BETCs, Biofuels and Boondoggles

Sen Doug Whitsett

by Sen. Doug Whitsett

Oregonians have endured unending cries from proponents of big government for more than a decade, claiming the State must have more revenue to run its operations. Those constant pleas, combined with Democrat dominance of both the House and Senate for the past dozen years, have resulted in frequent tax and fee increases levied on Oregon citizens and businesses.

Proponents of ever-increasing government spending universally fail to acknowledge that state government has a spending addiction. Typically absent from their discussion is any reference regarding where the new revenue has been spent and what that spending has achieved. Also missing is any narrative regarding the wasting of taxpayer money on multi-million dollar boondoggles that should never have been allowed to happen.

Political leaders have failed to prioritize programs that provide needed services to Oregonians. Instead, state officials have spent literally hundreds of millions of dollars on attempted social engineering and “market transformations,” often under the guise of protecting the environment. Their explanations are usually devoid of any accountability for the use of other peoples’ money.

Citizens should ask if we are better off in the aftermath of all that spending. I have observed little, if any, improvement in either the level or quality of services provided to our residents during my three terms serving in the Oregon Senate. What I have observed instead is rampant crony capitalism, where favored industries and constituencies receive huge chunks of public money with little or no accountability for what that money buys.

In this recent Oregonian article, reporter Hillary Borrud highlights several of these ongoing issues.

Senate Bill 324, was signed into law during the 2015 legislative session by newly appointed Governor Kate Brown. The Act extended the sunset on the state’s so-called Clean Fuels program, enabling the controversial agenda to move forward. The divisive law was passed on party-line votes with unanimous opposition from Republicans in both chambers and Senator Betsy Johnson (D-Scappoose).

Borrud’s article takes a look at where the Program is about six months after the enactment of that law. “Oregon has just one commercial ethanol production plant right now, despite sinking $51.3 million worth of various incentives into ethanol projects in the decade leading up to the new law. The state also has only one commercial biodiesel plant, after awarding $6.1 million in biodiesel production incentives during the same period.”

The biofuels program under SB 324 promised those incentives would be used to create jobs in Oregon because fuel providers would switch to biofuels in the name of reducing greenhouse gas emissions (GHG). That promise was broken. Borrud’s article points out that much of the ethanol being used in Oregon is not produced in Oregon. Rather, it is imported by rail from states such as Minnesota, Kansas and Nebraska.

An ethanol plant in Boardman received Business Energy Tax Credits (BETCs) worth $10 million and originally planned to hire up to 100 employees. It is our understanding the plant has produced no commercial cellulosic ethanol and currently employs about 15 people. The only Oregon business currently producing ethanol for fuel companies is also based in Boardman. It received $14.6 million in BETCs.

Another plant in Clatskanie obtained nearly $8 million in BETCs, as well as a $20 million loan. Approximately $18 million of that loan was written off by the state after the company filed for bankruptcy. The Clatskanie facility was converted to a crude oil transfer facility after the company filed for bankruptcy. It has since been retrofitted again to handle ethanol shipments heading out of state.

Nearly $750,000 in BETCs were given to a company in Cornelius that has not produced any biofuels for the people of Oregon. An official from the Department of Environmental Quality (DEQ) is quoted in Borrud’s article stating that despite all the incentives, the company produces only small quantities of ethanol. She went on to say that DEQ is now expecting much of the state’s alternative fuels to come from landfill and other waste gases instead of biofuels.

The Clean Fuels program has essentially provided nearly $60 million in “venture capital” using taxpayer money. Apparently, private sector venture capitalists wouldn’t touch these “investments.”

Moreover, according to DEQ figures, the Clean Fuels program will impose hidden taxes up to 19 cents per gallon of motor fuel. All of that revenue will flow to out of state and international green energy companies. None will be used to maintain and improve Oregon streets and highways.

Finally, the Clean Fuel program was promoted as a means to reduce GHG. To date, DEQ has been unable to provide objective, statistically significant data demonstrating the program will produce any significant reduction in GHG emissions.

By any objective measure, the Clean Fuel program is destined to be a complete failure.

State government’s insatiable appetite for spending other peoples’ money is embodied in what promises to be a very expensive and divisive campaign for Measure 97. It will levy a new tax on businesses that is expected to raise around $6 billion per biennium if passed by voters this November.

Much of the rhetoric surrounding Measure 97 is the same that was used to promote Measures 66 and 67. In that 2009 campaign, the supporters maligned companies that create jobs and opportunities for Oregon for supposedly not paying their “fair share” in taxes. Voters approved both measures in a special election held in January 2010.

But even though Oregonians gave proponents of those measures the benefit of the doubt by voting for them, state government services did not improve. The state instead posted the nation’s lowest high school graduation rate, has seen alleged widespread abuse of children in its foster care system and has settled multiple whistleblower lawsuits.

Proponents of Measure 97 are falsely claiming the money it would raise must be spent for funding public education, health care and services for senior citizens. However, short of a constitutional amendment, it is not possible to bind how future legislatures spend General Fund money. This has been verified by Legislative Counsel, the attorneys who draft all of the bills and provide legislators with legal opinions.

The Democratic co-chairs of the budget-writing Ways and Means Committee have also gone on the record verifying the Legislature will be free to spend Measure 97 money however it wants. One co-chair acknowledged that some of it could, indeed, be used to offset some of the $885 million in projected increases of the state’s Public Employee Retirement System.

Another salient fact is never mentioned by supporters of the Measure. According to the non-partisan Legislative Revenue Office, state tax collections have been and remain at historical highs. Even without Measure 97 revenue, Oregon government has never before had so much money to spend.

The Taxpayers Association of Oregon recently determined that Oregon is the number one tax-and-spend state in the Western United States. The state and local governments here spend more per capita than our neighbors and 39 other states. When that level of government spending is divided by population, Oregon spends over $8,000 per resident. That is nearly double what is spent in Utah, and well above what is spent in Washington and California.

Backers of the measure have even tried strong-arming economists they hired to analyze the measure. They apparently wanted the economist to distort what the Measure actually will and will not do. The editorial board of the Bend Bulletin newspaper was among those objecting to those tactics.

Other tactics allegedly employed by proponents have resulted in a complaint being filed with the state’s elections division. If verified and upheld by the courts, the election law violation complaints could result in felony charges.

Despite all of the seeming dishonesty and underhanded tactics surrounding it, state officials are refusing to change the voter pamphlet statement submitted in support of the Measure.

Legislation was proposed in the 2015 session that would have required information in a voters pamphlet statement to be true. That bill was defeated on party-line votes in both the Senate and the House.

Oregon voters are once again being asked to support higher taxes to fund state government programs. Governor Kate Brown has endorsed Measure 97 and is already planning how to spend the $6 billion in new revenue. Majority Democrats would better serve the public by working to reduce out of control state spending before asking the people of this state to fill government coffers with additional dollars.

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