Representative Dennis Richardson: Common Sense Budgeting

By State Representative Dennis Richardson,

The 2009 Oregon Legislative Session has ended, but the consequences have yet to begin. The House Republicans have summarized key legislation from their perspective (click here), and the House Democrats have done the same ( click here). Newspaper editorialists have opined (click here). And, the pundits have created cartoons (click here) and (click here).

Looking back on Oregon’s 75th Legislative Session, it is clear that some things never change. Mark Twain, 130 years ago, wryly observed: “The mania for giving the Government power to meddle with the private affairs of cities or citizens is likely to cause endless trouble . . . and there is great danger that our people will lose our independence of thought and action . . . and sink into the helplessness of [one] who expects his government to feed him when hungry, clothe him when naked, to prescribe when his child may be born and when he may die, and, in fine, to regulate every act of humanity from the cradle to the tomb, including the manner in which he may seek future admission to paradise.”

“No one’s life, liberty, or property is safe while the legislature is in session.”

“What is the difference between a taxidermist and a tax collector? The taxidermist takes only your skin.”

More recently, in the 1930’s, cowboy humorist, Will Rogers, warned those desiring efficient government:

“Be thankful we’re not getting all the government we’re paying for.”

When considering Oregon’s 12.4% unemployment, decreasing jobs, decreasing income, and the record breaking tax, fee and fine increases just passed by our legislature, I don’t know if I should laugh or cry. The session has ended and what is done is done.

Let us look to the future. Today’s newsletter will focus on what I believe to be the most important law that Oregon should enact–key legislation that was not introduced, not enacted, and will never be enacted unless by a citizen’s Initiative. It could be called something like Oregon’s “Common Sense Budgeting,” and it saves money during good times and draws on it to smooth out the bad times. Since it limits the Legislature’s ability to spend every dollar it gets, such a proposal can only gain approval if required by Oregon voters. At the end of this newsletter, I will ask for your opinions, suggestions and criticisms of this proposal.

Oregon Common Sense — Budgeting Assumptions:

1. Common sense tells us Oregon cannot continue spending more money than it receives, and if Oregon’s state government were to live within its means there will be fewer demands for increased taxation on its citizens.

2. Common sense tells us Oregon should save part of what it receives during good times to offset on-going expenses during recessionary periods. By doing so it would smooth out the swings from drastic spending increases followed by devastating cuts to education, public safety and human services budgets; and

3. Common sense tells us the economy runs in cycles, yet the legislature spends every dollar during boom times, then increases taxes and debt to compensate for revenue losses during recessionary times. This boom-and-bust cycle will continue unless the people bind the legislature with a common sense plan requiring the state to live within its means.

To implement such common sense principles in Oregon’s budgeting processes, an amendment to the Oregon Constitution could be passed that provides the following:

1. Spending increases for each biennial budget shall be limited to the percentage increase in Oregon’s thirty-year personal income tax revenue average. Since economies rise and fall for many reasons, one way to determine how much growth would be appropriate and affordable for Oregon state government is to average out Oregon’s General Fund tax revenue stream over three decades. The personal income tax is the largest source of state revenue and its average growth over time is a good indicator of Oregon’s sustainable growth factor. Oregon’s personal income tax revenue growth has averaged six percent (6%) per year for the past 30 years. As you can see from Oregon’s General Fund Revenue History, click here, [ LINK to: Oregon General Fund History. ] there have been periods of high revenue increases and periods of stagnation. By averaging a 30 year time span, it becomes clear that for Oregon to live within its long-term revenue streams, its expenditures should not exceed 6% per year””which would result in a 12% budgetary growth limitation for each two-year “biennial” budget.

2. Excess revenues go to Oregon’s Rainy Day Fund. During economic boom times, when revenues exceed the 30 year spending limitation, excess revenue will go to the Rainy Day Fund–Oregon state’s savings account. The Rainy Day Fund will hold and earn interest on Oregon’s excess revenues until there are clear economic triggers demonstrating the economy is in a period of substantial recession.

3. Rainy Day Fund reserves will off-set inadequate state revenues during economic recessions. In my four legislative sessions I have watched the boom-and-bust pendulum dramatically swing back and forth. There was the recession of 2003, when revenue shortfalls were finally solved with a $750 million tax increase, after a brutal eight month session. The 2003 tax increase became Measure 30, which was nullified by the voters. Those dark budget days brightened substantially during the housing and construction boom that followed. By the 2007 session, the economy was booming and the Legislature spent every penny of anticipated biennial revenues. In fact, spending was increased by a jaw-dropping 22% in a single biennial budget. Unfortunately, those happy days were short-lived and, once again, the pendulum swung back from boom to bust. As a result, nearly $1 billion of revenue failed to materialize. The shortfall finally was balanced with spending cuts and by draining cash reserves during the final months of the 2007-09 biennium.

In sum, the Oregon Common Sense proposal would limit spending to the 30-year revenue average, and end the legislature’s drastic boom-and-bust budgeting swings. The proposal would smooth out the highs and lows with savings during the good times and by back-filling revenue short-falls with Rainy Day Fund reserves during recessionary times.

Is the idea worth pursuing? I would appreciate your input in a brief survey letting me know what you think about the concept and what can be done to either improve it or replace it with a better idea. Please make your opinion known by clicking here for survey.

Thank you for taking the time to read and consider my newsletters. Your input is extremely valuable. In the recent session, there was a greater involvement by Oregon voters than ever before. On certain issues, hundreds of Oregonians emailed and called legislators to make voters’ opinions known. It had an impact and, in several instances, legislation was passed, amended or killed as a result of voter input and pressure. I commend all who took the time to make their voices heard. Your legislators represent you, the citizens, and neither you nor your legislators should ever be allowed to forget it.

Sincerely,

Dennis Richardson
State Representative