Rep. Kevin Cameron: Building A Rainy Day Fund Requires True Spending Reform

by House Republican Leader Kevin Cameron

Most Oregonians recognize the need for a robust rainy day fund to protect essential services during economic downturns. However, not everyone agrees on the best way to save for a rainy day.

Some argue that canceling kicker checks to taxpayers and businesses will solve all of our problems. However, any effort to undermine the kicker will fail as long as Oregonians believe that state spending is out of control. To regain their confidence, the Legislature must show that it’s capable of saving money just as families and businesses do every day.

The idea of building a rainy day fund at the expense of the kicker isn’t new. In 2007, the Legislature suspended the corporate kicker and redirected the revenue into the newly created rainy day fund. Some heralded this as a major achievement that would end the boom-or-bust nature of Oregon’s finances.

After an initial estimated deposit of $309 million, the rainy day fund was depleted as the economy soured and the Legislature continued to spend beyond our long-term means. With the rainy day fund now close to empty, some are going back to the kicker as the ultimate solution for future shortfalls.

I believe there is a better way to rebuild our rainy day fund. Legislative Republicans have proposed dedicating 1 to 3 percent of general fund revenue at the beginning of every biennium to the rainy day fund. Simply put, our proposal requires the Legislature to save money before it spends it all. If our proposal had been in place since the beginning of 2007, we would’ve set aside as much as $792 million without touching the kicker and without taking more money out of the economy.

However, there is no single solution that will make Oregon’s budget sustainable over the long term. The kicker is not the cause of Oregon’s fiscal problems, and diverting Oregonians’ kicker checks will not save services in the future. Even our own proposal will only go so far to protect Oregon when it’s raining. To truly bring spending under control, aggressive savings must be complemented by major reforms to our budgeting process.

Overall, state spending has increased 40 percent since 2005. This level of spending has created a $3.5 billion shortfall that everyone reads about in the news. This shortfall only describes the difference between revenues and the cost of maintaining an unsustainable state budget. It includes roll-up costs from new government programs that taxpayers couldn’t afford; hundreds of millions in one-time federal bailout money; and hundreds of millions in state salary, benefits and PERS increases.

In reality, the Legislature will have $1.2 billion more to spend in 2011-13 than it did in the previous biennium. This will make for an increase, not a reduction, in general fund spending.

In addition to setting aside money for the future, true reform means developing a budget on existing revenues — not on what’s needed to maintain the status quo. We must determine what state government can do with what we have, and work to provide the best possible services at a cost taxpayers can afford.

Government reform is not a Republican or Democratic issue. Gov. John Kitzhaber’s recommended budget is based on available dollars, not tax increases, and establishes a reserve of $220 million. His budget demonstrates a real commitment to long-term spending reform, and offers a fiscally sound blueprint for the Legislature to follow. House Republicans are willing to put partisan politics aside and work with the Democratic governor to prevent yet another decade of deficits.

The Legislature must answer this call for change. Kicker reform advocates should understand that as long as state government resists true spending reform, there will be little appetite among Oregonians to lessen or eliminate kicker refunds.

Rep. Kevin Cameron, R-Salem, is the Oregon House Republican leader. He is CEO of Café Today Restaurants.