Failed Promises: Why the Legislature Should Reject TriMet’s Request for New Spending Authority

TriMet is currently seeking new spending authority in SB 1510 to help finance regional “multi-modal” transportation projects. Legislators should deny this request based on previous experience with TriMet commitments.

To refresh the memory: during the 2003 session, TriMet sought approval to increase the payroll tax rate by one-tenth of a percent. According to TriMet’s then-General Manager,

“TriMet’s proposed payroll tax increase will be used exclusively to provide new or enhanced transit service. This will include assisting in the operation of Washington County Commuter Rail, Clackamas County light rail, Lake Oswego Streetcar, a substantial increase in Frequent Service routes, and enhanced local connections to these lines.”[1]

The rate increase was approved, and was phased in over a 10-year period.

During the 2009 legislative session, TriMet sought an additional rate increase. The legislature again approved the request. The TriMet board approved the first of 10 planned rate increases last September, and the new rate of 0.7337% went into effect on January 1, 2016.

Let’s look at the results. After a decade of tax increases, it’s clear that there is no correlation between increased TriMet revenue and actual levels of service: 

TriMet Financial Resource Trends for Operations, 2004-2015

 (000s)

CLICK HERE TO VIEW TABLE IN PDF 

2004 2006 2008 2010 2012 2014 2015 % change
Passenger fares $55,665 $68,464 $80,818 $93,729 $102,240 $114,618 $116,734 +110%
Tax revenue $155,705 $192,450 $215,133 $208,933 $248,384 $275,357 $292,077 +88%
Total operations $290,513 $342,274 $404,481 $433,609 $488,360 $522,155 $493,572 +70%

 

In fact, there is negative correlation – as TriMet’s revenue went up over the course of a decade, actual service went down: 

Annual Fixed Route Service and Ridership Trends for TriMet

2004-2015

CLICK HERE TO VIEW TABLE IN PDF 

2004 2006 2008 2010 2012 2014 2015 % change
 
Hours of service 1,698,492 1,653,180 1,712,724 1,682,180 1,561,242 1,608,090 1,676,826 -1.3%
Miles of service 27,548,927 26,830,124 26,448,873 25,781,480 23,625,960 23,763,420 24,248,910 -12%
Originating rides 71,284,800 74,947,200 77,582,400 77,769,119 80,042,810 75,779,560 77,260,430 +8.4%

 Note: The term “originating rides” excludes transfers.

Source: TriMet, http://www.trimet.org/pdfs/publications/trimetridership.pdf 

There is a slight correlation between revenue and transit use, as total originating rides went up 8% while operating revenue went up 70%. However, ridership peaked in 2012 and has dropped by 3.5% since then.

TriMet claims that the 2003 promise of “enhanced service” was met because many new rail lines were built. But to the 66% of TriMet riders who travel by bus and saw their service drop by 12%, shiny new rail lines were of little consolation.

TriMet now wants to expand its reach through SB 1510 so as to spend new funds for “multi-modal” projects. We suggest a simple response: unless and until TriMet transit service returns to at least 2004 levels, no additional spending authority should be granted.

[1] Fred Hansen, testimony before the Senate Revenue Committee on SB 549, March 11, 2003, p. 3.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. 

Government-Imposed Minimum Wage Increases Don’t Work for Oregon Small Businesses

The concept that everyone should earn at least some government-mandated minimum wage is politically very appealing. It’s almost the classic example of taking from the few and giving to the many. “The few” in this case are portrayed as rich businessmen who could never spend all the money they have, so what’s wrong with making them pay their workers a little more? Now, proponents of raising Oregon’s minimum wage are trying to convince us that somehow such policy is actually good for small business owners.

A recent report from the Oregon Center for Public Policy claims that a higher minimum wage works for small businesses by giving them “more of what they need most: customers with money.”

In reality, raising the minimum wage would only benefit small businesses if owners didn’t mind depleting their own savings or investment funds in order to support higher labor costs. Otherwise, they would have little choice but to raise prices, which would harm all their customers, especially those on the lower rungs of the economic ladder.

And, because minimum wage laws actually cut off those lower rungs on the economic ladder, younger, less educated, and less experienced workers will be even less likely to get or keep the very jobs they need to be customers in the first place. They may spend their unemployment checks, but those checks won’t go as far once prices are raised to cover the higher labor costs that a boost in the minimum wage imposes.

The argument that a higher minimum wage pumps more money into the economy assumes that the resulting pay increases are somehow “new money.” In reality, much if not all of that “new money” will be offset by a corresponding loss of savings or investment funds that otherwise would contribute to more economic growth and hiring more workers.

Just because low-wage workers are likely to quickly spend any wage increases doesn’t mean that on balance that’s good for small business. Taken to its logical conclusion, that would mean small business owners, and everyone else, should never save and invest for the future, but immediately spend every dollar they earn also. If this behavior really benefitted the economy, why are we seemingly so concerned about the dismal rate of saving and investing for retirement among Oregonians? Couldn’t small businesses benefit even more by encouraging everyone to spend all their income right now?

Another set of arguments for raising the minimum wage include the assumptions that higher wages “motivate employees to work harder;” “attract more capable and productive workers;” “lead to lower turnover, reducing the cost of hiring and training new workers;” and “enhance quality and customer service.”

While higher wages may lead to the benefits stated above, if business owners believe that is the case then they should be willing and eager to raise wages whenever possible. The fact that minimum wage proponents want to force business owners to reap these benefits weakens their case.

Finally, there is a real irony in the campaign to boost Oregon’s minimum wage. Minimum wage laws conspicuously leave out a class of individuals who don’t get a paycheck from someone else, but hopefully get one from themselves. Self-employed people, small business owners, and entrepreneurs trade a steady paycheck for the opportunity to be their own boss. They often risk everything―their homes, their savings, all their assets―to build a business that might someday earn them a much higher paycheck than they could ever earn working for someone else.

But, while building a business, many entrepreneurs actually earn less than the minimum wage. They may actually have negative earnings, dipping into savings or borrowing money to keep their doors open and pay their employees. And yet, if these risk-takers hire anyone to help them make their dreams come true, government says they must pay those workers at least $9.25 per hour in Oregon today, and perhaps as much as $15 per hour in the near future.

So, while business owners are free to do a lot of things, and take a lot of risks, one thing they cannot do is hire anybody for less than the minimum wage, even if they are earning less than that themselves. Of course, this may not be a winning argument politically.

It’s easier to demonize supposedly “rich” business owners than to tell workers and job seekers the uncomfortable truth that to be employed in a successful business they must produce as much or more value than they wish to be paid.

Proponents of raising the government-mandated minimum wage know that they have little to lose and much to gain politically by telling young, less educated, and less skilled workers that they deserve to be paid more, and it’s only greedy business owners standing between them and the higher wages they desire.

Let’s just hope that if another bump in Oregon’s minimum wage results in some workers losing their jobs and others not getting hired in the first place that they place the blame for their troubles where it belongs―not on employers, but on those who promised them higher wages but couldn’t deliver because economic reality stood in the way.

Testimony Regarding SB 324-A, Low-Carbon Fuels Standards

The top legislative priority for most Democrats in Salem has passed the Senate and will be up for its first public hearing in the House on Tuesday, February 24th.

SB 324-A, the “low-carbon fuel standard” bill pushed so hard by Cylvia Hayes and former Gov. Kitzhaber, will be reviewed in the House Environment and Energy Committee at 3:00 p.m. on Tuesday. In prepared testimony sent to the committee today, Cascade President John A. Charles, Jr. points out that the “carbon intensity” of driving has dropped by 47% since 1975, making SB 324 redundant. Moreover, carbon dioxide is not a real “pollutant” anyway, so there would be no public health benefits to reducing emissions.

If SB 324 passes, it would raise the price of motor fuel by at least 19 cents/gallon, but none of the increase would benefit roads. Only an actual “motor fuel tax” raises money for roads, and Oregon already has a state gas tax of 30 cents/gallon. Legislative leaders hope to also increase that tax, meaning motorists would face two new taxes but receive less than half the benefits.

Cascade supporters are encouraged to contact their state Representative in opposition to this poorly-conceived bill.

Read full testimony here

Testimony on Measure 86 to Portland Community College Board

The following testimony was presented to the Portland Community College Board at their meeting on September 18, 2014.  The Board then voted 5 to 2 in favor of a Resolution giving their support to the Oregon Opportunity Initiative, Measure 86 on the November ballot.

Testimony before the Portland Community College Board in Opposition to the Oregon Opportunity Initiative (Measure 86):

Good evening, Chair Palm and members of the Board. My name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a public policy research organization based in Portland.
I urge you to reject this Resolution for the following reasons:

First, you have no assurance that any funds generated by the Opportunity Initiative won’t simply replace funds the legislature already allocates to higher education. Plus, there’s no assurance that one community college student will benefit. Decisions about what, if any, funding will benefit specific students will be left to some unnamed public body, subject to the same lobbying efforts the legislature faces now.

Second, even if the Opportunity Initiative helps some students in the short run, it will make the whole system less affordable in the long run. Such third-party payments from states and the federal government are a big part of the reason that college costs and student debt are rising rapidly.

I’m sure you work hard to keep student prices under control. But, to the extent that Measure 86 puts more taxpayer money in student pockets, it will take some pressure off you to do so.

Third, I’m not sure voters understand that even if the Treasurer’s optimistic investment assumptions for Measure 86 work out, income taxpayers will be on the hook to repay all the principal and interest on any bonds issued by the state for decades into the future.

Before asking taxpayers to repay those bonds for the next thirty years, you might consider how technology is beginning to reduce higher education costs.

One Oregonian who recognizes the power of the coming technological revolution is the chief sponsor of the Oregon Opportunity Initiative himself, Treasurer Wheeler. Last October in a public meeting, he criticized the university system for being…

“…very slow to adapt the opportunities around technology.” He said that “there’s a lot of institutional inertia in the university system just as there is in Salem. And, all of these new technologies have opened up new windows to learning that do not require a student to even be in the same state.” He noted that online programs such as iTunes University on his own smartphone “don’t cost…a cent” and are a “game changer” that “undercut the entire economic model of the university system as it currently exists today.” *

So, if technology will put downward pressure on college costs, why saddle Oregon taxpayers with perhaps one hundred million dollars or more in debt over the next 30 years to fund the current high-cost model?

Finally, based on recent ACT test scores, only 30 percent of Oregon’s high school graduates are competent enough at English, reading, math and science to pass freshman college classes. Before you encourage more spending on higher education, shouldn’t we find ways for our public school system to prepare most college-bound students to actually succeed there? Otherwise, we’re just paying twice for remedial courses to teach college students what they should have learned in high school.

Wouldn’t you rather see every new PCC student ready for college-level courses, rather than dump more of your limited budget into teaching them what they should already know?

In conclusion, whatever the value of a college degree is to an individual, it’s becoming clear that Opportunity Initiative state funding of those degrees is likely to cost taxpayers more than they gain. I urge you to reject the Oregon Opportunity Initiative.

Thank you.

* Ted Wheeler, Washington County Public Affairs Forum, October 28, 2013.
59-second answer: youtube.com/watch?v=ZMPMtmEyieg.
Entire hour-long presentation with Q&A: youtube.com/watch?v=l1hYXGA3CLA.
Relevant question starts at 52:16.

The Demise of the Highway Trust Fund: A Market Solution

 

In the 1967 film The Graduate, Dustin Hoffman plays a nerdy twenty-something who suffers through an unwanted college graduation party hosted by his parents. As he makes the rounds, a middle-aged business man offers a memorable bit of career advice: “I just have one word for you: plastics.”

 

In the context of today’s forum on the future of the Highway Trust Fund, I also offer one word of advice: Uber.

 

Most of you probably know that the ride-sharing company Uber relies on the use of a smartphone app to connect potential customers with nearby drivers who use their own vehicles to provide door-to-door transit service. The $17 billion company has become so successful that in late June thousands of taxi drivers around the world went on strike to protest this private, unsubsidized challenge to their monopoly franchises.

 

The Oregonian reported recently that Uber had launched in Vancouver, WA, but faces one major barrier: The company’s service is outlawed in Portland. In fact, Portland is the only major city on the entire west coast that does not allow Uber.

 

This issue is symbolic of everything that’s wrong with transportation policy. Municipal taxi regulation is as anachronistic as the price and route control which used to be imposed by the Civil Aeronautics Board (CAB); and the Congressional decision to euthanize the CAB in 1978 enabled the market-based airline revolution that changed flying from a boutique experience for the wealthy to a mass consumption option for the middle class.

 

Transportation insiders are now obsessed by the consistent failure of Congress to come up with a new funding stream for surface transportation programs, but the success of Uber suggests that we’re looking in the wrong places for money. There is a vast amount of investment capital circling the globe, looking for a profitable place to land. That capital can be deployed to the benefit of motorists and transit users if we create real markets in transportation.

 

Apparently, most people in this room have a different perspective; they agree with Congressman Blumenauer that the primary solution is to raise the 18.4 cents/gallon federal gas tax. But if we step back and think about the nature of the problem, there is no reason to have the federal government involved at all. The beneficiaries of every transportation investment are the users, who can pay the full cost through user fees or local taxes. All users are local.

 

Collecting taxes from Ames, Iowa and Camden, New Jersey to finance a road culvert project in Beaverton, OR is a convoluted and wasteful way to pay for service. The only reason we cling to it is because it benefits the politicians and bureaucrats whose power base is tied to the laundering of gas tax money through Washington, D.C. The legislative ability to pork-barrel from one state to another removes all fiscal discipline, and virtually guarantees that vast amounts of money will be wasted on useless toys such as “high-speed rail.”

 

I was asked to defend the concept of “devolution” today, and I’m happy to do so. There are federal agencies that should follow the Civil Aeronautics Board into the bureaucratic burial grounds, including the Federal Highway Administration and the Federal Transit Administration. Neither adds much value, and both distract us from better solutions.

 

However, devolution would only be a small step forward because state and local politicians love to pork-barrel tax money just as much as federal officials do, and they’re very good at it. For instance, in 2013, the Portland Auditor released a report entitled: “Transportation funding: revenue up, street maintenance down.” That’s all you need to know about the contrived road maintenance crisis in Portland.

 

The Metro Auditor has published at least 5 reports since 2008 chastising Metro for wasteful transportation spending. The Metro Council has completely ignored these reports.

 

TriMet has been awash in taxpayer cash over the last decade, yet service has dropped. Between 2004 and 2013, total annual operations revenue at TriMet went up 62%, while annual vehicle miles of transit service went down by 14%.

 

Given that pork-barreling is endemic to government spending, the transportation finance “solution” requires a massive dose of Uber, whereby capital is raised from private investors, innovative services are marketed entirely on the basis of consumer preference, and the profit motive imposes fiscal discipline on spending.

 

What is preventing this from happening in transportation is the mindset of government officials. They want to control the flow of investment dollars, pick all the projects, set all the prices, and determine how and where people travel.

 

In other words, they insist that we regulate surface transportation in the same failed way that the CAB used to set prices and routes for commercial airlines.

 

The Uberization of the transportation economy would involve at least the following elements:

 

  1. Allowing/encouraging bridges and limited access highways to be converted to tollways, with variable pricing in those urban areas where peak-hour traffic congestion is a problem. The gas tax at any level cannot solve urban congestion because traffic varies by day of the week, time of day, location, and direction of travel. Therefore, the appropriate user fee must vary in real time as well in order to modify behavior appropriately.

 

  1. Restricting the use of all highway toll revenues to maintenance and expansion of those tollways. Motorists cannot be used as ATMs for non-road boondoggles.

 

  1. Allowing/encouraging private companies to build new highways and bridges with private equity, financed through electronic tolls, without excessive regulation. The latter point is highly relevant as we consider the possibility of a third bridge over the Columbia River that might be built by a private company and financed entirely with tolls. If that company approached Metro next week seeking help with the environmental permits, everyone in this room knows what the response would be: drop dead.

 

We need a major attitude adjustment among regulators, not just more money.

 

  1. Deregulating the entire transportation market to allow/encourage competition to TriMet, the streetcar, the taxi cartel, PDOT, and ODOT.

 

  1. Devolving all decisions away from the federal government, and converting the existing 18.4 cents/gallon federal gas tax to an add-on state tax (which would bring the state tax rate to 48.4 cents/mile).

 

  1. Creating real markets in transportation infrastructure and returning consumer sovereignty, whereby consumers get all the transportation choices they want – as long as they are willing to pay for them.

 

The decades-old arguments about the federal gas tax versus some other funding mechanism is stale. You can choose to stay in that endless legislative loop, or you can get out of it and look for something else. The success of private companies such as Uber, Lyft, Bolt Bus, and the large consortiums building new tollroads all around the world indicates that there is plenty of money available for the construction, reconstruction, and maintenance of surface transportation facilities under the right conditions. The job of elected officials is to create those conditions and then get out of the way.

 

I predict that within two years, Uber will be legal in Portland, and the local taxi cartel will have morphed into something much more market-driven. We should applaud this change, and look for other opportunities to connect consumers with service providers through the dynamic market process.

 

A version of this essay was presented at a Portland town forum sponsored by Rep. Earl Blumenauer on August 4, 2014.

 

Testimony to TriMet Board About WES Expansion

John A. Charles, Jr. presented this testimony to the TriMet Board of Directors on May 28, 2014 with regard to their proposed expansion of the Westside Express Service.

 

Board members:

Below are my comments on Resolution 14-05-27, Adopting the Fiscal Year 2014-15 Annual Budget and Appropriating Funds, for your May 28 meeting:

Assumed cost of fringe benefits: According to the introductory narrative, the proposed FY 15 budget “assumes management’s initial offer for active and retiree health benefits.” This is consistent with the budget statements from previous years, which have tended to “assume away” unpleasant aspects of labor negotiations. It does not seem prudent to continue making these assumptions, based on the history of TM labor negotiations over the past 22 years. As much as I like seeing the proposed expansion of service, perhaps it would be better to scale back service enhancements and set aside more funds for a worst-case outcome on the cost of health benefits.

Plans for WES expansion: The staff recommends purchasing two additional vehicles for WES, at a cost of $8.5 million, or $13.2 million over 20 years of debt service. All of those costs will cannibalize other general fund programs. I’d suggest that this proposal be pulled from the budget and possibly added back later, after further public vetting.

WES is TriMet’s most expensive fixed-route service, but I’m not aware of any justification that has ever been offered. Fewer than 1,000 TriMet riders benefit from these subsidies each weekday. Why are WES riders so privileged?

To put the issue in context, below are the costs of WES compared with those of similar bus service offered by SMART of Wilsonville. While WES is undoubtedly a nicer and quicker ride for users, the cost premium is difficult to justify to non-riding taxpayers who have to make up the difference.

Express Service from Wilsonville Station to Beaverton Transit Center

Operating cost/mile Operating cost/hour
TriMet Express Rail $43.74 $949.84
SMART Express Bus $   1.30 $   83.17

In addition, WES is an energy hog. According to a new report by the Federal Railroad Administration, the average energy consumed by all commuter rail systems in America during 2010 was 2,923 British Thermal Units (BTU) per passenger-mile. WES was close to the bottom: It consumed 5,961 BTU per passenger-mile, more than twice the national average (by comparison the top performer was Stockton, CA: 1,907 BTU/passenger-mile).

Not only is WES inefficient compared with its peer group, it is wasteful compared with other modes of travel. The national average for all transit buses in 2010 was 4,240 BTU per passenger-mile; for light-duty cars, the average was 3,364.

WES has always been a planning mistake. Before the Board decides to double-down on failure, there should be careful consideration of an alternative action: terminating service. None of the current board members had anything to do with the original decision, so no one should feel a personal need to defend it. Certainly terminating service would result in some short-term costs because of likely re-payment penalties to the federal government, but at some point the lower operations would provide net benefits to taxpayers (including those outside of TriMet’s district in Wilsonville, who pay TriMet more than $25,000/month to subsidize train operations).

In a typical year, there are very few opportunities for the Board to actually express a clear policy choice for TriMet’s future; most decisions are made by the staff. This is a rare chance for the Board to isolate two distinct policy options, consider the long-term effects, and express an independent preference for one of those options. I strongly encourage you to defer action on the proposed purchase of additional WES vehicles for at least another 60-90 days in order to have that public conversation.

Sincerely,

John A. Charles

Cascade Policy Institute

Cascade in the Capitol: Testimony for the House Education Committee Against SB 1538 which would limit new charter school options

February 19, 2014

Testimony Against SB 1538 Before the Oregon House Education Committee

Chair Gelser and members of the Committee, my name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute based in Portland.

I would like you to reject SB 1538.

Interestingly, the Senate has overwhelmingly approved SB 1525, which would make it easier for Oregon college students to take online courses from institutions outside the state. The chair of the Senate Education and Workforce Development Committee noted how fascinating it was that the proposal would break down borders standing in the way of Oregonians having more higher education learning opportunities. That seems non-controversial and clearly a good thing.

Unfortunately, by a much closer margin, the Senate also approved SB 1538, which does the exact opposite of SB 1525. It actually builds up borders that will stand between Oregon’s Kindergarten through 12th grade students and new public charter school options that might offer the very educational opportunities they want and need.

Several years ago I was watching a Portland Public Schools Board Meeting where several charter applicants were making their cases to the board.

One group wanted to start a school with, what I recall, was a particular arts curriculum. They’d jumped through all the hoops required of a charter applicant, but when the board members began commenting, it became clear that the applicant stood no chance of approval.

One board member looked at the applicants, and at the audience, and stated, “We already have one of those.”

She went on to explain that the district already had a school with a similar curriculum focus, and therefore they obviously didn’t need any more. How she knew that there was no more demand among parents and students for such a focus was unclear.

They already had one of those, so that ended the discussion.

This bill would make it even easier for Portland and other districts to write off competent, innovative charter applicants by simply stating that their schools wouldn’t advance one or more educational goals that the board had identified.

We already have one of those” would become… “We don’t need even one of those.”

This bill would stifle innovation, and stifle opportunities for students currently “captured” by their local public schools to find any way out…to find a better fit for their educational needs.

I hope you reject it.

Cascade in the Capitol – Testimony Against Placing Limitations on New Charter Schools (SB 1538)

February 6, 2014

Testimony Against SB 1538 before the Oregon Senate Education and Workforce Development Committee
By Steve Buckstein

Chair Hass and members of the committee, my name is Steve Buckstein. I’m the Senior Policy Analyst and founder of Cascade Policy Institute, a Portland-based free-market think tank.

I’m here to ask you to reject SB 1538.

Chair Hass, the committee just approved SB 1525, which would make it easier for Oregon college students to take online courses from institutions outside the state of Oregon. You noted how fascinating it was that the proposal would break down borders standing in the way of Oregonians having more higher education learning opportunities. That seems non-controversial, and clearly a good thing.

Unfortunately, if you approve the bill we’re discussing now, SB 1538, you’ll be doing the exact opposite. You’ll be building up borders that will stand between Oregon’s Kindergarten through 12th grade students and new public charter school options that might offer the very educational opportunities they want and need.

A few years ago I was watching a Portland Public Schools board meeting where several charter applicants were making their cases to the board. One group wanted to start a school with, what I recall, was a particular arts focus. They’d jumped through all the hoops required of a charter applicant, but when the board members began commenting it became clear that the applicants stood no chance of approval.

One board member looked at the applicants, and at the audience, and stated, “We already have one of those.” She went on to explain that the district already had a school with a similar curriculum focus, implying that obviously they therefore didn’t need any more such schools. One was enough.

SB 1538, brought to you by the current Portland Public School Board, would make it even easier for Portland and other districts to write off competent, innovative charter applicants by simply stating that their proposed schools wouldn’t advance one or more educational goals that the board had identified.

Back when I was about to graduate from a Portland elementary school, I considered attending Benson Polytechnic High School. It was the one Portland public school with an emphasis on technical education, and it seemed to always have a waiting list to get in. I wondered then why the district never opened another Benson type school to meet the obvious need.

Why was “We already have one of those” the mindset then, and why is it the mindset still?

I now believe it’s because board members and administrators don’t have to be concerned about the needs of most students, because most students and their parents don’t have the means to exercise other options, such as moving near a school that better meets their needs, or paying taxes for the public school system and tuition for a private school at the same time.

If SB 1538 becomes law, this mindset of “We already have one of those” could easily morph into “We don’t need even one of those.”

This bill would stifle innovation, and stifle opportunities for students currently “captured”* by their local public schools to find any way out…to find a better fit for their educational needs.

I hope you reject it.


SB 1538 was approved on a 4 to 1 vote in the Committee and will go to the Senate floor for a vote.

Archived audio of the entire February 6, 2014 hearing is here, beginning with the hearing on SB 1525. Senator Hass’s comment about breaking down borders beginning at 08:19 into that hearing. The hearing on SB 1538 begins at 17:20, with public testimony for and against the bill. My oral testimony begins at 51:04.

* Public school districts often try to maintain or increase the percentage of eligible students living within each school’s particular geographic boundaries. This percentage is openly referred to by district officials as the “capture rate.” Anything that could reduce the capture rate of a given district school, such as creation of a new charter school, is seen by those officials as a potential threat to their capture rate goals.

Cascade in the Capitol – Testimony Against Additional Tobacco Taxes (HB 4129)

February 11, 2014

Testimony Against HB 4129 in the House Revenue Committee

By Steve Buckstein

Chair Barnhart and members of the committee, my name is Steve Buckstein. I’m the Senior Policy Analyst and founder of Cascade Policy Institute, a Portland-based free-market think tank.

I’m here to ask you to reject HB 4129.

Why the state should not increase so-called sin taxes

• Funding any state program through additional tobacco taxes would add one more advocacy group to those who openly or secretly applaud more smoking in Oregon.

• Oregon’s addiction to tobacco revenues will only grow if we become dependent on those revenues to fund any new programs.

• Taxes on alcohol and tobacco are frequently justified as a means of discouraging “unhealthy” behavior. But this objective quickly gives way to a different one: raising revenue. This creates a “moral hazard” problem: sin taxes cannot simultaneously both discourage consumption and raise more revenue. For one to succeed, the other must fail.

• As cigarette smoking continues to decline, tobacco taxes will fail to fund current, let alone new, programs, punching more holes in future state budgets.

The regressivity of sin taxes

Providing health care services to specific groups of people, in this case smokers, may make some smokers better off; but it will also make other smokers and their families worse off. As you may know:

• Cigarette smoking adults are more likely to be uninsured than non-smoking adults.

• Cigarette smokers are in poorer physical condition than non-smokers.

• Cigarette smokers generally have lower incomes and less formal education than non-smokers.

• Cigarette smokers are more likely to be unemployed or unemployable than non-smokers.

In summary, increasing tobacco taxes is regressive, targeting less educated, lower-income, and sicker Oregonians.

Policy option:

If funding new or increased health care services for smokers is worth doing, it should be done through the General Fund so everyone participates. This avoids the moral hazard problem and is not nearly as regressive as the tax increases proposed in HB 4129.

Thank you.
————-
Audio of the entire hearing is here. The HB 4129 hearing section starts at 1:03:25 into the audio.

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