Who says Oregon pays public school teachers more than other states? The National Education Association, that’s who!

By Steve Buckstein

As Oregon legislators wrestle with how much money to spend on public education, advocates claim that we spend too little compared to other states. They demand that legislators spend more, and raise taxes to do it. But, according to the nation’s largest teachers union, the reality is quite different.

As I noted recently, in its Rankings & Estimates report for 2016 and 2017, the National Education Association says that Oregon spends more per student than 33 other states: $13,320 per Average Daily Attendee versus $12,572 nationally.

Another interesting finding in the NEA report is how much Oregon pays its public school teachers. In 2015-16 it shows the average teacher salary in the country was $58,343, compared to $60,459 here in Oregon. We spend three percent more on teacher salaries than the national average.*

But, the report also shows that our per capita personal income is nine percent less than the national average: $48,783 versus $43,783.

So, while we pay our teachers three percent more, we do that out of incomes that are nine percent less than the average American. Add those two numbers together, and it’s clear that based on our ability to pay we compensate Oregon teachers very well.

All this data add weight to the argument that we don’t need new taxes to better fund public education. We fund it very well already.


*“Where applicable, ‘average teacher salary’ includes the contract amount plus 6 percent for the employer portion of retirement contributions.” Page 146 of the NEA report.


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization.

The Case of the Missing Transit Money

By John A. Charles, Jr.

Last week the TriMet Board adopted a budget for fiscal year 2018, which begins on July 1.

As usual, the budget shows no correlation between the levels of subsidies given to TriMet and the amount of service provided to customers.

For example, in 2008, TriMet had a total of $397 million to pay for operations of bus and rail service. In 2018, the agency predicts it will have $600 million, a 51% increase. Yet bus service—which carries two-thirds of all passengers—has barely improved.

In 2008 the “revenue-miles” of bus service (those miles where buses were in operation) totaled 22,574,030. If service increases in 2018 as planned, the total is likely to be 22,597,927—only a 0.1% increase.

Where did all the money go?

TriMet claims that increased light rail service made up the difference, but between 2008 and 2016 the revenue-miles of MAX only went up 14%. No service increase in 2018 will make up the difference between 14% and 51%.

Moreover, ridership is not growing along with the increased funding. In fact it is shrinking. During 2008 the total number of “originating rides” (which excludes transfers) was 77.6 million. Ridership peaked in 2012 at 80 million, and then dropped to 77.2 million in 2016.

TriMet is also losing market share, especially at peak hours. According to the Portland city auditor, in 2008 an estimated 15% of all Portland commuters used TriMet. By 2016, that had dropped to just 10%.

The steady rise in TriMet’s revenue is almost entirely due to tax subsidies, not passenger fares. In fact, next year passenger fares will only account for 10% of TriMet’s all-funds budget—likely the lowest level of passenger support in TriMet history.

Nonetheless, the Oregon legislature is considering a bill that would authorize a new, statewide employer tax that would generate even more subsidies for transit. The Portland experience shows that this is a bad idea. The more we subsidize monopoly transit, the more the employees divert funds for their own use.

Last year TriMet spent $1.23 on employee benefits for every $1.00 expended in wages. That largely explains why service levels have been stagnant.

In 1969 the Portland City Council put Rose City Transit out of business because Councilors believed that a government-run monopoly would be much more efficient than a private-for-profit company. The TriMet experience has shown that the City Council was wrong.


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

 

Who says Oregon spends $13,230 per public school student? The National Education Association, that’s who!

By Steve Buckstein

Ever since Oregon’s property tax limitation Measure 5 shifted the bulk of education funding from local sources to the state general fund in 1990, public education advocates have claimed that our schools are severely underfunded, spending less than most other states. They want the legislature to raise taxes now to rectify this supposed crisis.

Ask a knowledgeable Oregonian how much money is spent per student in our public schools and they might say the number is about $8,781, which is what the state currently gives school districts per student.

But, ask the nation’s largest teachers union, the National Education Association, and you’ll get a much different answer. According to the NEA’s just-released Rankings & Estimates report for 2016 and 2017, when you count local, state, and federal funding, current expenditures per Oregon student in Average Daily Attendance are estimated to be $13,230. That puts us five percent above the national average of $12,572. Oregon spends more than 33 other states.*

Add in spending for capital outlays and interest payments, and that $13,230 number goes up to total expenditures per student of $14,911.**

Even at the lower number, public schools spend over $396,000 a year for each 30-student classroom. Subtract the average teacher salary plus benefits of some $85,000, and Oregonians should ask where the additional $300,000-plus is going before even thinking about raising taxes on anyone.


* There are several ways to calculate current expenditures per student. The NEA computes two of those ways in this report. Definitions are given in the report Glossary. Oregon’s 2017 Average Daily Attendance (ADA) of pupils “under the guidance and direction of teachers” is estimated in Table I-3 to be 531,434. Oregon’s 2017 Fall Enrollment of pupils registered in the fall of the 2017 school year is estimated in Table I-6 to be 578,176. Because there are more pupils registered in school districts than actually in class on an average day, current expenditures per ADA of $13,230 (Table J-9) is higher than current expenditures per Fall Enrollment, which is $12,161 (Table J-10). Oregon spends more than 33 other states under both these methods.

** Under the two ways of calculating expenditures per student explained above, the author’s calculation of estimated 2017 total expenditures based on Average Daily Attendance of $14,911 is higher than that based on estimated Fall Enrollment, which is $13,705.


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization.

Kicker Envy 2017

By Steve Buckstein

Individual Oregon income taxpayers may receive kicker refunds when they file their 2017 tax returns based on a percentage of the state income tax they paid in 2016. Based on the May revenue forecast, $408 million could be coming back to taxpayers, with the average refund being $210. A final determination of whether the kicker will “kick” and how big it will be should be announced on August 23.

But even before those potential refunds reduce our 2017 tax liability, some are questioning whose money it is, and others seem envious that the “rich” will get much bigger refunds than the rest of us. So, whether the kicker law is good or bad public policy, let’s think a little about who this money really belongs to. Is it a rebate for overpaying your taxes, or is it somehow “our” money that is better left in government coffers?

How the kicker works 

First, the mechanics of the kicker law: Oregon state government is highly dependent on the personal income tax for its General Fund budget. With a fairly flat tax structure, most wage earners are in the nine percent income tax bracket, while the highest income earners are in the top 9.9 percent bracket. Therefore, state revenue can be quite volatile, going up and down as the economy cycles between boom and bust.

The legislature first passed the kicker law in 1979, and voters added it to the state constitution in 2000. It mandates that state economists estimate what income tax revenue will be over the following two-year budget period. The legislature then must balance the budget by not allocating more money than the estimate. If the estimate is low by two percent or more, then the entire surplus must be returned to taxpayers. The kicker law actually is composed of two parts, dealing with personal income taxes and corporate income taxes differently. In 2012 voters decided that any corporate kickers would be returned to the state general fund to provide additional funding for K-12 public schools.

Some people argue that the way the kicker “kicks” makes little sense. They correctly note that projecting state revenue two years out to within a two percent margin is terribly difficult, and has been done only rarely. Others defend the kicker law as an important brake on runaway government spending, especially since voters have rejected other tax and expenditure limitations at the polls.

Whose money is it? 

Whether the kicker law is good or bad public policy doesn’t change the answer to a more fundamental question: Whose money is it?

Some argue that the kicker money really belongs to the state. After all, they say, it’s in the state’s coffers because individuals paid what the tax law said they owed on their tax returns. As long as any Oregonian has a “need” for that money—be they school children, the elderly, the disabled, etc.—then the money should go to them instead of back to the individuals who earned it.

How much is that latte? 

Of course, this is the Marxist “from each according to his ability, to each according to his need” justification. Taken further, not only would the kicker money remain with the state, but the state could retroactively come after even more of your previous income if, in the wisdom of government officials, anyone still “needed” those funds.

One way to look at this argument is to think about walking into a coffee shop today and ordering a $3 latte. The price is posted on the wall, but the person behind the counter asks you a question before accepting your order. “Did you get a raise last year?” “Yes,” you tell her proudly, “I was very productive last year and my boss gave me a 10 percent raise.” “That’s great,” she replies. “The $3 latte will cost you $3.30.” “Why?” you wonder. “Because your ability allows me to better meet my needs.”

You wouldn’t accept this argument from your barista, and you shouldn’t accept it from your government.

Next, some argue that the kicker “lavishes a windfall on those who don’t need it.” They point to the top one percent of taxpayers with adjusted gross incomes over about $386,000 who would receive more than $4,500 each, while the average taxpayer would only get back $210. What is often unstated in this argument is that those “lucky” top taxpayers paid way more income tax than the rest of us, and they will get back exactly the same percentage of their tax payments as everyone else does.

Envy is a powerful emotion, but it should not trump reason. If we can find a better way to restrain runaway government spending, we should do so. But until that day arrives, the kicker law is one defense against those who argue that some of the money you earned belongs to someone else just because they “need” it.


Oregon Income Tax Calculator: https://smartasset.com/taxes/oregon-tax-calculator


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization. An earlier version of this Cascade Commentary was published in November 2007.

 

Overtaxed and Underbuilt

By John A. Charles, Jr.

An Oregon Legislative committee is proposing a massive series of tax increases to pay for various transportation projects.

The proposal calls for higher taxes on vehicle registration, increased gas taxes, a new sales tax on motor vehicle purchases, a statewide employee tax to subsidize transit, and a new bicycle sales tax.

While there are many bad ideas on this list, perhaps the most offensive is the sales tax on vehicle purchases. It is being crafted so that most of the money would be diverted from highway maintenance into something called the “congestion relief and carbon reduction fund.”

Anything that includes “carbon reduction” in the title is guaranteed to be a boondoggle.

Before this proposal goes any further, legislators should consider a bill simply focusing on improving the road system. We all benefit from better roads.

In addition, they should try to charge people based on actual road use, not the mere ownership of vehicles. The gas tax is a good surrogate for this, so it would make sense to increase the gas tax rate while lowering vehicle registration fees. This would be fair to motorists, while still raising the funds needed for road improvements.


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

Proposed Oregon ESA Law Would Offer Students Choices While Breaking Even for Public Schools

By Steve Buckstein

Senate Bill 437, under consideration this legislative session, would offer Oregon K-12 students the flexibility to choose the educational options that best meet their individual needs through a universal Education Savings Account program. ESAs deposit a percentage of the funds that the state otherwise would spend to educate a student in a public school into accounts associated with the student’s family. The family may use the funds for approved educational expenses such as tuition, tutors, online courses, and other services and materials.

The fiscal impact of a universal ESA program for Oregon has been evaluated in an analysis released by Cascade Policy Institute. The fiscal “break even” for state and local school districts would be reached at an annual amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students. These dollar amounts are proposed in an amendment to the bill.

Of course, fiscal impact should not be the primary measure of this or any well-designed school choice program; but it is a political reality that a fiscal burden should not be imposed on the state at a time that all budgets are under pressure. An ESA program would offer Oregon families as much choice as possible in how their children take advantage of educational opportunities funded by the state. For more about the Educational Opportunity Act: The Power of Choice, visit schoolchoicefororegon.com.


Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization.

Oregon Taxpayers, Not Riders, Pay Most Costs of Public Transit Operations

By John A. Charles, Jr.

In a recent interview with the Portland Business Journal, Chris Rall of Transportation for America argues for increased state support of public transit service. He says that Oregon only covers three percent of the operating costs of transit, while other (unnamed) states pay for 24 percent.

I don’t know the source of Mr. Rall’s claim, but the audited financial statements for the largest transportation districts in Oregon show a very different picture.

In FY 2016 TriMet had total operations revenue of $542,200,000 but only $118,069,000 came from passenger fares. That means TriMet riders received a 78% subsidy from other sources.

At Lane Transit District in Eugene, passenger fares in 2015 were only $7.2 million, while total operating revenue was $60.9 million. Non-riders paid for 88% of operations.

For Cherriots Salem-Keizer transit, public support totaled 94% of all operating revenue in 2015.

Undoubtedly the largest subsidy goes to the Portland-Eugene passenger rail line operated by ODOT. For every one-way ticket sold in 2015, the public paid $120.

Before state legislators approve any more subsidies to transit, they should require that transit operators recover at least 50% of costs from customers. If riders are only willing to pay 10 percent, why should taxpayers have to pick up the rest of the tab?


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

How Legislators Can Balance Oregon’s Budget—Without Raising Taxes

By Eric Fruits, Ph.D.

Despite an eight percent increase in general fund revenues, Governor Kate Brown and some lawmakers say Oregon is facing a $1.7 billion budget shortfall in the 2017-19 biennium. Nevertheless, the Governor has released a budget that expands entitlements while raising taxes, fees, and charges by nearly $275 million for the general fund alone.

Expanding programs while increasing taxes is something Oregon could do if it were a rich state. Oregon is not a rich state. Income for the average Oregonian is about nine percent lower than the national average, and the cost of living is 15 percent higher. In other words, the average Oregonian earns less but pays more for basic items than the average American. Oregon legislators and other policymakers must face the reality that the state simply cannot afford costly new or expanded programs.

My analysis published in Facing Reality: Suggestions to Balance Oregon’s Budget Without Raising Taxes (February 2017), by Cascade Policy Institute and Oregon Capitol Watch Foundation, identifies seven straightforward solutions to the state’s current budget crisis for savings of nearly $1.3 billion in the next biennium.* If all the solutions were implemented, none of the tax and fee increases outlined in the Governor’s budget would be necessary.

Governor Brown blames three-fifths of the budget crisis on Oregon’s decision to expand Medicaid coverage under the Affordable Care Act. Policymakers undertook the expansion with full knowledge that the federal government would be shifting some of the costs of expansion to the state. Janelle Evans, budget director for the Oregon Health Authority, estimates these costs to the state’s general fund will be as much as $360 million in the next biennium. With many portions of the ACA likely to be reformed or replaced by this Congress, Oregon can see immediate budget savings by opting out of the Medicaid expansion now.

The skyrocketing costs of Oregon’s Public Employee Retirement System presents the biggest long-run challenge to balancing state and local government budgets. As reported in The Portland Tribune, the impact on the 2017-19 state budget is approximately $500 million because the state funds two-thirds of the operating costs of school districts, which will also be hit with the steep increase in PERS costs. In addition to the higher costs of PERS padded into the agency costs, the Governor’s budget includes a $100 million line item to support the state’s increased PERS costs.

Senate Bill 560 provides a reform that would cap at $100,000 the final average salary used to calculate Tier 1 and Tier 2 retirement benefits. The PERS actuary calculates this reform alone would save the state budget approximately $135 million in the 2017-19 biennium.

Oregon has the 12th highest pay in the U.S. for state employees. The Governor’s budget proposes increasing the state government workforce by 675 full-time-equivalent employees. This expansion of the public sector workforce would cost the state more than $120 million in additional compensation costs for the 2017-19 biennium. A halt on adding more state employees during this biennium would free up resources and ward off some of the pressure to increase taxes, fees, and charges.

In addition to these items, Oregon can face its budget reality by adopting targeted reductions already identified by the Department of Human Services, reforming the state’s cash assistance programs, saying “no” to the Governor’s wish to expand Medicaid to those who are not “legally present” in the state, and saying “no” to Measure 98’s unfunded high school education spending mandate.

State tax revenues are approaching all-time highs. Nevertheless, the state must face the budget reality that Oregonians do not have the resources to support ever-expanding spending programs that outpace our ability to pay for them.

 

* Solution Impact
Medicaid—opt out of ACA expansion $360 million
Cover All Kids—reject expansion $55 million
PERS—$100,000 cap $135 million
Department of Administrative Services—halt additional hiring $120 million
Department of Human Services—targeted reductions $321 million
Department of Human Services—cash assistance reforms $160 million
State School Fund—reject Measure 98 $139 million
Total $1,290 million

 


Eric Fruits, Ph.D. is an Oregon-based economist and adjunct professor at Portland State University. Fruits has been invited to provide analysis to the Oregon Legislature regarding the state’s tax and spending policies. His testimony regarding the economics of the Oregon public employee pension reforms was heard by a special session of the Oregon Supreme Court. A version of this article originally appeared in The Portland Tribune on February 23, 2017.

Car Ownership Is Not a Crime

By John A. Charles, Jr.

A bill has been introduced in the state legislature that would impose a $1,000 ownership tax every five years on automobiles more than 20 years old.

Fortunately, leaders of the Republican Party quickly denounced it; and without bipartisan support the bill has no chance of passage. The chair of the House Revenue Committee, Rep. Phil Barnhart of Eugene, has announced that the bill is dead.

The fact that this legislation was even introduced points to a conceptual problem shared by many lawmakers: They think that owning a vehicle is undesirable and should be taxed.

But owning a car imposes no cost on the public; it’s the use of the vehicle that we should be concerned with.

As one legislator told me many years ago, “I own four cars—but I only drive one at a time!”

Since we do need money for improved roads, any transportation tax should focus on road use. One option would be to lower the cost of vehicle registration in exchange for a small increase in the gas tax.

Motorists deserve all the roads they are willing to pay for. Raising the gas tax would give drivers a chance to vote with their tires for a better road system.


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

“Facing Reality” Report Offers Solutions to Governor Brown’s $1.7 Billion Budget Hole Without Raising Taxes

FOR IMMEDIATE RELEASE

Media Contacts:

Steve Buckstein (503) 242-0900

Jeff Kropf (541) 729-6229

PORTLAND, Ore. – Cascade Policy Institute and Oregon Capitol Watch Foundation jointly released a new report Wednesday, entitled Facing Reality: Suggestions to balance Oregon’s budget without raising taxes. The report offers practical solutions to fill Governor Kate Brown’s estimated $1.7 billion budget hole without raising taxes.

Facing Reality is the third budget blueprint in a series: In 2010 and 2013 Cascade Policy Institute and Americans for Prosperity-Oregon published Facing Reality reports that offered state legislators an opportunity to “reset” state government using the time-tested principles of limited government and pro-growth economic policies.

“Oregon has over one billion dollars more to spend than the last budget but is still nearly two billion short because Governor Brown’s budget continues out-of-control and unsustainable spending,” said Jeff Kropf, Executive Director of Oregon Capitol Watch Foundation. “It’s time to face the reality that raising taxes will never provide enough money to build the fantasy utopia envisioned by the Governor and current legislative leadership. There is no free lunch, and new taxes are only going to hurt the poor and the middle class.”

Facing Reality outlines $1.3 billion in reduced spending in seven specific areas which, coupled with small across-the-board agency reductions, equals $1.7 billion, enough to fill the Governor’s estimated budget hole and removing the need to raise taxes.

“Keep in mind that even with our Facing Reality budget reductions, the state of Oregon will still be spending more money than the previous budget,” said Steve Buckstein, Senior Policy Analyst and Founder of Cascade Policy Institute. “The reality the Governor and the legislature must face is that the bill for years of overspending is coming due, and raising taxes that hurt the economy is not the answer. Reducing how fast spending grows is the sustainable way forward.”

This third Facing Reality report offers politically possible solutions to meet the needs of Oregonians. It still gives most state agencies more money to spend, but without enacting new taxes being proposed by the several dozen tax increase bills introduced for consideration in the 2017 legislative session.

Here are the seven specific budget reductions proposed in Facing Reality:

Solution Impact
PERS—$100,000 cap $135 million
Department of Administrative Services—halt additional hiring $120 million
Medicaid—opt out of ACA expansion $360 million
Cover All Kids—reject expansion $55 million
Department of Human Services—targeted reductions $321 million
Department of Human Services—cash assistance reforms $160 million
State School Fund—reject Measure 98 $139 million
Total $1,290 million

For agencies not identified for specific reductions in the report, across-the-board reductions of about three percent from Governor Brown’s budget would eliminate the shortfall she identified. If this plan were implemented, none of the tax and fee increases outlined in the Governor’s budget would be necessary.

Buckstein and Kropf note, “Most Oregonians must face their own family budget realities every day. Facing Reality is a good-faith effort to hold our state government to the same budgetary realities. We look forward to working with state legislative and executive branch leaders to help implement such realities in 2017.”

Read the full report here: Facing Reality: Suggestions to balance Oregon’s budget without raising taxes

Founded in 1991, Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity.  Oregon Capitol Watch Foundation is a 501(c)3 charitable educational foundation dedicated to educating Oregon citizens about how state and local governments spend their tax dollars by researching, documenting, and publicizing government spending and developing policy proposals that promote sound fiscal policies and efficient government.

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