Billion Dollar Deficit Its Really Just A Sales Tax Priority Oregon

A $1.8 billion deficit in a time of record revenue.


If lawmaking doesn’t work out for the Legislature’s chief budget writers, they have a solid future in horror flicks. The budget framework released earlier this month by Sen. Richard Devlin, D-Tualatin, and Rep. Nancy Nathanson, D-Eugene, is nothing short of terrifying for the dystopian picture it paints if the state fails to raise additional revenue.

Among the possible outcomes for the state, in light of a projected $1.8 billion gap between revenue and expenses: Hundreds of thousands of low-income residents could lose coverage under the Oregon Health Plan; K-12 teachers could be laid off, leading to even more crowded classrooms; help and services for seniors could be slashed.

The budget writers’ point is well taken. This state fundamentally needs more money – ideally, in a form that offsets the volatility caused by Oregon’s reliance on personal-income taxes for revenue. But Oregonians should not let the quest for new money distract them from the other facts underpinning Oregon’s current financial dilemma and legislators’ failure to deal with them. Lawmakers must use this session to address not just revenue, but also spending – particularly on public-employee pensions. And they must fix their destructive habit of ignoring problems until it’s too late.

Among the facts that you don’t hear much from the governor or Democratic legislative leadership: This $1.8 billion deficit is coming amid a period of strong, sustained economic and revenue growth in Oregon. In fact, in terms of absolute general-fund and lottery dollars, the state expects record revenue. The state budget writers estimate they will have an additional $1.3 billion in tax and lottery money for the coming biennium compared to the current biennium. In other words, the gloom-and-doom scenario that the budget writers painted doesn’t stem from recession or unemployment.

 It does stem, however, from the fact that spending has far outpaced revenue growth. So supposed “cuts” aren’t necessarily reductions in the actual sum of money allocated to a program. Rather, the allocation isn’t great enough to cover expected increases – due to personnel costs, new directives from ballot measures and other expenses – tied to maintaining the same level of service.

Another fact you don’t hear much about is that the Legislature knew years ago that the state would be on the hook for huge expenses but did little to prepare.

For example, consider the Oregon Health Authority, which is seeking a $1.2 billion increase for the coming biennium to help pay for the state’s expansion of health care for low-income Oregonians. To the state’s credit, Oregon has long been a leader in seeking to expand such coverage. It just hasn’t been so far-sighted in identifying how to pay for it, even though the state knew for years that various funding commitments from federal government were due to expire or shrink in 2017.

To be fair, legislators have been directing money to K-12 and higher-education budgets to rebuild school programs after years of deep cuts during the recession, as Devlin told The Oregonian/OregonLive Editorial Board. But it does not excuse legislators’ putting off the hard math that they now face.

And then, there is the Public Employees Retirement System. Public employers, including school districts, county governments and state agencies expect to see their required contributions to the pension fund increase for the next several years due to a massive imbalance between the fund’s assets and the fund’s obligations. While Democratic leaders are quick to point to the 2015 Oregon Supreme Court decision that invalidated significant reforms, they are far less chatty about other proposals to trim future benefits that legislative lawyers believe could withstand a legal challenge.

Sen. Peter Courtney, D-Salem, and House Speaker Tina Kotek, D-Portland, said in an interview with The Oregonian/OregonLive Editorial Board that the proposed pension reforms will be vetted through the committee process this session, a statement so bland it betrayed their lack of interest. Unfortunately, they showed the same apathy about a revenue proposal being developed by Sen. Mark Hass, D-Beaverton, that could raise upwards of $500 million.

They and Oregonians should keep in mind one more inconvenient fact: While Oregon is raking in record revenue, its rate of growth is slowing. So there may not be much time to seriously alter our revenue and spending framework before an economic downturn. It’s all the more reason to quickly get down to work.

– The Oregonian/OregonLive Editorial Board 

The Oregonian Editorial Board
January 28, 2017