Budgetary games loom on the horizon in Oregon

Sen Doug Whitsett

by Sen. Doug Whitsett

Last week, Governor Brown released her recommended budget for the upcoming 2017-19 biennium. During a press conference held at her ceremonial office at the state capitol in Salem, Brown made remarks outlining her budget priorities.

She described her priorities as “cradle to career” education, improving the state’s consistently dismal high school graduation rate, expanding health care coverage, investing in transportation, improving access to affordable housing, clean air and water and safe communities.

While those seemingly lofty goals are admirable, the governor’s recommended budget clearly shows they are unaffordable as presented. The proposals would cost about $1.7 billion more than the state has to spend. Her rhetoric undoubtedly sets the stage for many months of pleas for tax increases. Those appeals are certain to dominate the upcoming 2017 legislative session.

Brown stated that “revenue reform” is still needed to align the state’s resources with its “aspirations.” She added that our needs as a state are growing while existing resources are not keeping up with costs to pay for the demands. For these reasons, she proposes nearly a billion dollars in new and expanded taxes.

This is the same tired rhetoric employed since the onset of the great recession in 2008. But according to her own executive staff members, Oregon is leading the nation in economic recovery. Why do Oregonians require more state services when our economy is supposedly thriving?

Having spent much of my legislative career as a member of the budget-writing Ways and Means Committee, I have an entirely different perspective.

Oregon’s General Fund and lottery revenues are projected to grow by $1.3 billion over next two years. My office has verified through the Legislative Revenue Office that the state has more revenue coming into its coffers than at any point in its entire history.  But the Governor’s budget proposes to spend about $2.8 billion more than ever before.

Furthermore, the Taxpayers Association of Oregon Foundation has determined that Oregon is the highest tax and spend state in the Western United States. Total government spending in Oregon, divided by the state’s population, equals over $8,000 per resident. That amount is nearly double what government agencies in Utah spend, and well above that of our neighbors in Washington and California. Overall, Oregon’s state and local governments spend more money per capita than all of the others in the region, as well as 39 other states.

Despite the unprecedented additional revenue, the Governor is still projecting a $1.7 billion budgetary “shortfall.” Wouldn’t it be more appropriate to present these facts as a spending and management problem rather than a budget deficit?

Budget overruns include the costs that will be required to fund the full implementation of the Medicaid portion of ObamaCare after federal funds begin phasing out next January 1. Up until now, the federal government covered the entire cost of expanding the state’s health care coverage for its residents through the Medicaid program. The state’s increased Medicaid costs will continue to balloon in future budgets as the state’s 10 percent share phases in.

The massive cost increase should come as no surprise, because it was clearly written into the original Affordable Care Act. Nevertheless, rather than addressing the existing “shortfall,” Governor Brown’s budget calls for increasing enrollment in the Medicaid program.

She also proposes more than $100 million be dedicated to wage hikes for state employees. In my opinion, even this huge number is disingenuous because public employee compensation contracts have always been designed to minimize the cost during the current budget cycle. They are structured to create roll-up costs that may double or even triple the actual costs during the next budget period and beyond.

The state’s unsustainable Public Employees Retirement System (PERS) is another huge cost driver the Governor is failing to address. If left unchecked, the system’s unfunded liability will continue to jeopardize the levels of services provided by the state, cities, counties and school districts.

There are possible solutions that we believe are fair and equitable. Our Legislative Counsel attorneys have stated they believe several are constitutional and would likely withstand a court challenge. However, Governor Brown failed to include them among her top policy priorities.

Instead, we find typical tactics in her recommended budget that have been used by Democrats in Oregon for years to try and wring more money out of taxpayers. Programs that are popular and prioritized by the public are deliberately deprived of revenue in an attempt to justify the need for further tax increases.

In the recent November general election, Oregon voters overwhelmingly passed three measures directing state funds to veterans’ services, career and technical education and Outdoor School programs.

Under Measure 96, which passed with 83 percent of the vote, around $18.5 million in lottery funds are directed to be added to that Oregon Department of Veterans Affairs budget. While the Governor’s recommended budget increased funding allocations for the agency, it also reduced its general fund allocation by around $9.7 million. This means that funding for veterans’ services will increase by only about half of what was just mandated by voters a few short weeks ago.

Perhaps the most immediate and visible casualty of Governor Brown’s recommended budget is the psychiatric hospital in Junction City. The $130 million, 100-bed facility is a mere 18 months old and is currently serving 81 patients. According to the budget proposal, its closure would “save” the state an estimated $34.5 million per year.

However, regardless of whether or not the hospital stays open, Oregonians will continue to pay for it for decades. The facility was largely built with borrowed money that will require about $10 million in principle and interest payments for the next 15 budget cycles, mostly from General Fund revenue.

The scenario is reminiscent of Multnomah County’s Wapato Jail, which cost $58 million to build and has never housed a single inmate. Officials have discussed converting it into a homeless shelter or selling it for substantially less than it cost to build.

Also on the chopping block are Oregon State University’s extension research offices and programs.

Perhaps most egregious are her plans to slash funding for fighting wildland fires and Oregon Project Independence. The latter has proven very successful at keeping elderly people in their homes for pennies on the dollar, compared to state-provided residential care. But Democrats have consistently threatened to cut its funding for much of the time I’ve spent in the Legislature.

All of this posturing will culminate in the members of the Ways and Means Committee holding public hearings throughout the state. As usual, representatives of constituent groups will coordinate and orchestrate their testimony to highlight the need for additional funding and, therefore, another tax increase.

As is typically the case, the 2017 session will feature many of the same organizations holding lobbying days and bussing supporters in to the capitol from all over the state. All this effort is alleged to prove that Oregonians need and want additional state services.

Oregonians would be wise to reject this cynical, back-door approach to raising taxes yet again.

The fact of the matter is that the state’s budget has nearly doubled throughout the last decade without a corresponding improvement in the services provided to citizens. Many of the same special interest groups that fund Democrats’ campaigns have long benefited from the use of these political budgetary games at the expense Oregon taxpayers.

Our better course of action would be to identify programs that legislators consider most essential and those that are least essential. We should ensure that adequate safeguards are put in place to spend the funds directed to essential programs in the most accountable, efficient and effective way possible. The least essential programs should be eliminated, with the costs saving dedicated to reducing the alleged deficit.

Legislators should make every effort to identify and eliminate waste, duplication of effort, fraud and other abuses of limited taxpayer dollars. The Oregon taxpaying public could represent an invaluable source of information toward that goal.

In the alternative, we run the risk of continuing the same sorts of manipulation that political leaders have employed for years. They seemingly have created a new and effective art form designed to justify increased spending.

Isn’t it time for Oregon taxpayers to say “enough?”

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