The New Era
The highly partisan world of Oregon politics makes it hard to get things such as budget deals done, as we saw clearly last week when the Oregon Senate failed to reach a bipartisan agreement on taxes and curbs to public employee pensions – PERS – after a fiery debate.
House Bill 2456, which needed 18 votes to pass, was defeated on a 15-15 largely party-line vote at the 11th hour as this year’s legislative session wound down.
Democrats in the Legislature wanted nearly $200 million in revenue raised from higher taxes on corporations and a 10-cent cigarette tax increase. The budget would have added $100 million to schools, $20 million to mental health programs, $40 million for community colleges and $40 million for senior services.
The PERS bill would have reduced the unfunded liability of $14 billion by $5 billion. PERS’s problems have crippled Oregon education, public safety and other public services – including right here in Sweet Home. Our PERS situation has attracted the attention of our nation’s economists, who have labeled it one of the most troubled in the United States.
An Oregonian newspaper report noted earlier this year that the state owed $59 billion in future benefits to public employees for all the service delivered through the end of 2010, while Washington, whose economy is about twice the size of Oregon’s, owed $62 billion for its similar plans. That’s quite a comparison.
It’s going to get worse for us all on the ground, as the PERS Board of Directors, in an effort to backfill that deficit hole, voted last fall to jack up the rates employers, such as our school district, must pay into the system by 45 percent.
At the end of the legislative tussle last week, both sides blamed the other, which isn’t surprising, as their “grand bargain” collapsed in a cloud of dust. Republicans were upset that the budget bill didn’t include $150 million in tax cuts for small businesses. Democrats wanted that cigarette tax to fund mental health programs.
The fact that Republicans held the line on tax increases is a plus, even though it cost us those PERS cuts. Those will be painful to everyone anyhow. Public employees unions have pretty much guaranteed that they will sue if their retirement benefits get cut.
Republicans argued that higher taxes are not needed to balance the state budget, which is expected to see a $2 billion increase in the next biennium simply from an improving economy. They say the answer to fixing schools that face overcrowded classrooms, shorter numbers of school days and fewer teachers is not more taxes, but better prioritizing.
Raising taxes simply reduces the purchasing power of Oregonians, which hamstrings businesses’ abilities to pay employees and contributes to the need for social programs.
It’s easy to point fingers and lay blame, but there are difficult issues. Just as in our homes, reduced spending or income is painful. Holding that line on taxes means possible reductions in public services – longer lines, shorter hours, less money for schools and public safety – that sort of thing.
The fact is, Oregon’s budget prioritization is far from where it could, and should, be.
This is a state that chose to spend $450 million to replace the I-5 bridge from Portland to Vancouver while these other financial challenges loom. A new bridge would certainly be nice, and would probably improve truck and rail transportation options, but Oregon needs to take care of its financial messes before throwing money at this.
Our state has some of the highest income and investment taxes in the nation. It faces what has been described as a “decade of deficits” unless major changes are made in the way it delivers and pays for government services.
The average Oregonian’s annual income in recent years has been 9 percent lower than the national average, which is where we were at a decade ago. We’re hurting individually.
Businesses, large and small, struggle with taxes and regulations that are unique to our state – 2010 Measures 66 and 67, for instance – and make life difficult for the enterprises that provide income for residents – and government.
Oregon spends nearly half its money on education, with another quarter of its funds going to human services. Here’s the challenge for both Democrats and Republicans: Get more for your money.
How about providing ways for social services recipients to gain self-respect and practical skills by providing public service for the benefits they receive? How about looking at innovative ways other countries educate their children, who learn better than ours?
Bottom line: Republicans were right to resist a tax increase but this PERS problem remains to be solved, and it’s going to take far-sighted ingenuity on both sides of the aisle to do so.