million). If the Legislature grants the Governor all of these revenue sources the total general funds & lottery revenue pool would be $14.9 Billion of General & Lottery Funds. It is my opinion that increasing State spending to the levels set forth in the GRB is both unwise and unsustainable.

Last November, Oregon’s voters soundly defeated Measure 48. As you will recall, M-48 was the measure that would have imposed a restriction on the growth of State spending to an amount equal to the combined percentage increases in inflation and population growth. Excess revenue would have been sent by the Legislature to a Rainy Day fund. Governor Kulongoski has taken the overwhelming defeat of M-48 as a mandate to invest in Oregon education, services, and infrastructure. Such a large influx of revenue in every quadrant of state spending should help keep the economy booming over the next two years. The important questions remain: What happens to Oregon’s budget after the 2007-09 “Boom-Time Biennium” is over? Can the increased level of spending be sustained?

Consider the following:

1. Oregon Budget History Graph. To get a sense of where Oregon’s spending habits are going, take a look at the ramp up of budgets in the 20 years between Oregon’s $12 Billion “All Funds” budget for 1987-88 and the $49 Billion for 2007-09. Is it realistic to think Oregon can maintain such an escalation in spending? This rate of spending is increasing faster than inflation, population growth, and the household incomes of most Oregonians.

2, Oregon’s Full-Time employee Equivalent (FTE) History. With the high cost of PERS and other benefits, a good indicator of future costs for the state is to look at the increases in FTE’s . (An FTE means one full-time position paid for the entire 24 months of the biennial budget. Thus, one FTE could equal two or more part-time or temporary employees, so long as their total hours equal that of a single full-time employee for a full two years.) The Governor’s budget recommends increasing the number of FTE’s over the next biennium from 47,612 to 50,023.

3. Interest Payments of Oregon’s Debt History. Discussion on Oregon’s revenue and spending habits often fail to include the costs of Oregon’s long-term debt payments. There are two main categories of Oregon long-term debt: Certificates Of Participation (COP’s) and Lottery Bond Debt (Debt intended to be paid by Lottery funds). The attached graph shows the upward trends including the increase in interest payments on COP’s from a little more than $200 million in the current budget to $300 million in the 2007-09 budget, and escalating to $360 million in 2009-2011.

As the session progresses, we will delve deeper into each of the above areas. For the present, we should merely keep in mind the need for long-term spending projections before we commit to expenditures that are unsustainable in future budgets.

Sworn In & Sworn At”¦
Being a Legislator is never dull. On Monday I was sworn in and by Tuesday I was being sworn at. Not quite, but I did receive an email warning me that if I did not oppose an increase in the tobacco tax, I could expect to get my “walking papers.” I answered the constituent’s inquiry as completely as I could, then after a quick check of the Voter’s Registration list, I suggested the person should consider getting registered and becoming a voter.

Gift Restrictions for Legislators
Many of you have read about the new House Rules which includes restrictions on gifts by lobbyists and others having business before the Legislature. I commend the new Speaker of the House, Jeff Merkley, for the time and effort he invested in reforming the House Rules. The House Republican Leadership were consulted by Speaker Merkley on several occasions and the Republican House members were supportive of nearly all of his proposed reforms. The only real objection was the Republicans believed that rather than limiting Gifts to legislators to a $10 limit with certain exceptions, it might be better to simply impose a “No Gifts to Legislators” rule for anyone with business before the Legislature. We made our position known, and our proposed amendment was not accepted. In the end nearly all the Legislators in both parties voted in favor of the gift restrictions and other House rules. The Speaker has now named me to serve on the gift “guidance committee.” Lucky me.

Sincerely,

Dennis Richardson
State Representative