Year: 2014

No Wonder Portland Can’t Afford to Maintain Streets

The Portland City Council seems determined to raise taxes to pay for street maintenance. But the City doesn’t have a revenue shortage problem; it has a spending misallocation problem, which continues to grow.

The latest example is a proposal to begin collecting and publicizing energy consumption data from about 1,000 of the largest commercial buildings in the city. This is being proposed as part of the city’s Quixotic attempt to “fight climate change.” Proponents claim soothing words that the regulation would “provide market recognition to those who perform really well” on some arbitrary energy consumption scorecard.

In fact, this is just an effort to shame building owners, managers, and tenants into adjusting their behavior to conform to the political edicts of City Hall. Commercial buildings consuming “too much” energy will receive a Scarlet Letter and be harassed by bureaucrats and activist groups into expensive energy conservation retrofits, many of which will make no financial sense.

The cost of city oversight? At least one full-time employee. This is why city streets are falling apart. Too many bureaucrats are pushing papers for programs that are irrelevant to the core functions of government. The Council should kill this idea before it goes any further.

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Tide Goes Out on Ocean Energy

A new report released by Cascade Policy Institute concludes that the public-private partnership Oregon Wave Energy Trust has failed to achieve a return on public investment.

The Oregon Wave Energy Trust (OWET) is a nonprofit, public-private partnership established by the Oregon State Legislature that works to “responsibly develop ocean energy by connecting stakeholders, supporting research and development, and engaging in public outreach and policy work.” Since its inception in 2007, OWET has received nearly $12 million in public funding from the Oregon Innovation Council (Oregon InC), another government-sponsored entity. OregonInC claims its initiatives must earn a profit, but that is clearly not the case with OWET. None of the money spent to date by OWET has led to any profitability.

Cascade President and CEO John A. Charles, Jr. commented, “Electric utilities in Oregon, both public and private, are quite capable of generating and delivering power to their customers. If wave power is a good idea, utilities themselves will bring it to commercial scale. If it’s a bad idea, taxpayers should not be forced to bear all the risks of early-stage experiments.”

The Cascade paper, entitled Waiving Profitability, recommends that Oregon legislative leaders “should closely examine all state-sponsored venture capital funds to determine if grant recipients will ever become financially self-sufficient, as originally envisioned. OWET would be an excellent place to start.”

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No Wonder Portland Can’t Afford to Maintain Streets

The Portland City Council seems determined to raise taxes to pay for street maintenance. But the City doesn’t have a revenue shortage problem; it has a spending misallocation problem, which continues to grow.

The latest example is a proposal to begin collecting and publicizing energy consumption data from about 1,000 of the largest commercial buildings in the city. This is being proposed as part of the city’s Quixotic attempt to “fight climate change.” Proponents claim soothing words that the regulation would “provide market recognition to those who perform really well” on some arbitrary energy consumption scorecard.

In fact, this is just an effort to shame building owners, managers, and tenants into adjusting their behavior to conform to the political edicts of City Hall. Commercial buildings consuming “too much” energy will receive a Scarlet Letter and be harassed by bureaucrats and activist groups into expensive energy conservation retrofits, many of which will make no financial sense.

The cost of city oversight? At least one full-time employee. This is why city streets are falling apart. Too many bureaucrats are pushing papers for programs that are irrelevant to the core functions of government. The Council should kill this idea before it goes any further.

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Report Shows No Return on Public Investment for Oregon Wave Energy Trust

PORTLAND, Ore. – A new report released by Cascade Policy Institute concludes that the public-private partnership Oregon Wave Energy Trust has failed to achieve a return on public investment.

The Oregon Wave Energy Trust (OWET) is a nonprofit, public-private partnership established by the Oregon State Legislature that works to “responsibly develop ocean energy by connecting stakeholders, supporting research and development, and engaging in public outreach and policy work.” Since its inception in 2007, OWET has received nearly $12 million dollars in public funding from the Oregon Innovation Council (Oregon InC), another government-sponsored entity. OregonInC claims its initiatives must earn a profit, but that is clearly not the case with OWET. None of the money spent to date by OWET has led to any profitability.

Cascade President and CEO John A. Charles, Jr. commented, “Electric utilities in Oregon, both public and private, are quite capable of generating and delivering power to their customers. If wave power is a good idea, utilities themselves will bring it to commercial scale. If it’s a bad idea, taxpayers should not be forced to bear all the risks of early-stage experiments.”

The Cascade paper recommends that Oregon legislative leaders “should closely examine all state-sponsored venture capital funds to determine if grant recipients will ever become financially self-sufficient, as originally envisioned. OWET would be an excellent place to start.”

Cascade Policy Institute is Oregon’s free market public policy research organization. Cascade promotes public policy solutions that foster individual liberty, personal responsibility, and economic opportunity. The full report, entitled Waiving Profitability: The Oregon Wave Energy Trust’s Failure to Achieve a Return on Public Investment, may be viewed here.

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Portland’s Streetcar Audit: What Went Wrong?

Last Thursday, auditors released a report questioning the Portland Streetcar’s performance. Ridership counts were inflated by 19%. Several additional metrics, including hourly vehicle operating costs and on-time performance, were either unreported or deemed not suitable for use. What went wrong?

First, too much data wasn’t reported. This includes measures for frequency of service, vehicle failure, and fare survey results. Other useful metrics, such as fare box recovery ratio, were simply incapable of being measured, due to a lack of data collection.

Second, when data existed, much was unreliable. Portland Streetcar uses surveying and self-reporting for many of its metrics, and these methods are prone to high error rates. Automatic passenger counters were recently installed to improve ridership accuracy. However, only six of the seventeen cars were outfitted, decreasing their overall effectiveness.

Finally, oversight was lacking. Performance reports were found to be incomplete with questionable results, an issue frequently overlooked by the Portland Bureau of Transportation. More troubling, the City does not have a systematic approach for using performance information to guide management decisions, leading to several missed opportunities for improvement.

Portland Streetcar has a long way to go before its metrics can be trusted again. While increased governmental supervision might sound enticing, there is a better way forward. Portland Streetcar should follow reproducible research principles and make its raw, unaggregated data easily available. This would allow anyone the ability to challenge their findings and methodology, the ultimate form of public oversight.

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Why Do City Leaders Keep Portland in the “Transportation Dark Ages?”

In November, Beaverton, Gresham, Hillsboro, and Tigard joined Vancouver, Washington in welcoming ridesharing juggernaut Uber to operate legally in their cities. Last weekend, Uber began operating in Portland without permission, in effect daring the authorities to stop it. While the City has issued a cease-and-desist order against Uber, more than 10,000 people have signed an online petition asking Mayor Hales to let the company operate in Portland.

Until now, most major cities have granted virtual monopolies to a few taxicab companies on the assumption that government must protect both the livelihoods of drivers and the safety and convenience of passengers within their jurisdictions. But in a truly free economy, we should celebrate the technological innovation that allows people with cars to make money by giving rides to people who want them.

The “sharing economy” stems from the realization that all of us own assets that we may not use all the time, whether it’s a spare bedroom in your home (think Airbnb), or an automobile that sits in your driveway for hours a day. It’s time for Portland to live up to its hype and let young (and not so young) creatives do what they do best—create services that the rest of us want and need. It’s time to legalize transit freedom and bring Portland out of the Transportation Dark Ages.

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Portland Should Join the “Free World” of Ridesharing

In November, Beaverton, Gresham, Hillsboro, and Tigard, Oregon joined Vancouver, Washington in welcoming ridesharing juggernaut Uber to operate legally in their cities. Conspicuously absent from this list was the region’s largest city, Portland, which became virtually surrounded by the smartphone app transit economy. Then, on the evening of December 5, Uber began operating without permission in Portland, in effect daring the authorities to stop it.*

If Soviet East Berlin couldn’t keep Western freedom out by building its infamous Wall, what chance does Portland have keeping its residents from exercising their freedom to choose ridesharing within arbitrary lines on a map?

Until now, most major cities have granted virtual monopolies to a few taxicab companies on the assumption that government must protect both the livelihoods of drivers and the safety and convenience of passengers within their jurisdictions. Economists will tell you that here, and in virtually every government-regulated industry, “the regulated end up capturing the regulators.” In this case the taxicab companies end up influencing government regulators to protect them from competition at the expense of the public.

Such influence is now ending in many cities, thanks to the rise of mobile applications, but it’s still going strong in Portland. So strong that a recent study of 50 large American cities gave Portland a grade of “F” for Transportation-Friendliness, primarily because it is so hostile to ridesharing.

Ridesharing can mean anything from carpooling with your neighbors to using a mobile app to summon one of many cars in your community whose owners are willing to drive you for money to your destination. Drivers can work as much or as little as they wish, “clocking in” to the app and out of it to fit their own lifestyles.

The new app economy has sprung up over a few short years, thanks to the creativity and productivity unleashed after another American “Berlin Wall” was torn down. The mandated breakup of the government-protected monopoly Bell Telephone System in 1982, and the rise of the Internet a few years later, led to the smartphones we all hold in our hands today. Going from no mobile applications in 2007, some two billion people worldwide now use them to improve their lives.

Mobile apps do virtually anything you can think of, from facilitating your online banking, to investing, to checking your health status…to helping you find quick, reliable transportation through companies such as Uber, Lyft, and a host of others.

Uber requires that drivers pass background checks, carry the proper insurance, own relatively new cars, etc. The beauty of ridesharing apps is that they can let drivers and passengers know something about who they’re riding with through instant feedback on the app. You can see your driver’s name, photo, car, license plate number, and rating by other passengers before ever getting in his or her car. Likewise, the driver can know your name and reputation assigned by your previous Uber drivers. Such feedback encourages everyone to be on their best behavior.

Uber requires that you pay with a previously enrolled credit card. No cash changes hands in the car, which may mean speedier and safer transactions. And, before ordering a ride the app can estimate the cost of your trip (often lower than a taxi) and how many minutes it will be before your car arrives. Note that nothing stops current taxicab companies from doing these same things―except perhaps government regulations.

This isn’t all about Uber. Uber is simply the largest ridesharing company at the moment, having just closed a $1.2 billion investment round that values the company at $40 billion. But if Uber fails to innovate or succumbs to recent bad publicity, it could end up like other also-ran technology firms. No ridesharing company has government-monopoly protection to shield it from your choosing another provider.

Beyond opening up transportation options for the public, ridesharing companies open up income-generating opportunities for car owners. In a truly free economy, we should celebrate the technological innovation that allows people with cars to make money by giving rides to people who want them.

The sharing economy itself stems from the realization that all of us own assets that we may not use all the time, whether it’s a spare bedroom in your home (think Airbnb), or an automobile that sits in your driveway for hours a day.

In city after city, people recognize the benefits of allowing ridesharing companies to operate. Portland Commissioner Steve Novick apparently justifies his decision to wait by saying he wants to find “…a way to adopt a less anachronistic [taxicab] system without destroying people’s livelihoods.” There is a way, Commissioner. Rather than imposing anachronistic regulations on ridesharing companies, remove them from the taxi industry and let everyone earn a living by offering customers more and better service.

Recently, more than 40 Portland business leaders demanded taxi reforms, calling on the City Council to legalize ridesharing. They wrote,

“…We have confidence you will see the laws and regulations that protect the taxi industry here in Portland for what they really are: outdated….They’re making people wonder―how can a taxi industry lobby keep Portland from being counted among the progressive, forward-thinking cities that are providing their residents and visitors with fast, easy, on demand services like Uber and its peers.” 

It’s time for Portland to live up to its hype and let young (and not so young) creatives do what they do best—create services that the rest of us want and need. It’s time to legalize transit freedom and bring Portland out of the Transportation Dark Ages.

* On December 8 the City issued a cease-and-desist order against Uber for 5pm December 11 and asked a Multnomah County judge to stop Uber from operating in Portland. Within less than 24 hours of these developments, Uber’s online petition asking Mayor Hales to let Uber operate in the City gathered more than 10,000 signatures.

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

 

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Spread your iGive link everywhere (Facebook’s a great way, but Twitter, email, blogs, bulletin boards, and handouts all work).

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Press Release: Report Shows No Return on Investment for Portland Seed Fund

December 3, 2014

FOR IMMEDIATE RELEASE

Media Contact:
John A. Charles, Jr.
503-242-0900
john@cascadepolicy.org
 

PORTLAND, Ore. – A new report released by Cascade Policy Institute concludes that the managers of the publicly financed Portland Seed Fund cannot provide documentation to show any positive return on investment for the millions of dollars spent on risky start-up ventures.

The Portland Seed Fund is a public-private venture intended to close a funding gap for entrepreneurs. It invests $25,000 in each startup selected and reserves money for follow-up investments as well. The City of Portland, the City of Hillsboro, and the State of Oregon (through the Oregon Growth Account) supplied most of the money for the first Seed Fund and a significant portion of the second Seed Fund. So far, the public funds amount to $3.4 million, with another $100,000 likely to come from this year’s Portland Development Commission (PDC) budget. The City of Portland and the Oregon Growth Account are the two biggest supporters, each contributing $1.5 million or more.

The Portland Seed Fund has spent large amounts of taxpayer money to subsidize private-for-profit companies, yet governments which gave money could not provide information about the success of those expenditures when questioned by Cascade researchers. It is not even clear that there are any defined expectations for this fund. Very little information is available, and the average taxpayer would have no way of knowing where tax funds are being spent. The Seed Fund is not even listed on the City of Portland’s Investment Reports.

Cascade President and CEO John A. Charles, Jr. commented, “The Portland Seed Fund allows politicians to play at being venture capitalists―without any of the personal risks that real venture capitalists bear. This is a misuse of taxpayer funds.”

The Cascade paper urges the City Councils of Portland and Hillsboro, and Oregon’s state legislators, to have public discussions about the Seed Fund, and either explain why tax funds are being spent on private companies or shut the Fund down.

Cascade Policy Institute is Oregon’s free market public policy research organization. Cascade promotes public policy solutions that foster individual liberty, personal responsibility, and economic opportunity. The full report, entitled The Portland Seed Fund: Planting High Hopes, Reaping Few Results, may be viewed here.

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The Governor’s Budget: Much More Than Beer Money

Governor John Kitzhaber released his proposed 2015-17 budget this week. Critics were quick to argue that it’s either too much or too little, depending on their point of view. Media reports focused on his General Fund budget which, at $18.6 billion, would be an eleven percent increase over the current budget.

In an attempt to make this number seem inconsequential, one person commented on an Oregonian story that $18.6 billion over two years works out to about $6.50 per day per Oregonian. He characterized that as less than the price of one beer at a Blazer game, and noted that with the Governor’s budget “you get a whole state, and you’re only renting the beer.”

But that’s less than one third of the story. While the General Fund is, in effect, the discretionary part of the budget funded primarily by state income tax revenue, the All Funds budget is much larger.

At $66.5 billion, the Governor’s All Funds budget proposal is more than three-and-a-half times bigger than the $18.6 billion General Fund amount. Much of that comes from fees and federal funds, but it’s still our money.

So, in the words of that one-beer-a-day commenter, the Governor’s total budget proposal actually would buy every Oregonian three Blazer game beers a day. Put in a more meaningful way, that’s $16,625 over the two-year period for every man, woman, and child in the state. Or, $66,500 for a family of four. Now that’s real money.

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Press Release: New Report Proposes Better Outcomes, Lower Costs for State and Local Governments Through User Fees

PORTLAND, Ore. – A new report released by Cascade Policy Institute suggests numerous ways state and local governments can lower the costs of public services through judicious, targeted use of “user fees,” rather than relying on general taxation. Resurrecting User Fees in Public Finance: A Prescription for Lowering the Cost and Improving the Fairness of Public Services was authored by Randall Pozdena, Ph.D. Pozdena is president of QuantEcon, Inc., an Oregon-based consultancy.

The share of personal income collected as revenue by state and local governments has doubled since 1945. Oregon and other U.S. state governments obtain approximately 75 percent of this revenue through broad-based taxation and 25 percent from fees levied on the beneficiary of the service.

This report details the theoretical and practical advantages of reducing reliance on broad-based taxation in favor of user charges. It reviews the economic philosophy of reliance on user charges versus broad-based finance and the findings of the public finance literature. These key findings are:

  • The total cost of public services would decline. By making users of services and facilities aware of the costs associated with their use, spending would be limited only to those services for which consumers get benefits commensurate with their user costs.
  • Because user fees, unlike broad-based taxes, are only paid if one uses a service, the public or private providers of the services are incentivized to provide a service of value and at the minimum cost. This effect is particularly pronounced if users also enjoy choice of the provider of the service.
  • User fees link the generation of revenue intimately to the specific service or facility used. This avoids the “trust fund” or “trough” financing model that allows political lobbies to direct the allocation of revenues and provision of services to those with political power, rather than what is beneficial to consumers overall.
  • The result is more efficient and equitable provision of services because of the closer nexus of financing burden and receipt of benefits from the services.

The report also examines historical and current patterns of state and local spending and revenue collection. The review of these practices reveals that increased reliance on user charges is both practical and desirable in K-12 education, higher education, health services, public safety, and transportation infrastructure (especially highway and transit services). Together, these services constitute approximately 50 percent of state and local public spending in Oregon and other states in the aggregate, but in total have less than 5 percent reliance on properly designed user fees at present.

Cascade President and CEO John A. Charles, Jr. commented, “Switching from general taxation to user fees would be a more progressive way to pay for infrastructure because those who consumed the most would pay the most. This is how we pay for electricity, gasoline, and thousands of other commodities.”

User fees can completely, or near-completely, replace broad-based taxation in key areas of public spending, and consistently yield better outcomes and lower costs. This would be a benefit to state and local government budgets and, ultimately, to the taxpayers who finance them.

Cascade Policy Institute is Oregon’s free market public policy research organization. Cascade promotes public policy solutions that foster individual liberty, personal responsibility, and economic opportunity. The full report by Cascade Policy Institute may be viewed here.

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Portland’s “F” Doesn’t Stand for “Transportation Friendly”

R Street Institute, a D.C.-based think tank, released its Ridescore website last week. The site grades 50 large U.S. cities based on taxi, limo, and transportation network friendliness. Portland received an F, making it the second-most transportation-hostile city in the survey. Why did Portland rank so poorly?

For taxis, competition is restricted through the use of a fleet cap, which limits the number of vehicles each cab company can operate. A recent study by the Portland Bureau of Transportation shows demand for taxis far exceeds supply on weekends, a direct symptom of fleet caps which prohibit even one more cab unless consumer demand for that cab can be proven before it is even put on the street.

As for limos, Portland forces customers to wait a minimum of one hour before receiving service. On top of that, fares for limos must be at least 35% more than those for taxis, keeping prices artificially high.

Finally, Portland is so hostile to transportation network companies like Uber, Lyft, and Sidecar that they have not been able to enter the market at all.

Portland is known for having one of the best public transportation systems in the country. Despite this, our misregulated private transportation system is one of the worst. Until this changes, we’ll continue to be stuck in the transportation dark ages.

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“Gainful Employment” Regulations Will Hurt Private Colleges

Ever since John Kenneth Galbraith published The Affluent Society in 1958, American liberals have been striving to build a full-fledged European welfare state in America. President Lyndon Johnson’s Great Society program was inspired by the same ambitions to socially and economically engineer the United States. Inspired in good part by the vision of an ideologically remade America, governments have expanded enormously over the half century that has passed since then. From the federal level all the way down to school boards and town councils, governments have gained new taxation, spending, and regulatory powers in almost every conceivable direction.

Despite this massive growth, there are still areas where government in America has not yet reached European size. One of them has to do with general income security. We should be thankful for that, for reasons I explain in my book Remaking America: Welcome to the Dark Side of the Welfare State. However, liberals keep pushing the ideological idea that every man and woman in America has some kind of inherent right to a certain income. Inspired by such concoctions as government being some kind of employer of last resort, and the basic income guarantee idea, liberals have made significant political and legislative gains in establishing the notion that people have the right to a certain income regardless of their own choices and efforts.

This move away from personal responsibility has accelerated under the Obama Administration. A good example is the regulatory conglomerate known as “Gainful Employment.” In a nutshell, this is an effort by the federal government to dictate to the private sector how much a person “should” make at certain points in his or her career. The implication―obviously not spelled out in the regulations―is that if a person does not make as much as the federal government thinks he or she should make, then some private entity somewhere, other than the person in question, bears responsibility for the insufficient earnings.

On March 14, 2014, the U.S. Department of Education explained how these regulations can be applied:

“The Obama Administration announced today new steps to address growing concerns about burdensome student loan debt by requiring career colleges to do a better job of preparing students for gainful employment—or risk losing access to taxpayer-funded federal student aid. The proposed regulations released by the U.S. Department of Education will help to strengthen students’ options for higher education by giving all career training programs an opportunity to improve, while stopping the flow of federal funding to the lowest-performing ones that fail to do so.”

In order to determine how much a student “should” make after having attended a so-called career college, in 2012 the federal government produced an Excel spreadsheet with more than 7,900 rows of earnings guidelines. The guidelines specify the maximum share of a person’s income that should go to paying back student loans. While this sounds like a misguided but ultimately inconsequential bureaucratic product, in reality it becomes an instrument for dictating the income trajectory for college graduates.

The loans used in the regulations are federal; and since the federal government controls the rates, repayment requirements, and all other financial aspects of the loan, it is easy to use the “Gainful Employment” regulations to establish minimum salaries for people who owe the government on such loans. All the government has to do is, again, to determine the maximum share of a person’s income that can go to paying back loans. If a person pays a larger share, then according to the regulations, she is not making enough money.

But what can the federal government really do if someone does not make what she “should” make? Well, as the quote above indicates, these regulations can be used to go after the educational institutions that a person graduated from. Andrew Quinlan, president of the Center for Freedom and Prosperity, elaborates:

“The Obama administration has consistently sought to eliminate education choices and reduce opportunities, particularly for the poor. The president has repeatedly tried to eliminate funding for the D.C. Opportunity Scholarship Program, despite the fact that the limited school-choice program costs less per pupil than public schools and has seen positive results for poor students. His Justice Department has even misused and misapplied old or irrelevant laws to assault local school-choice programs. Now, the Department of Education is targeting private-sector colleges through so-called ‘Gainful Employment’ regulations. The rules not only punish an entire business model…but by closing one of the best avenues for working class adults to improve their education and increase employability, they also threaten jobs and the economy. The proposed rules would cut off federal loan and financial-aid eligibility for programs that fail to meet certain federal standards, such as graduates with high student-loan debt relative to their earnings in the first few years after graduation. This is a deeply flawed approach for reasons both practical and philosophical.”

Career colleges help millions of Americans advance or reinvent their careers. They are a private-sector invention, responding to a need by others in the private sector, and they operate entirely at the mercy of the free market. If a school provides inadequate education, its graduates make less money than graduates from other schools. Prospective students quickly pick up on such differences and make a free-market, independent choice to avoid low-performing schools.

It seems, however, that this application of the “Gainful Employment” regulations has created a perfect storm of statist intentions: The desire to regulate people’s incomes has merged with a deeply held negativism toward private education.

America has a proud, centuries-old private education tradition. We also have a centuries-old, well-working free-market economy where people can both fail and succeed. The very pursuit of happiness, prosperity and a satisfying career is often as rewarding as reaching the goal. The “Gainful Employment” regulations, and all other regulations aimed at socially and economically engineering our society, rob people of that very reward. Fewer people become productive, independent citizens and more people become dependent on government for their progress through life. The welfare state wins.

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Press Release: Legal Analysis Finds Land Board in Breach of Trust over Elliott State Forest

November 25, 2014

FOR IMMEDIATE RELEASE

Media Contacts:
John A. Charles, Jr.
503-242-0900
john@cascadepolicy.org

Kathryn Walter
617-519-6168
kwalter@altuslaw.com

 

PORTLAND, Ore. ― A detailed legal analysis released today by Cascade Policy Institute concludes that the State Land Board, which has responsibility for the Elliott State Forest, has not prudently managed this asset and likely has breached its fiduciary trust to generate maximum net revenue over the long term for K-12 schools, as required by the Oregon Constitution.

The Elliott is a 93,000-acre forest on the south coast. It is part of a portfolio of lands known as “Common School Trust Lands” (CSTL), and these lands must be managed as endowment assets for public schools. The State Land Board, comprised of the Governor, the Secretary of State, and the Treasurer, manages all Trust Lands.

For over 30 years, the net revenue from the Elliott has been steadily declining. In 1994 a consultant to the Oregon Department of Forestry recommended that the Board divest itself of the Elliott entirely, stating that, “Selling the Elliott is the only marketing alternative likely to significantly increase net annual income to the CSF.”

In 1995, the Division of State Lands (as it was then known) recommended that the Board sell all 3.4 million acres of Trust Lands for the same reason. Both recommendations were rejected by the Board.

In 2013, the Elliott actually lost $3 million, prompting the Board to sell 2,800 acres. On December 9, 2014, the Board will consider recommendations from the Department of State Lands for a “new business model” for the Elliott.

Trust law requires that trustees exercise reasonable care and skill in managing a trust and make trust property productive. Trustees must also preserve trust property and defend actions that may result in loss to the trust and must act with absolute loyalty to the beneficiaries. Failure to carry out these duties is a breach of the trustee’s fiduciary duties.

The Cascade legal analysis, undertaken by Portland attorney Kathryn Walter, concludes that:

  1. The Board is not prudently managing the trust land assets. Although a trustee is not charged with 20/20 hindsight, the trustee must be able to explain the reasoning behind an investment strategy. Only recently has the State Land Board attempted to understand the value of the Elliott State Forest. Further, the Board has ignored recommendations to divest all trust land holdings.
  1. The Board should have known that doing nothing was imprudent. The Board, by its inaction, has breached its duty by failing to dispose of the Elliott State Forest when the opportunity presented itself and, by waiting too long, has left the trust with devalued property.
  1. The Board must protect the trust from loss, including insuring trust property against loss and when facing litigation or other claims implicating the trust. A trustee is also obligated to defend the trust against claims, to avoid claims of liens and other losses, and to pay taxes. The Board failed to fulfill its duties by not negotiating a Habitat Conservation Plan (“HCP”), which would have alleviated the impact of the federal Endangered Species Act (ESA) on the Elliott.
  1. The appointment of the State Land Board as trustee in Oregon’s constitution likely violated trust principles from the trust’s beginning. A trustee has a duty to act honestly and with undivided loyalty to the interests of the trust and its beneficiaries. By virtue of the Board members’ political roles, the Board members cannot offer undivided loyalty to the beneficiaries because they are beholden to so many competing interests.

Cascade Policy Institute President John A. Charles, Jr. stated, “During 2013, the Land Board managed to lose $3 million on a timber asset worth some $500 million, while the S&P 500 Index was enjoying total returns of 32%. When the Land Board meets on December 9, it must take action to ensure that the Elliott State Forest begins generating income for public schools.” Cascade has recommended that the Board either sell the Elliott, or explore a land exchange with the federal government.

Charles also noted, “Since the Land Board is a highly political entity, the state legislature in 2015 should consider establishing a new, non-political board to assume management responsibilities for all Common School Trust Lands.”

The full report by Cascade Policy Institute may be viewed here.

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Let’s Talk Turkey – with Uncle Sam

On this Thanksgiving I have to give credit to The Blaze for alerting me to a serious issue of public concern. Apparently the U.S. government, in its collective wisdom, believes that Americans need its help to purchase, prepare, and eat the traditional holiday turkey.

The United States Department of Agriculture is devoting resources (read, your tax dollars and/or some of the nearly $17 trillion federal debt) to maintain a website called Let’s Talk Turkey—A Consumer Guide to Safely Roasting a Turkey. On it, you’ll find some helpful, and some less than helpful, tips that apparently your government doesn’t think you can find on any of the thousands of sites a quick Google search on turkey preparation will reveal before your eyes.

Sites hosted privately by the likes of Safeway, Butterball, and even the Mayo Clinic apparently aren’t sufficient to give you the reliable information you need on this significant national holiday.

But wait, there’s more. If you need more personal turkey help, there’s a federal Meat and Poultry Hotline you can call and speak with a live government employee. Just think of the last time you sought “help” with your taxes from an IRS phone line. Of course, the government turkey hotline is only live from 5am to 11am Pacific time on Thanksgiving Day. After 11am you may have to rely on that for-profit turkey purveyor Butterball, which answers its Turkey Talk-Line until 4pm and even answers the phone starting at 4am on Thanksgiving.

Please understand I’m not suggesting that you use any but an official government, taxpayer/debt funded website or phone line to get your turkey tip information. But if you’re going to ignore my advice and feel particularly rebellious this Thanksgiving, you might want to watch this State Farm video featuring “Duck Dynasty” turkey safety tips.

No matter how you glean your turkey safety and cooking tips, let’s be careful out there. After all, who could know more about turkeys than the federal government?

Steve Buckstein is Founder, Senior Policy Analyst, and Satirist-in-Residence at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Scare Tactics Not Working in Road Tax Debates

The Oregon Department of Transportation (ODOT) recently issued a report describing the deteriorating condition of Oregon highways. The authors estimate that the cumulative cost to the state economy from poor roads will be $94 billion by 2035.

At the same time, the Portland City Council is considering a new local income tax to pay for road maintenance and safety, citing a lack of adequate funding.

While road maintenance is indeed a problem throughout Oregon, the public is unlikely to approve new road taxes. The primary reason is a lack of trust. During the past 15 years, Portland has squandered vast amounts of money on fads like streetcars, light rail, bioswales, and “road diets.” At the state level, ODOT spent nearly two decades and $180 million on a silly bridge-with-light-rail proposal to Vancouver, Washington that is now dead.

These projects were mostly aimed at getting people “out of their cars.” Yet the reality is, regardless of how people travel, more than 99% of all trips take place on a road. So road maintenance needs to be the top priority with existing transportation dollars.

New methods to pay for transportation infrastructure will eventually be needed, but politicians need to re-earn the public’s trust before that can happen.

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Scare Tactics Not Working in Road Tax Debates

The Oregon Department of Transportation (ODOT) recently issued a report describing the deteriorating condition of Oregon highways. The authors estimate that the cumulative cost to the state economy from poor roads will be $94 billion by 2035.

At the same time, the Portland City Council is considering a new local income tax to pay for road maintenance and safety, citing a lack of adequate funding.

While road maintenance is indeed a problem throughout Oregon, the public is unlikely to approve new road taxes. The primary reason is a lack of trust. During the past 15 years, Portland has squandered vast amounts of money on fads like streetcars, light rail, bioswales, and “road diets.” At the state level, ODOT spent nearly two decades and $180 million on a silly bridge-with-light-rail proposal to Vancouver, Washington that is now dead.

These projects were mostly aimed at getting people “out of their cars.” Yet the reality is, regardless of how people travel, more than 99% of all trips take place on a road. So road maintenance needs to be the top priority with existing transportation dollars.

New methods to pay for transportation infrastructure will eventually be needed, but politicians need to re-earn the public’s trust before that can happen.

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Tear Down Oregon’s (Self-Created) Berlin Walls!

The Berlin Wall came down twenty-five years ago this week. The Wall, which separated East and West Berlin, was one of the most powerful visible symbols of the metaphoric “Iron Curtain” which divided the Soviet Bloc nations from the free countries of Europe during the Cold War.

My friend John Fund, the former Wall Street Journal editorial writer, has often shared a human story from when the Berlin Wall fell in 1989. He once met four teenage girls while visiting East Berlin in 1984. As he prepared to board the train that would take him back to the West, John asked them what they wanted to be when they grew up:

“A schoolteacher, said one. A hairdresser, said another. A nurse, said the third. Only Monika, the oldest and clearly the wisest, hesitated. Finally, she sighed and said, ‘It doesn’t make any difference what we become when we grow up. We will still always be treated like children.’”

That statement made a profound impact on John. He noted how he could go anywhere in the world from that street corner, but these teenagers could not go 500 yards to see the bright lights of West Berlin.

They had to remain in “a semi-comfortable, but drab existence, in which any independent thoughts they might have would be hidden within themselves from the government.”

John and Monika kept in touch over the next few years. Then, two days after the Berlin Wall fell on November 9, 1989, John’s phone rang.

There was the unmistakable sound of an overseas call. “This is Monika!” she shouted in halting English. “I am calling from Berlin West! I am over the Wall!”

Monika did not plan to flee East Germany. But now that the Wall was down, she could leave if the people who ran that government reneged on their promises of free elections and economic reforms.

John reminded Monika of their first meeting and asked if she felt she was finally being treated like a grownup.

“Yes,” she said. “I think everyone in my country decided for themselves to grow up overnight.”

Monika knew what it was like to be finally treated like an adult by her government; but Americans are now being treated more like children, as the limited government our Founders gave us morphs into a behemoth. It’s up to us to “tear down the Walls” of national programs like ObamaCare and the myriad regulatory barriers that impede freedom and opportunity here in Oregon.

Cascade Policy Institute has helped educate Oregonians since 1991 about the benefits of freedom and liberty. We look forward to working even more closely with everyone who is committed to keeping our communities and our state from being encircled by our own, self-created Berlin Walls.

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Arizonans Gain the “Right to Try” to Save Their Lives

Amid last week’s election excitement, Arizonans overwhelmingly approved their “Right to Try” referendum, allowing terminally ill patients access to experimental drugs that have completed basic FDA safety testing but are still awaiting further approval. With seventy-eight percent of the vote, Arizona becomes the fifth state to pass Right to Try legislation this year. Momentum is building with wide bipartisan support. Is there any reason for opposition?

Opponents worry that Right to Try may harm the drug development process by pushing patients away from clinical trials. One way to deal with this concern is the Colorado approach, which requires patients be ineligible for trials in order to participate in Right to Try.

More troubling, critics fear that Right to Try takes advantage of vulnerable patients. They worry the terminally ill may choose options that are not in their best interest and that may ultimately lead to an early death.

Right to Try isn’t a magic bullet, though. It doesn’t guarantee a cure, nor is it free from risk. What it offers is a choice when all other options have failed. Oregon already offers terminally ill patients the choice to end their lives under the Death with Dignity Act. If you can choose to die, shouldn’t you be able to choose to fight to live?

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A Time for Choosing

Did you choose between a left or right in yesterday’s election? If that phrase sounds familiar, perhaps you watched an emerging leader utter it 50 years ago last week.

In 1964 an actor named Ronald Reagan gave what has become known simply as “The Speech” on behalf of his ill-fated Presidential candidate, Barry Goldwater.

The half-hour TV address, “A Time for Choosing,” wasn’t able to propel Goldwater to the Presidency, but it is credited with launching Reagan’s political career and his eventual landslide victory in 1980 against a sitting president, Jimmy Carter.

You can watch The Speech online. Here are two of my favorite lines:

“This is the issue of this election: Whether we believe in our capacity for self-government, or whether we abandon the American Revolution and confess that a little intellectual elite in a far-distant capitol can plan our lives for us better than we can plan them ourselves.”

And…

“You and I are told increasingly we have to choose between a left or right. Well I’d like to suggest there is no such thing as a left or right. There’s only an up or down: [Up to] man’s age-old dream—the ultimate individual freedom consistent with law and order—or down to the ant heap of totalitarianism.”

I didn’t fully appreciate these concepts then; I do now.

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Policy Picnic – November 19, 2014

Please join us for our monthly Policy Picnic led by Cascade President & CEO John A. Charles, Jr.

Topic: Alternatives to the Proposed Portland Street Tax

Description: The Portland City Council seems determined to enact a new tax to pay for basic road maintenance. In this seminar, we will discuss why such a tax is unnecessary, and what the city should do to maintain and improve the road system.

Admission is free. Please feel free to bring your own lunch. Coffee and cookies will be served.

Space is limited, so sign up early!

 
Sponsored by:
Dumas Law Group

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2014 Fall Newsletter

See what Cascade Policy Institute has been up to in the Fall of 2014 in our latest newsletter.

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$15 Minimum Wage? More May Turn Out to Be Less

Last summer, Seattle passed an ordinance raising its minimum wage to $15 per hour. A Portland-area restaurant owner recently explained in The Oregonian how a $15-per-hour minimum wage here would spell lower total wages and less opportunity for his employees.

Lee Spectator wrote: “I start most of my new hires at minimum wage, then, based on their performance, give them a raise within their first 30 to 60 days. I give merit raises based on performance [and] annual performance reviews….With a $15 per hour minimum wage, that would go away. I would have no room to pay them any more, and they would have no incentive to work harder.”

With increased wage expenses also come higher taxes and workers-comp insurance. These would balloon to nearly 48 percent of Spectator’s total business expenses, he says.

So, what would be the likely result if Portland raised the minimum wage to $15 an hour? To start, fewer jobs will be available in small businesses that pay hourly. Fewer employers will want to hire low-skilled workers like teenagers, since they will need more productive and experienced workers to justify paying them a higher wage. Entry-level workers should have the chance to climb the ranks and achieve higher earnings as a consequence of their hard work, not to be stuck at one uniform pay grade or else have no job at all.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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Scaling Down: The Power of One

By Darla M. Romfo

Earlier this fall I had the pleasure of attending the awards ceremony for the Broad Prize for Urban Education. In the ensuing days, many bloggers and journalists weighed in with criticism, including one who pointed out that “although recent winners of the Broad Prize show positive results compared to many large urban districts, their scores are largely flat—or worse—over the past several years.”

I am sure this must be both disappointing and frustrating to Mr. and Mrs. Broad who made the fortune they are giving away by innovating, adapting, and always getting better. They wanted this prize to inspire the same kind of actions in public education.

Teddy Forstmann, who, along with John Walton, founded the Children’s Scholarship Fund (CSF) in 1998, was a man cut from the same cloth as Mr. Broad. Ted hoped the demand demonstrated when parents of 1.25 million children applied for 40,000 partial scholarships to escape their assigned public school would get the ball rolling and bring about substantial educational improvement for all children within the four-year window for those first scholarships. In Ted’s experience, demand for a better product and a bit of competition led to an improved product. Ted was certainly frustrated with the snail’s pace of it all.

And by now everyone who has ever uttered the words “education reform” is a little frustrated. More than a decade later, billions more in taxpayer dollars, in addition to the billions heaped on by private philanthropy, has been spent to achieve largely mediocre to poor overall results. There are pockets of hope, and we do have much better data. Now we know there is not only an achievement gap between minorities and whites, but also between all U.S. students and children in other countries.

It’s not clear that if we had full blown school choice, the end of teacher tenure, higher standards, or whatever flavor of education reform you favor, that every child would have the opportunity to reach their full potential. Certainly, one or some combination of those things would help many children; but we would still have kids who live in poverty and very unsettled home situations coming to school every day with needs that are beyond what can be addressed by education reform alone.

One thing I have both experienced through relationships with students I’ve met through CSF and observed in the lives of others is that a caring adult who really invests in an authentic relationship with a child will bring enormous benefits to the child, to say nothing of the rewards to the adult. I know Ted and John both experienced this with children they helped directly apart from their education reform efforts. John once told me on a school visit in Omaha that giving the scholarships and meeting the kids and their parents grounded the whole effort of trying to reform the larger system. He knew no matter what happened with those efforts, he was having a direct impact on the lives of kids today.

We can’t stop trying to get education right in America, but maybe we will get further faster if every adult who can gets involved in the life of a child who has a couple of strikes against them. Whether it is through a mentoring program, a scholarship program, a school-based program, or some other means, it could make the ultimate difference in a child’s life, and you don’t have to be up to speed on the latest education reform idea to do it and make it work. Anyone who is willing to give of themselves to another human being will bring about change in that person and themselves. Isn’t that the real reason we are all here anyway?

Darla M. Romfo is President and COO of Children’s Scholarship Fund, based in New York City. CSF has helped 139,000 low-income children nationwide attend the K-8 schools of their parents’ choice through privately funded scholarships worth $568 million. Cascade Policy Institute runs CSF’s Oregon partner program, Children’s Scholarship Fund-Portland.

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Shouldn’t the Terminally Ill Have the “Right to Try” to Save Their Lives?

By Matthew Hayes

Last Friday, Michigan approved Right to Try legislation with overwhelming bipartisan support. Colorado, Missouri, and Louisiana all passed similar measures this year, with Arizonans voting on the issue this November. What is Right to Try and why is it gaining steam?

Spearheaded by the Goldwater Institute, an Arizona-based public policy organization, Right to Try legislation allows terminally ill patients access to drugs, biotics, and implants that have completed basic FDA safety testing but are still awaiting further approval.

The FDA offers a similar program, known as Compassionate Use. Unfortunately, the process isn’t easy. Physicians typically face 100 hours of paperwork and research per applicant. The entire process can take several months, a luxury many terminally ill patients don’t have.

These costs are seen in the usage statistics. In 2011, fewer than 1200 patients received expanded access, while more than 1500 people died of cancer each day. Right to Try legislation removes many of these barriers, making the process easier and faster for patients. While it can’t be known how many lives these save, the number is undoubtedly greater than zero.

Since 1997, the Death with Dignity Act gives terminally ill Oregonians the right to end their lives. Bringing Right to Try to Oregon offers these citizens the chance to do more than just hasten death; it offers a chance to beat their illness.

If you have the right to die, shouldn’t you have the right to fight to live?

Matthew Hayes is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Kitzhaber’s “Clean Fuels Program” Is a Hidden Gas Tax

By Jon Egge

Many politicians on the West Coast have fallen in love with untested policies and programs they say will help solve global warming. Many of these policies are mind-bogglingly complicated. What, after all, is a low carbon fuel standard (LCFS), or clean fuels program? And how exactly do programs like “cap and trade” work? And, perhaps most importantly, how do these policies impact you, the consumer?

Here’s the dirty little secret the politicians don’t want to talk about: All of these policies are going to make it more costly to produce gasoline and diesel. In fact, that’s the intended purpose of so-called “market-based” schemes to reduce greenhouse gas emissions. By making the energy we need and use every day more costly to produce, other energy supplies—like wind, solar, biofuels, and hydrogen fuel cells—will become more competitive. And where these programs have been implemented—such as in California—they are also conveniently generating billions of dollars in new revenue for the state to spend however it pleases. That’s why climate-change policies like cap and trade and LCFS are becoming Trojan horses for hidden taxes. These revenue programs provide limited environmental benefits but generate big political paydays.

California has adopted the nation’s only LCFS, a program energy experts say is infeasible. Forcing manufacturers of gasoline and diesel fuels to meet a standard that can’t currently be met puts the state’s entire fuel supply in a very precarious position.

Now, politicians in Oregon are considering a LCFS that, if implemented, will become a new hidden gasoline tax designed to increase the cost of fuel and decrease the bank accounts of everyday motorists and businesses who rely on transportation. Hidden tax schemes increasing the costs of fuel are also regressive revenue-generating policies that hurt poor and middle-income families the most. These families spend a much larger portion of their income on transportation and fuel than wealthy families do, and hidden gas taxes therefore take a much bigger bite of their budgets. Unlike their wealthier counterparts, working families simply can’t trade their vehicles for expensive hybrids and electric cars. And because these policies aren’t transparent, consumers often have no idea why their fuel costs are rising.

We all want to improve our environment and ensure cleaner air. But punishing motorists by increasing fuel costs through hidden taxes is not the way to do it. Governor John Kitzhaber has made it clear he plans to move forward with a LCFS—even without the support of the state’s elected legislators. Last session, our Legislature, after careful consideration, declined to extend authorization for the LCFS. Under the governor’s unilateral direction, the Department of Environmental Quality is now adopting rules to push the LCFS forward.

The governor and agency bureaucrats need to be reminded, once again, that when gasoline and diesel costs go up, families and small businesses suffer. It’s time to put a stop to the hidden gas tax that is masquerading as climate change policy.

Jon Egge is a plumbing service contractor in Clackamas and serves on the Oregon Advisory Council of the National Federation of Independent Business. He is a board member of Cascade Policy Institute. This article originally appeared in The Oregonian.

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More Tax Dollars for College ― Or Prepare Students to Succeed There?

Oregon voters are being asked this November to authorize spending more tax dollars to help some students afford an arguably unaffordable higher education. Measure 86 will create a permanent fund to subsidize certain students, which can be financed several ways including through state general obligation bonds. Any bonds issued under the so-called Oregon Opportunity Initiative will have to be paid off over 30 years, primarily by income tax payers, not by students. Only the earnings on bond proceeds and other funds will be available for subsidies.

There are several problems with this proposal:

First, Measure 86 does nothing to reduce the overall cost of higher education in Oregon. In fact, it actually could increase those costs as more taxpayer dollars flow into the system.

Second, even if the measure does help some students afford college, we don’t know if they will be prepared to succeed there, or if they will need costly and time-consuming remedial courses to learn what they should have learned in high school.

Our educational leaders in Salem anticipated the need to prepare students better for college years ago, and they took steps that they hoped would address the issue. In 2007 the state Board of Education adopted The Oregon Diploma, which was intended to ensure that students are prepared to enroll in postsecondary education without the need for remedial courses.

The Oregon Diploma “…requirements are designed to better prepare each student for success in college, work, and citizenship. To earn a diploma, students will need to successfully complete the credit requirements, demonstrate proficiency in the Essential Skills, and meet the personalized learning requirements…A phase-in schedule (2007 – 2014) has been created to allow students, families, schools and teachers to adequately prepare to meet these new requirements.”

Apparently assuming that The Oregon Diploma would get all students college-ready by 2014, Governor John Kitzhaber recommended, and the Legislature adopted in 2011, what has come to be known as Oregon’s 40-40-20 educational attainment goal. By 2025, this state policy aims for 40 percent of Oregonians to have a four-year baccalaureate degree or higher, 40 percent to have an associate’s degree or certificate in a skilled occupation, and the remaining 20 percent to have at least a “college and career-ready” high school diploma or its equivalent.

So, how are we doing in getting to that 40-40-20 goal by 2025? Three national reports issued over the last two months raise serious questions as to whether most Oregon high school graduates are coming anywhere close to being “college and career-ready.”

First we learned that only 30 percent of Oregon’s 2014 high school graduates are deemed “college ready” based on their American College Testing Organization (ACT) college admissions examinations in all four tested subjects of English, Reading, Math, and Science.

Then, a U.S. Chamber of Commerce report revealed that “Oregon is one of the very worst states when it comes to preparing students for college and the work force.” It noted that “Oregon ranks in the bottom 10 when it comes to getting students ready for college and careers.” We earned a grade of “D” in Academic Achievement and an “F” in Postsecondary and Workforce Readiness.

Finally, we found out that only 46 percent of Oregon public high school students who took the SAT college entrance tests scored high enough to demonstrate that they are prepared for college.

So, it looks like Oregon has struck out three times when it comes to meeting The Oregon Diploma goal of better preparing each student for “success in college, work, and citizenship” by 2014. We have eleven more years to see if the Governor’s 40-40-20 goal pans out, but it isn’t looking good so far.

Before we encourage more taxpayer spending on higher education through Measure 86, shouldn’t we find ways for our public school system to prepare most college-bound students to actually succeed there?

As I’ve noted before, that won’t take more money, because research shows that spending more money doesn’t lead to better educational outcomes; it just rewards the adults who get paid by the system. Instead, we should take the top-down control away from bureaucrats in Salem and give it to parents and students through a genuine system of school choice. Then watch our college readiness numbers climb. Otherwise, we’re just paying twice for remedial courses to teach college students what they should have learned in high school.

Removing the need for those remedial courses could help more students than Measure 86 ever would, and it should help Oregon taxpayers by reducing the cost and the time it takes to educate college students.

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

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Dissing Online Education

One can imagine that blacksmiths and buggy whip makers didn’t take kindly to the automobile revolution that started in the late 19th century. Those at risk of losing their horse-related jobs likely made the case for resisting the new, glitchy, and dangerous metal machines. We all know how that rivalry turned out.

Today, another revolution is beginning. Just as thousands of years of horse travel were largely replaced within a few decades, one wonders what the future of physical classroom education might be in the face of the online education revolution.

A Portland State University professor of educational leadership recently authored an op-ed making the case that “effective teaching practices such as class discussion, relational learning and other activities of the traditional classroom are hard to offer on a computer screen.” That might be true; face-to-face educational interactions may never go away, but soon they could be greatly supplemented or even overshadowed by online innovation.

The future is always daunting to those at risk of being displaced, but the future is coming and we will find ways to adapt to it and even improve upon it. Buggy whips may be a thing of the past, but there are still plenty of jobs for people who know how to make and care for our modern horseless carriages.

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The Elliott State Forest Should Be an Asset―Not a Liability―for Oregon Schools

By Jordan Lofthouse, Randy Simmons, and John A. Charles, Jr.

With Oregon’s schools constantly facing budget crises, why are our lawmakers missing out on the opportunity to give more money to our kids?

As part of the Common School Trust Lands, the Elliott State Forest has the constitutional obligation to generate money for Oregon’s schools. In the last few years, however, environmental interests have carefully manipulated the Endangered Species Act so that the Forest costs taxpayers money instead of providing funds for Oregon’s children.

Lately, harvest levels and revenues have been a fraction of their former levels. Despite potential to harvest 40 million board feet in 2013, actual harvest was only 4.5 million board feet. The expected timber harvest for 2014 is similar. This has resulted in a net deficit of $3 million that is covered by your tax dollars.

The Oregon State Land Board is searching for ways to balance the financial responsibilities of the forest with environmental factors hindering the Forest from providing revenue for schools.

Researchers at Utah-based Strata Policy have identified several options for monetizing the Elliott State Forest so it can meet its constitutional responsibility to Oregon’s children. Privatizing the Elliott State Forest is likely the most financially beneficial option. In a report for the Cascade Policy Institute, Eric Fruits of Economics International concluded that selling or leasing Forest assets could provide stable funding for Oregon schools at approximately $40 to $50 million annually.

A second option is a land exchange between the federal government and the state government. The federal government would receive control of the ESF in exchange for federally owned land that could be more easily monetized for Oregon schools. Other states such as Utah, Minnesota, and California have all successfully made land exchanges to increase revenue for schools.

A third but less likely option consists of renewing a Habitat Conservation Plan (HCP) with federal agencies. HCPs allow timber to be extracted while also protecting endangered species habitat. The former HCP expired several years ago, meaning that harvestable areas in the Elliott State Forest are severely limited. If state and federal agencies can negotiate a new HCP for the forest, timber harvest and revenue can increase while also protecting critical habitat. However, conflicts between state and federal agencies make HCP renewal a significant challenge.

As we consider ways of providing increased funding for education in Oregon, we should press the State Land Board to pursue options that will allow the ESF to fulfill its constitutional responsibilities. We can no longer allow environmental groups and federal regulations to dictate the failure of this trust at the expense of children’s education.

 

Jordan Lofthouse and Randy Simmons are scholars with Strata Policy, based in Utah. John A. Charles, Jr. is President and CEO of Cascade Policy Institute in Portland.

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Molalla Patriots

Join us as Kathryn Hickok will be presenting to the Molalla Patriots on the subject of Common Core.

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Washington County Public Affairs Forum

Watch Cascade’s own Steve Buckstein take on State Treasurer Ted Wheeler to debate this November’s ballot Measure 86, the Oregon Opportunity Initiative.

Click here to learn more.

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Time for a “New Business Model” for the Elliott State Forest

Oregon’s political leaders have the chance to do what they frequently ask of the state legislature: provide more money to Oregon’s schools. So why aren’t they doing it?

The Elliott State Forest on Oregon’s South Coast is an endowment asset for Oregon public schools and is supposed to be making money through timber sales. Unfortunately, due to mismanagement by the Oregon Land Board, timber harvest levels (and associated revenues) have been a fraction of their former levels.

Earlier this year, the Land Board directed the Department of State Lands to develop a new business model for the Elliott in order to turn it from a “net-negative to a net-positive.” In a new report by Cascade Policy Institute, researchers at Utah-based Strata Policy have identified several options for monetizing the Forest so it can meet its constitutional responsibility to Oregon’s children. One option, privatizing the Forest, is likely the most financially beneficial. In a previous Cascade report, economist Eric Fruits concluded that selling or leasing Forest assets could provide stable funding for Oregon schools at approximately $40 to $50 million annually.

The State Land Board will make preliminary decisions on the “new business model” on December 9. Environmental advocates are pushing strongly to eliminate all timber harvesting from the Elliott, but the Board must turn the Forest into an income-producing asset to fulfill its fiduciary obligations to the schools.

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It’s Time to Change Our Failed Federal Lands Policy

By Ken Ivory

In 1976, Congress changed its “policy” regarding our public lands (Federal Lands Policy Management Act, or FLPMA). This “policy” change sought to retain public lands in federal ownership―ignoring the 200-year-old obligation of Congress to transfer title to our public lands.[1]

In 2009, the U.S. Supreme Court, in Hawaii v. OHA, unanimously declared that Congress does not have the authority to unilaterally change the “uniquely sovereign character of [a state’s] admission,” particularly where “virtually all of a state’s public lands are at stake.” This “policy” change has failed Western communities and schools, forest health, wildlife preservation, watershed management, and jobs and the economy―locally and nationally. The Supreme Court has also called these statehood Enabling Acts promises “solemn bilateral compacts between each State and the Federal Government” where both parties have rights, duties, and remedies for breach―even against the federal government if it fails to perform its duties, including its duty to transfer title of the public lands.

However, because Congress changed its “policy” regarding our public lands:

  • Western communities are dying;
  • Western communities have as little as 10% taxable lands to generate revenues for schools, roads, public safety, and public services for the sick and the poor;
  • Western communities are prevented from creating jobs through the responsible use of their abundant natural resources, which further diminishes tax revenues;
  • Western communities are prevented from harvesting even sick and dead trees (let alone our great renewable forest resources), which would create healthier forests less susceptible to catastrophic fires that kill millions of animals, destroy watershed for decades, and harm life and private property;
  • The FBI is now warning that our forests are weapons for al Qaeda jihad efforts instead of renewable resources for creating wealth, funding schools, and providing for healthier forests;
  • Hunters, fishers, campers, recreationists, and others are denied access to public lands as federal agencies arbitrarily close thousands of roads throughout the West;
  • Western states and local governments are dangerously dependent for funding on a broke federal government that is cutting promised funding, robbing revenues derived from Western lands, and even clawing back SRS monies already paid;
  • Western states get between 30-50% of their total revenues from this same broke federal government;
  • Eastern states are paying nearly $9 billion a year to inflict this harm on Western states;
  • As a nation, we are dependent on China for 95% of the rare earth minerals that are essential for national defense technology and modern electronics (including renewable energy technologies), even though an abundance of rare earth minerals is locked up in federally controlled Western lands;
  • As a nation, we are dependent on foreign sources of oil, gas, and minerals, despite having more than $150 trillion in oil, gas, and minerals (and tens of thousands of jobs) locked up in federally controlled lands.

We have the opportunity of our generation to leverage our voices, through local and state representatives, to compel Congress to change its failed “policy” that is killing Western communities, siphoning funds out of Western schools, closing off Western lands, destroying Western forests, locking up Western resources―and in the process destroying Western and national jobs, economic activity, and tax revenues.

It’s been done before. Did you know that the federal government controlled for decades as much as ninety percent of the lands in of Illinois, Missouri, Indiana, Arkansas, Louisiana, and Florida? Those states simply refused to be silent or take “no” for an answer. They banded together and leveraged their individual, community, and state voices and persistently called upon Congress to honor its obligation to transfer title of their public lands.

There is a solution big enough for the pressing problems of Western states, including Oregon. Congress must change its failed, community-killing “policy.” County and state representatives and their constituents should refuse to be silent or take “no” for an answer until it does. Jobs, school funding, better care for and access to our lands, and our economic future depend on it.

Ken Ivory is president of the American Lands Council and a member of the Utah House of Representatives. He has been a guest speaker on this issue for Cascade Policy Institute, Oregon’s free market think tank.

[1] See, A Legal Overview of Utah’s H.B. 148 – Transfer of Public Lands Act by Professor Donald Kochan, http://americanlandscouncil.org/downloads/Kochan%20Utah%20Public%20Lands%20WP.pdf

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Freedom in the Digital World

Join Cascade staff on November 22 at the Crowne Plaza Hotel in Lake Oswego at this year’s Freedom Seminaron “Freedom in a Digital World” with economist Robert Higgs and Liberty.me CEO Jeffrey Tucker.

Get Your Tickets Here

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Executive Club

Redder or Bluer?

GMO Marijuana?

Same bathrooms for the top 2?

Drivers licenses for alien judges in digital camo?

Time for the postmortem! Postpartum?

Let’s hear from the band

Eric Winters, Lindsay Berschauer, and Gregg Clapper

singing their a cappella hit single

Oregon Election 2014

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The election is coming!: A discussion of Oregon’s 7 statewide ballot measures

Please join us for Cascade’s monthly Policy Picnic led by founder and senior policy analyst Steve Buckstein on October 22, at noon.

There are seven statewide ballot measures on Oregon’s General Election ballot. Cascade has taken positions on two of them: Yes on Measure 91 to decriminalize marijuana, and No on Measure 86 to direct more tax money into subsidizing certain higher education students. Come join us in a conversation about the latest election-related issues – we’d love to hear your opinion!

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

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Report Shows Possibilities for Elliott State Forest to Make Money for Oregon Schools

Today, the Cascade Policy Institute released a report analyzing the range of policy options for turning the Elliott State Forest from a liability into an asset for Oregon’s Common School Fund.

The Elliott State Forest (ESF), located on Oregon’s South Coast, is part of a portfolio of lands known as “Common School Trust Lands.” These lands are an endowment for the Oregon public school system and must be managed by the State Land Board to maximize income over the long term. Unfortunately, due to environmental litigation, income from the Elliott’s net timber harvest receipts has been steadily declining over the past two decades. In 2013, the ESF cost Oregon taxpayers $3 million, which was a drain on the Common School Fund.

“The State Land Board has been watching the financial returns from the Elliott State Forest steadily decline for over 20 years, while doing essentially nothing,” said Cascade Policy Institute President John A. Charles, Jr.

“The Elliott is now a liability instead of the $800 million asset it was in 1995. Oregon schools deserve better,” said Charles. “The State Land Board has a fiduciary obligation to take decisive action, and the analysis by Strata Policy helps provide a road map for Board decision-making.”

The Land Board in 2014 directed the Oregon Department of State Lands to develop a “new business model” for the ESF. The Cascade report, prepared on contract by Strata Policy, a Utah-based consulting firm, provides a critical review of various options for accomplishing this goal.

The report divides the known options into three categories: viable options, potentially viable options, and individually unviable options.The top three recommendations – the only ones considered “viable” – are full privatization, a land exchange with the federal government, and completion of a Habitat Conservation Plan that would allow logging in habitat currently used by protected species.

The full privatization option was analyzed at length for Cascade Policy Institute by economist Eric Fruits and published as a separate paper in March. Selling or leasing the forest clearly would result in the greatest financial returns to Trust Land beneficiaries over the long term.

A land exchange with the federal government also could result in healthy financial returns to the Common Schools if any lands could be identified for such an exchange, but that is doubtful given the litigious nature of federal forest management in the Pacific Northwest. Moreover, it would take Congressional approval, which likely would take a decade or more to execute. Such delays appear to be a violation of the fiduciary trust responsibilities held by the Land Board.

Development of a Habitat Conservation Plan (HCP) would face the same bureaucratic challenges. Oregon attempted to develop an HCP in cooperation with the U.S. Fish and Wildlife Service and spent $3 million over a 10-year period without gaining federal approval. Before reviving this effort, there needs to be some reassurance from the federal government that an HCP is actually possible.

The Land Board is scheduled to take public testimony regarding ESF management in Coos Bay on October 8, and will discuss options for a “new business model” at its December meeting in Salem.

The full report by Strata Policy may be viewed here.

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No New Street Fee: City Council Should Approve Street Maintenance from the General Fund

Last week Portland City Commissioner Steve Novick suggested that the City Council approve $7 million in General Fund dollars to help pay for street maintenance. The City expects to have a surplus of some $9 million this fall, allowing new discretionary requests from individual bureaus.

Such a transfer would be far preferable to enacting a street tax, which has been widely opposed. Continuing to push the tax would be divisive and a huge waste of time for the hundreds of city residents who would show up to oppose it. Street maintenance is one of the most basic responsibilities for any municipality. Therefore, it is appropriate to use property tax dollars from the General Fund to maintain the road network.

Moreover, the City Council has an abysmal track record of managing dedicated transportation user fees. This was highlighted in a report issued last year by the Portland City Auditor, showing that dedicated transportation revenues had been going up over the last decade, while actual spending on road maintenance had dropped. This conclusion makes any proposed tax increase a non-starter.

The unexpected budget surplus gives the Council a graceful way to put the street tax proposal to bed. They should take the opportunity and move on.

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Conservation Is Not Always the Best Option

The Oregon Public Utility Commission (PUC) is considering a request by the Energy Trust of Oregon (ETO) to allow the Trust to spend ratepayer dollars on certain energy efficiency measures that don’t pencil out. The Oregonian has correctly noted that if the estimated benefits of such projects are less than costs, we should stop spending ratepayer dollars on the subsidies.

Several recent op-ed writers have taken The Oregonian to task on this because the local mantra of environmental advocates has long been that conservation is always better than building a new power plant. In a world of high natural resource prices, this is likely true; as a region we have saved a lot of energy through conservation over the past 30 years.

But we are in a new boom period for American energy production, across multiple fronts, including natural gas, coal, oil, and propane. With a glut of natural gas, domestic prices have dropped, leading to negative results for the benefit-cost tests applied to some conservation projects. Yet, advocates who were happy to trumpet the virtues of “cost-effective” investments all those years now resent the fact that the math no longer works in their favor. Therefore, they’d like to change the rules.

Proponents have made a lot of arguments for continued public subsidies: the ETO should be allowed to offer a “core program” of insulation measures for natural gas homes that are exempt from cost-effective determinations; there are “non-energy” benefits from conservation, such as more comfortable buildings; and natural gas prices might rise again, so we should keep all these contractors working to install stuff even if it doesn’t make financial sense today.

But the law that created the Energy Trust was clear that ratepayer funds collected through the three percent monthly tax on ratepayers (otherwise known on your monthly utility bill as the “Public Purpose Charge”) could only be spent on “cost-effective” measures. It’s bad enough that the PUC has been letting ETO operate with a waiver from this requirement for the past two years; there is no justification for another extension.

The PUC staff recently made draft recommendations to the Commission that will disallow those measures with the worst benefit-cost numbers, but continue allowing many that are close to positive, but still losers. The PUC should take the guesswork out by simply complying with the law. Ratepayer funds should only be spent on conservation measures where estimated benefits exceed costs.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. This article originally appeared in the Oregonian on September 21, 2014.

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No Death Panels Here―Yet

ObamaCare mastermind Dr. Ezekiel Emanuel recently published an Atlantic magazine essay explaining why he hopes to die at age 75, which for him is eighteen years away.

He won’t kill himself, but plans to refuse any medical treatment other than palliative care for pain or disability. He says that like death, “…living too long is also a loss. It renders many of us, if not disabled, then faltering and declining, a state that may not be worse than death but is nonetheless deprived.”

Psychotherapist Michael Hurd explains that Emanuel takes his position from “the oldest, most primitive creed of ethics in human history: Self-sacrifice….Like all self-conscious advocates of selflessness, he seems proud of his willingness to hurt his family by proclaiming his wish to die. ‘Hey, look at me. I’m so selfless I don’t even wish to live. It hurts my family, but that shows how willing I am to be sacrificial.’”

Hurd notes, “This is what passes as the standard of sophisticated, high-end, state-of-the-art ethics, at least among the sophisticates and elite whom we have given permission to run our lives.”

Of course, Emanuel leaves himself an out: “I retain the right to change my mind and offer a vigorous and reasoned defense of living as long as possible.”

So there you have it: Emanuel’s 57-year-old self making the sacrificial case for not wanting to live more than 18 more years, but admitting that his 75-year-old self might very well make a different choice. Who would have guessed?

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

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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.

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Cascade Policy Institute Encourages a ‘No’ Vote on Measure 86

The Board of Directors for the Cascade Policy Institute recently voted to oppose Measure 86, known as the Oregon Opportunity Initiative, on November’s ballot.

Measure 86 would require the creation of a Permanent Fund for Post-Secondary Education, which can be funded a number of ways, including by the state selling general obligation bonds. Earnings on the Fund can be used to subsidize certain students, but it will be taxpayers who are saddled with paying off any bonds for 30 years, with interest.

Further, only 30 percent of Oregon’s 2014 high school graduates showed readiness for college, based on ACT college admissions tests.

“We shouldn’t spend more money on higher education until our public school system prepares most college-bound students to actually succeed there,” said Cascade Founder and Senior Policy Analyst Steve Buckstein. “Otherwise, we’re just paying twice for remedial courses to teach college students what they should have learned in high school.”

Measure 86 is based on what one researcher calls “one of America’s most durable myths…that the more people who graduate from college, the more the economy will grow.” However, Richard Vedder, author of the book “Going Broke by Degree: Why College Costs Too Much,” notes that conclusion may depend on how those educations are paid for. He found statistical evidence that states which provide more higher education funding actually have slightly lower economic growth rates than states which provide less.

“Individuals know their needs better than politicians do, so leaving the money in private hands produces better results,” said Buckstein.

Finally, even the chief sponsor of Measure 86, State Treasurer Ted Wheeler,  criticized the university system for being slow to adapt to new opportunities in technology which can make education cheaper and easier for students*.

“As technology drives down higher education costs, why saddle Oregon taxpayers with perhaps $100 million or more in debt for the next 30 years to subsidize the old, high-cost economic model? The answer is we shouldn’t,” said Buckstein.

* Video of Treasurer Wheeler’s statement is online at:
youtube.com/watch?v=ZMPMtmEyieg
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Cascade Policy Institute Gives Support to Measure 91

Cascade Policy Institute’s Board of Directors recently voted to support the latest marijuana legalization initiative, Measure 91, which will be on Oregon’s November ballot.

While Cascade has always supported the decriminalization of cannabis on both philosophical and practical grounds, this is the first actual ballot measure in which the organization sees the positive features outweighing the negative features.

In response to this vote by the Cascade Board, Cascade’s President and CEO John A. Charles, Jr. released the following statement:

“There is a simple reason to support the Measure 91: consenting adults should be allowed to make informed decisions about cannabis use on their own, without undue interference by the state. Measure 91 promotes this goal through a formal sales licensing process as well as through the Section 6 ‘exemptions’ that allow small amounts of cannabis to be owned and exchanged by unlicensed individuals without taxation.

“That said, Measure 91 is not without flaws. One is the expansion of jurisdiction for the OLCC, a state monopoly that should have been abolished long ago. Taking on marijuana sales will make this agency more deeply entrenched than ever before, even though it is not a proper function of government to be in the business of selling either distilled spirits or marijuana.

“In addition, Measure 91 is clearly designed to be a revenue-raising measure, and the distribution of funds to schools, police, and other designated recipients creates a ‘moral hazard’ problem in which beneficiaries of taxation will have a direct stake in the future sales of marijuana. Over the past 30 years lawmakers have become increasingly dependent on lottery sales, as well as excise tax revenues from tobacco, distilled spirits, beer, and wine. Adding marijuana to that list is a step in the wrong direction.”

Despite these downsides, Charles stresses that Measure 91, on balance, is a sensible approach to cannabis possession, and worthy of voter support.

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School Choice Fosters Students’ “Profound Gratitude,” Author Says

Students everywhere are back in school, including grade school children from low-income families who are attending Oregon private schools thanks to the Children’s Scholarship Fund-Portland.

New York Post columnist Naomi Schaefer Riley recently interviewed a diverse group of students who have graduated from Children’s Scholarship Fund programs across the country. Her book, Opportunity and Hope: Transforming Children’s Lives through Scholarships, shows what a good education means to young people who have a better chance in life because of private scholarships, and she makes a compelling case for the power of school choice. The scholarship alumni profiled in the book are representative of thousands of others, including more than 650 students who have received scholarships here in Oregon.

Riley wrote: “The recurring themes I heard…were ones of improved academic outcomes, solid foundations for high school, college, and beyond, and a profound gratitude and desire to give back….Together, these children will ensure that the next generation gets its shot at the middle class.”

For many children in America, one-size-fits-all public schools fail to let them truly learn and excel; and many low-income parents want access to schools that match their children’s needs. Children’s Scholarship Fund students are living proof of what is possible when families are empowered to choose the schools that are right for their children. For more information about real-world education solutions that are getting results for kids, visit SchoolChoiceForOregon.com.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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Forum on the Future of America’s Transportation Infrastructure

Cascade president and CEO John Charles  presented on the demise of the highway trust fund at a Portland town forum on August 4, 2014. The forum, sponsored by Rep. Earl Blumenauer, included a number of presenters that spoke on the the future of America’s transportation infrastructure.

Charles’s presentation can be seen at 1 hour and 14 minute (1:14) mark of the video shown below.

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The PUC Is Right: Some Conservation Projects No Longer Make Sense

The Energy Trust of Oregon (ETO) is a nonprofit organization funded by taxes imposed on utility ratepayers. Most of the tax money is spent on subsidies for energy conservation programs.

While energy efficiency is a good idea, not all projects pencil out. State law requires that specific measures, such as installing additional attic insulation, be “cost-effective.” That means that installing the measure makes more financial sense over the long term than having the utility simply provide more energy. Projects that are too costly are disallowed.

Now that the country is experiencing a glut of natural gas, many conservation measures no longer meet the legal requirement; but the Energy Trust wants an exception in order to continue funding its energy efficiency programs. Proponents argue that energy conservation is always cheaper in the long run than building a new power plant, but clearly this is not the case. According to the Energy Trust itself, some of their efficiency measures only return two dollars of benefits for every five dollars spent.

The staff of the Public Utilities Commission is recommending that some conservation measures preferred by the Trust be disallowed in order to protect ratepayers from excess taxation. This is the proper recommendation to make, and the Commission should support it.

When natural gas prices are low, ratepayers should be rewarded, not punished by continued taxation for projects that no longer make sense.

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Why Literature Lovers Hate Common Core

Please join us for Cascade’s monthly Policy Picnic led by publications director Kathryn Hickok on September 17, at noon.

Kathryn will discuss reasons many teachers say the Common Core State Standards are taking the language out of language arts and the love out of literacy. Common Core supporters argue the new standards will improve students’ literacy, but will they do the opposite instead? What can parents do about it?

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

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The Votes Are In: Small Scholarships Have a Big Impact

The Children’s Scholarship Fund is a nationally recognized, privately funded scholarship program which has helped more than 139,000 low-income children attend tuition-based elementary schools nationwide since 1998. The program recently surveyed scholarship families in New York about their experiences. The results include:

• 98.5 percent said their CSF scholarships help them make the best educational choices for their child.

• 73.1 percent reported they could not afford to send their child to their chosen school without a CSF scholarship.

• 70.3 percent noticed an improvement in their child’s academic performance and/or engagement since enrolling in their current school.

While New York City public schools spend about $20,000 per student, an average CSF scholarship grant of $1,600 is enough to empower these low-income parents to obtain a private school education for their kids.

Cascade Policy Institute runs the Oregon partner program of the Children’s Scholarship Fund. The New York program’s poll results are consistent with the informal feedback Cascade receives from scholarship parents here. “I wish that the education system could understand that not every child fits into the same sized box, and everyone needs to do what is right for their family,” said one Portland-area CSF parent.

Programs like the Children’s Scholarship Fund respect the decision-making processes of families and support parents in directing their children’s education. School choice programs like CSF prove that good things happen when parents can vote with their feet on behalf of their own kids.


 

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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Don’t Pay Twice for Public Education

Last week, the American College Testing organization (ACT) released the results of its national college admissions examination consisting of tests in English, Reading, Math, and Science. Thirty-six percent of Oregon’s 2014 high school graduates took the tests. Only 30 percent of those students scored high enough to be ready for college in all four subject areas.

One conclusion we might draw from these findings is that we shouldn’t spend more money on our higher education system until we can honestly say that our K-12 system is preparing 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.

This is yet another reason for voters to reject Measure 86 on the November ballot. It will encourage state legislators to borrow perhaps $100 million or more to subsidize certain student higher education costs. Before we saddle taxpayers with such debt, let’s fix our K-12 system. That won’t take more money, because research shows that spending more money doesn’t lead to better educational outcomes; it just rewards the adults who get paid by the system.

Instead, we should take the top-down control away from bureaucrats in Salem and give it to parents and students through a genuine system of school choice. Then watch our college readiness numbers climb.


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

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Will Parent Rebellion Spell Doom for Common Core?

By Lance Izumi

If one asked most people a couple years ago about the Common Core national education standards, the response would have been a blank stare. Now, Common Core is a front-burner political issue because parents are discovering that their children are struggling under the new standards.

Common Core is a set of national math and English standards, which most states, including Oregon and California, have adopted because of the funding incentives and strong-arm tactics used by the Obama Administration. There have been many “big picture” criticisms of Common Core: the lack of transparency and public input when Common Core was developed, the middling quality of Common Core, the high cost of implementing Common Core, and nationalization of education under Common Core. Yet, these critiques are now being overshadowed by the anger of parents at how Common Core is negatively affecting the learning of their children.

Columnist and former Reagan speechwriter Peggy Noonan has written that Common Core’s Achilles heel is implementation: “implementation―how a thing is done day by day in the real world―is everything.” Take, for example, new Common Core-aligned curricula and associated teaching methods.

Core Connections is a Common Core-aligned math curriculum that is starting to be implemented in classrooms and which emphasizes the use of cooperative learning. The curriculum tells the student: “Learning math [through cooperative teamwork] has an advantage: as long as you actively participate, make sure everyone in your study team is involved, and ask good questions, you will find yourself understanding mathematics at a deeper level than ever before.” While such utopian pronouncements sound impressive, the reality is quite different.

Bryce is a sixth grader at a public school in Northern California. He is a very bright student, achieving several perfect scores on the state’s math exam and consistently receiving A+ grades in math. Yet, Core Connections has had a discernible negative impact on Bryce.

Under Core Connections, Bryce and his fellow students are organized into teams of three to four students. Bryce says that there is unequal participation among team members, with more advanced students being more involved and carrying more of the work.

Further, not all the groups finish at the same time. Those that finish early can’t go on to harder problems, but have to wait until other teams finish. Oddly, Bryce says that his teacher doesn’t want early finishers to read because that’s English language arts, and not math.

Since the teamwork method started, the class usually doesn’t finish math lessons in time, and sometime it cuts into their science time or the math is simply not completed. Bryce emphasized that this situation happens a lot. When asked if the class starts the next day where they left off the day before, he answers “no,” saying that the class simply goes on to the next new concept.

When asked his thoughts on the new teamwork method, Bryce said that he thought that working in teams was distracting: different ideas were talked about at the same time; there was too much noise from other groups; and, worst of all, much of the conversations were not about math.

Whereas his prior math curriculum allowed him to do math at his own pace, so he was doing eighth-grade math while still a fifth grader, now Bryce says he has to spend a lot of time explaining his answers and go at the same pace as his team.

Bryce’s frustrations with the new Common Core curriculum are having a negative impact on his achievement. According to his mother, for the first time Bryce’s grades are starting to falter, which is worrying her greatly.

Bryce’s problems with the new Common Core curriculum are not unique. Children and parents across the nation are up in arms over the confusion inherent in Common Core curricula. A recent PACE/University of Southern California poll found that 41 percent of Californians surveyed were opposed to Common Core, while only 32 percent supported it, a flip from the poll numbers recorded last year.

As Peggy Noonan observes: “Life isn’t lived in some abstract universe; it’s lived on the ground, in this case with harried parents trying, to the degree they can or are willing, to help the kids with homework and study for tests.” Parents seeing their children struggle under Common Core’s liberal teaching methods and philosophy are rebelling, and that rebellion likely spells eventual doom for Common Core.


 

Lance Izumi is Koret senior fellow and senior director of education studies at the Pacific Research Institute and a guest contributor for Cascade Policy Institute.

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Charter Schools Achieve Superior Outcomes with Unequal Funding

The University of Arkansas has published a first-ever comparison study of cost effectiveness and return on investment between different types of public schools. The Productivity of Public Charter Schools rates 28 states and the District of Columbia according to the productivity of charter schools relative to traditional public schools.

Public charter schools receive 36% less funding on average than regular district schools. While greatly underfunded relative to district schools, charter schools in many states score significantly higher in math and reading on the eighth grade National Assessment of Education Progress (NAEP). Oregon’s charter schools receive 44% less funding than regular district schools and achieve higher NAEP scores at lower cost.

The study advises that the higher productivity of many charter schools may be associated with exercising greater discipline with education dollars than traditional public schools do. Studies have shown that increased public education funding hasn’t helped students learn better. “Not only are charter schools doing more with less, they are on the whole demonstrating a superior ability to act as responsible stewards of taxpayer dollars,” said Kara Kerwin, president of The Center for Education Reform.

Rather than continually increasing traditional public school funding, let’s reconsider what we already spend. Giving traditional public schools the freedom to imitate what works for successful charters may do more to improve children’s learning outcomes than allocating more money to the status quo.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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Will the Supreme Court’s Ruling on Subsidies Be ObamaCare’s Downfall?

By Sally C. Pipes

The battle over ObamaCare has shifted to the courts. This time, the president is on the defensive. Last month, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ruled 2-1 in Halbig v. Burwell that the federal government lacks the authority to provide subsidies to offset the cost of health insurance to folks shopping for coverage on HealthCare.gov, the federally run exchange. The federal government has since asked the full Circuit Court to hear the case.

The same day that the D.C. Circuit panel issued its ruling, the Court of Appeals for the Fourth Circuit, based in Richmond, Virginia, arrived at the opposite conclusion in a similar case, King v. Burwell, and upheld the federal subsidies as legal. The disagreement practically begs the U.S. Supreme Court to weigh in. The plaintiffs in King v. Burwell have petitioned the U.S. Supreme Court for cert. If granted, the case will go to the high court. It’s unlikely that the high court will hand down a decision until spring or fall 2015.

The D.C. Circuit panel has the law on its side. Should the Supremes agree with them, then ObamaCare could quickly unravel. And if it does, Congress should be ready with a replacement health care reform plan that empowers doctors and patients, not the federal government.

The Affordable Care Act’s text is unambiguous about how the insurance exchanges are supposed to work. According to the law, federal subsidies are available through exchanges “established by the State.” Thirty-six states didn’t set up exchanges. In some cases, their elected leaders decided not to. Other states tried to build their own. In many cases—among them Oregon, Maryland, Vermont, and Hawaii―they failed.

The law provided that the federal government would step in if the states did not. As a result, the federal government has found itself running an exchange that serves more than two-thirds of the states. And it’s decided, based on the counsel of the legal eagles at the IRS, to ignore those four words— “established by the State”—in order to dole out subsidies.

Even as it sided with the federal government, the Fourth Circuit observed, “If Congress did in fact intend to make the tax credits available to consumers on both state and federal Exchanges, it would have been easy to write in broader language, as it did in other places in the statute.” The court, which ruled for the government, went on to say that it “cannot ignore the common-sense appeal of the plaintiffs’ argument; a literal reading of the statute undoubtedly accords more closely with their position.”

ObamaCare’s supporters argue that “congressional intent” justifies direct federal subsidies. But they’ll have a tough time proving that before the Supreme Court. An early version of the health care reform bill did include an explicit authorization to distribute subsidies through a federal exchange. But it was absent from the final version.

That’s a problem for the Obama Administration, as U.S. Supreme Court precedent holds “that Congress does not intend sub silentio to enact statutory language that was earlier discarded in favor of other language.” Or as another Supreme Court decision put it, “the starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.”

If the Supremes forbid the Obama Administration from distributing subsidies through the federal exchange, the law will crumble. That’s because many, if not most, exchange shoppers will be unable to afford policies without subsidies. As more and more people go without insurance, the exchange pool will skew sicker and premiums will head higher.

Already, average monthly premiums for a mid-level silver plan are $324. They’ll rise 8 percent next year, according to Avalere, a consulting firm. Eighty-seven percent of the people in the 36 states that rely on the federal exchange are receiving subsidies. Without those subsidies, premiums for some 5 million people will spike dramatically. The disappearance of subsidies would also destroy the employer mandate, which requires employers with more than 50 full-time workers to provide insurance coverage.

Fortunately, there are other ways to expand access to affordable insurance. Subsidizing insurance does little to encourage insurers to rein in premiums. In fact, if distributed as a percentage of premiums, subsidies can reward them for hiking prices. Expanding competition among insurers, by contrast, can make insurance more affordable and drive down costs. Creating a truly national marketplace—where Americans could purchase health insurance across state lines—would do just that. There’s no reason insurance should cost 2.5 times more in Rhode Island than in Alabama.

Allowing individuals to purchase health insurance tax-free—just as those who have employer-sponsored insurance through their work can—would also make coverage more affordable. Most Americans get health insurance through their place of work. So they have little incentive to consume care judiciously. After all, they’re not paying the bill. Increased usage of the health care system leads to higher overall premiums.

Two years ago, ObamaCare’s individual mandate survived before the U.S. Supreme Court. The law’s exchange subsidies may not be so lucky.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published by Forbes.

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Join a Union or Pay? Not So Fast, Say Oregonians

A public opinion poll released this week reveals that 84% of Oregonians agree that employees should have the right to decide, without force or penalty, whether to join or leave a labor union.

The poll of 500 Oregon adults was conducted for National Employee Freedom Week, a grassroots campaign of 77 organizations in 44 states dedicated to helping union employees learn about their right to leave their unions.

The Oregon results are slightly higher than the national average. Nationwide, 82.9% of respondents support allowing union employees to leave their union without force or penalty, a concept known as Right to Work.

Currently, 24 states have passed Right to Work laws. Because of a deal struck by Governor John Kitzhaber in March, Oregonians won’t have the opportunity to end forced union dues in the public sector this year.

Unions often do as little as is required by law to inform their employees that they have the right to opt out. But as previous polling illustrates, over 33 percent of those in union households want to leave. Therefore, educational efforts like National Employee Freedom Week are needed to inform and educate union members about their workplace rights and empower them to make the decision about union membership that’s best for them.

You can learn more at Cascade Policy Institute’s new Oregon Employee Choice website, OregonEmployeeChoice.com.


Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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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.

 

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Eight Out of Ten Oregonians Agree: Let employees choose whether or not to join a union or pay union dues

Because of a deal struck by Governor John Kitzhaber, Oregonians won’t have the opportunity to end forced union dues in the public sector this year. However, a just-released public opinion poll makes it clear that if the Public Employee Choice Act had been on this November’s ballot, most voters likely would have supported it.

The poll, conducted for National Employee Freedom Week (August 10-16) asked adults across America:

“Should employees have the right to decide, without force or penalty, whether to join or leave a labor union?”

Nationwide, 82.9 percent of respondents answered Yes. Of the 500 respondents in Oregon, a resounding 84 percent answered Yes.*

These results are significant because Oregon and twenty-five other states require workers to pay so-called “fair share” dues even if they decline union membership and refuse to pay the political portion of union dues. The other 24 states have taken advantage of federal Right to Work law that lets workers choose not to pay any dues at all if they decline to join a union. The federal government also prohibits forced union dues in its own workplaces; yet unions still represent some federal workers, and they represent workers in Right to Work states who voluntary choose to join.

Forced union dues are on the political front burner this year because of the recent Harris v. Quinn U.S. Supreme Court decision. It favored certain Illinois home care workers who don’t want to join a public employee union or pay dues just because their services are paid for with state funds. While the ruling may be narrowly interpreted, it did cause two of Oregon’s largest public employee unions to stop collecting fair share dues from some ten thousand home and child care workers in this state who have chosen not to join their ranks.

Unions claim that such workers should pay fair share dues because the unions are currently required to bargain for and represent them even if they decline union membership. But that is not the fault of those workers, and the unions haven’t seemed to mind as long as their dues money kept flowing.

Unions also claim that without their representation, workers would see their pay and benefits decline. But, after union stronghold Michigan became the latest Right to Work state in December 2012, per-capita personal income actually rose from $38,291 in 2012 to $39,215 in 2013, according to the U.S. Department of Commerce’s Bureau of Economic Analysis. That was the ninth highest increase in the country.

Why do workers want to opt out of union membership and all union dues? Some think they have better uses for their own money. Some want to “vote with their feet” against what they see as poor union service or negotiating results. Still others oppose their unions’ political agendas. They simply don’t want to support any organization that doesn’t share their political beliefs, whatever those might be.

The right to work without third-party interference is more than an economic issue; it is a profoundly moral one as well. No one should be compelled to pay union dues in order to hold a job. Hopefully, Oregon will soon grant true employee choice to every worker in our state.

* Last year’s National Employee Freedom Week poll asked union households, “If it were possible to opt out of membership in a labor union without losing your job or any other penalty, would you do it?”

The results were released in this June 2013 Cascade Commentary: More than thirty percent of Oregon union households want out.

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

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New Poll Shows 84% Percent of Oregonians Support Employee Choice

Eighty-four percent of Oregonians support allowing union employees to leave their union without force or penalty, a concept generally referred to as Right to Work. That’s the finding of a new poll, released today by Cascade Policy Institute as part of National Employee Freedom Week, which runs from August 10 to 16. NEFW is a grassroots campaign of 77 organizations in 44 states dedicated to helping union employees learn about their right to leave their unions.

The poll, with a sample size of 500 Oregon residents, asked this question: “Should employees have the right to decide, without force or penalty, whether to join or leave a labor union?” Of the respondents, a resounding 84 percent answered Yes.

The coalition also released a poll showing 82.9 percent of Americans nationwide support the Right to Work principle. Currently, 24 states have passed Right to Work laws which allow workers to leave their union without penalty or having to pay dues to an organization they choose not to belong to. Because of a deal struck by Governor John Kitzhaber, Oregonians won’t have the opportunity to end forced union dues in the public sector this year.

The poll results are significant because Oregon and twenty-five other states require workers to pay so-called “fair share” dues even if they decline union membership and refuse to pay the political portion of union dues. The other 24 states have taken advantage of federal Right to Work law that lets workers choose not to pay any dues at all if they decline to join a union. The federal government also prohibits forced union dues in its own workplaces; yet unions still represent some federal workers, and they represent workers in Right to Work states who voluntary choose to join.

Cascade Policy Institute founder Steve Buckstein notes, “Most Oregonians now support letting workers decide whether to both join and pay any dues to a union. Cascade research finds significant economic benefits if Oregon becomes a Right to Work state, but employee choice is more than an economic issue. It’s a profoundly moral one as well. No one should be compelled to pay union dues in order to hold a job.”

Unions often do as little as is required by law to inform their employees that they have the right to opt out. But as previous NEFW polling illustrates, over 33 percent of those in union households want to leave. Therefore, educational efforts like NEFW are necessary to inform and educate union members about their workplace rights and empower them to make the decision about union membership that’s best for them. More information is available at www.EmployeeFreedomWeek.com and at Cascade’s new website, www.OregonEmployeeChoice.com.

The poll was conducted by Google Consumer Surveys, between July 11 and July 31, 2014. It surveyed adults nationwide, including roughly 500 Oregonians and has a margin of error of approximately 3.76 percent.

Cascade Policy Institute is Oregon’s free market public policy research center. Cascade’s mission is to explore and promote public policies that advance individual liberty, personal responsibility, and economic opportunity.

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Sustainability Is Fine, Unless There’s Nothing Left to Sustain

The University of Oregon may hire four new “hot shot” sustainability professors whose mission will be to “change the world by figuring out how to rebuild and reorganize cities…to account for climate change, population growth and environmental damage.”

Worthy goals, no doubt. But remember what the blind longshoreman philosopher Eric Hoffer had to say about the role of cities in civilization:*

“I’ve found that everything creative comes from the city. All men’s theories and great achievements―they were not realized in the bracing atmosphere of forests and steppes and mountaintops, but in the crowded, stinking cities! NOTHING OF IMPORTANCE HAS EVER COME FROM THE VILLAGE—how could anything be invented in places where strangers are not welcome?Man becomes human in the city; without the city, man would have been nothing…And, of course, it’s in the cities that man decays, too. America will die if we don’t know how to run viable cities.”

But, Hoffer wouldn’t trust “hot shot” professors to solve our city’s problems. Here’s what he had to say about such men:

“I AM AFRAID OF SCHOOLTEACHERS AND INTELLECTUALS—I THINK THEY MAKE THE WORST TYRANTS IN THE WORLD, AND THEY NEVER HAVE ANY UNDERSTANDING OF THE MASSES.”

Hoffer saw business as “the sphere that most of the energy and ambition and talent in America gravitated toward.” But, then he saw the “social landscape in America…started to tilt away from business, and the rewards offered to intellectuals…loomed higher and higher.”

“Hot shot” professors may be smart; but they won’t create the goods and services we need to truly sustain our lives, liberty, and happiness. For that, we need a vibrant business climate, and I see nothing in the “hot shot’s” job description that allows for that.
* All Eric Hoffer quotes are from Eric Hoffer: An American Odyssey, by Calvin Tomkins, EP Dutton, 1968


 

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

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Time for a Third Bridge to Vancouver

Last week a conceptual plan for a new bridge over the Columbia River was unveiled at a public forum in Vancouver, WA. The plan, presented by Florida-based Figg Engineering, calls for a four-lane bridge east of I-205. The new bridge would have 144 feet of river clearance – the same as the I-205 Bridge — and include sidewalks and bikeways completely protected from highway traffic.

The financing is still to be determined, but could involve user fees, known as tolls. In fact, one option would be for the bridge to be privately owned and operated, paid entirely with tolls. Those drivers unwilling to pay could continue to use the Glenn Jackson Bridge, as they do today.

Oregon political officials are notably cold towards the idea of a third or fourth bridge over the Columbia. Local politicians believe that the two bridges we have now are all we should ever get – even though Portland is served by nearly a dozen bridges over the smaller Willamette River.

As the Portland-Vancouver region grows we will need much more bridge capacity. Since government won’t provide it, we should welcome this opportunity to pursue a private investment option.

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

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A free-market guru with ties to Portland

In honor of Milton Friedman’s 102nd birthday this July 31, below is Steve Buckstein’s op-ed in Friedman’s memory, which appeared in The Oregonian the day after he passed away in 2006.

Full text

A great champion of human liberty passed away on Thursday at the age of 94.  Milton Friedman won the Nobel Prize in economics in 1976, but he likely will be remembered more for his passionate devotion to individual freedom.

Friedman’s connection to Oregon was through his devoted wife Rose, a member of the Director family. He was born in New York City in 1912, the son of poor Eastern European immigrants. She emigrated with her family from Eastern Europe to Portland in 1913. She attended public schools and Reed College before transferring to University of Chicago. Rose and Milton met as graduate students at Chicago and the rest, as they say, is history.

They raised two children together and co-wrote three books on economics and public policy: “Capitalism and Freedom,” “Free to Choose” and “Tyranny of the Status Quo.” Rose also helped produce the 10-part PBS television series, “Free to Choose,” which introduced the power of free-market economic ideas to the general public here and around the world beginning in 1980. They published their memoirs, “Milton and Rose D. Friedman, Two Lucky People” in 1998.

Milton started his career as a young economist in the 1930s working for the New Deal Roosevelt administration in Washington, D.C. He worked in the U.S. Treasury Department during World War II before leaving government for teaching. He later said: “My experience in those years shaped the advice I regularly gave my graduate students in later years: by all means spend a few years in Washington — but only a few.”

Friedman issued that warning because he came to realize that government controls over prices, wages and production were both inefficient and violations of liberty. He described himself as “thoroughly Keynesian” back then but later said, “You know, it’s a mystery as to why people think Roosevelt’s policies pulled us out of the Depression. The problem was that you had unemployed machines and unemployed people. How do you get them together by forming industrial cartels and keeping prices and wages up?

More than perhaps any other modern economist, Friedman’s ideas were credited by Western leaders such Ronald Reagan and Margaret Thatcher, and free-market revolutionaries in formerly communist countries, as a driving force behind their efforts.

Milton Friedman was fond of saying that he was not a conservative. He did not want to conserve much of what our current political culture has to offer. He called himself both radical and libertarian. He was an early and strong advocate for abolishing the military draft, and he saw more harm than good in government’s attempts to outlaw peaceful human behavior such as drug use and prostitution.

Of all the ideas he advocated, none was more important to him than universal school choice, a concept he first wrote about in 1955. He and Rose founded the Milton and Rose D. Friedman Foundation to advocate for both public and private school choice.

I first met Milton and Rose when they attended the Ashland Shakespeare Festival in 1989. Just this past Monday I thought about what Milton would have said in response to a front page Oregonian story about how many citizen initiatives aimed at limiting the power of government had not passed in the recent election. The headline read, “Voters nip libertarian dreams across U.S.” If Milton had seen that, I think he would have responded, “It was the tactics that didn’t succeed in this election. The dreams, which are really American Dreams, live on.”

Milton Friedman, lover of liberty, is gone.  But his dreams, the dreams of countless people here and around the world, live on.

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Is There a More Flexible Way for Students to Invest in Themselves?

By Joel Grey

State Treasurer Ted Wheeler has proposed a new program intended to help Oregon students go to college in spite of the quickly ballooning cost of tuition. Under the proposed “Oregon Opportunity Initiative,” the state of Oregon could borrow money by selling general obligation bonds and then invest the proceeds. Students could receive grants or other subsidies from the earnings on this investment each year, while taxpayers would be responsible for paying back the bonds. The state must use all discretionary spending necessary to pay back bondholders with interest over thirty years. Bonds issued for this purpose likely would reduce the opportunity to bond for other critical needs of the state such as roads and bridges.

This proposal is potentially a costly mistake for Oregon and fails to prevent the inflated cost of education from growing even faster.

Even with the increased cost of college, higher education can still be a good investment for individual students. People with bachelor’s degrees likely will see their incomes increase by more than the cost of attendance over their careers. Because of this, it is unwise to eliminate part of the cost to the student by having taxpayers help fund their education. Students should pay for their own education, even if they are not paying at the time they are enrolled.

If the cost of college to the student is reduced, it creates a third-party payer problem: Because they are not directly affected by cost increases, students will worry less about the price of college, allowing it to inflate more over time. Conversely, if students are expected to pay for their education, they are more cautious about expenses and debt.

Even traditional loans have a third-party payer problem because costs are externalized to the future. Students have to pay eventually, but they don’t necessarily fully consider this because it is a long-term issue. While traditional loans lead to problematic student debt, there are other ways of financing education that don’t lead to third-party payer problems.

One viable solution to student debt was proposed almost sixty years ago by Milton Friedman: human capital contracts. A private person or institution, such as a bank or investment firm, pays for a student’s education. In exchange, the student pays a fixed percentage of income over a certain period of time. Human capital contracts would be more flexible than traditional loans. As a percentage of income rather than a fixed dollar amount, they would be less likely to be financially burdensome to the borrower and would thereby lower the rate of default.

Human capital contracts are also more flexible for the lender. Current federal loans treat all students equally in rates and borrowing limits. Private institutions could offer lower or higher rates based on an individual student’s career path or academic performance, allowing certain students to receive lower rates while riskier students are given higher rates.

Human capital contracts are likely to benefit lower-income students the most. It is very unlikely that those students could afford to pay for college up front, but they would have the same earning potential as anyone else in their field upon graduating. Human capital contracts would allow them to use these future earnings to make college attainable in the present.

While human capital contracts are also a third-party payer system, the private nature of the funding gives lenders an incentive to control their costs. They will need to ensure that students can pay back what they borrowed. The federal government doesn’t have the same incentive with its student loans because it doesn’t need to earn a profit.

Human capital contracts are not a silver bullet; nothing is. For example, they likely wouldn’t be useful for students who only intend to work part time or to become stay-at-home parents because lenders couldn’t recoup their investments. However, human capital contracts are a better choice overall for students and Oregonians when compared with the taxpayer-funded Oregon Opportunity Initiative. They would eliminate many problems of current loans, provide an incentive to view education as an investment, and control costs. All of this would help manage the expense of college long-term while still allowing students from any income bracket to attend college.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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The Portland Seed Fund: Lots of Fertilizer, Little Growth

By Joel Grey

The Portland Seed Fund (PSF) started in 2011 as a joint public-private venture intended to close a funding gap for entrepreneurs attempting to start a business. It invests $25,000 in each selected startup and reserves money for follow-up investments. The City of Portland, the City of Hillsboro, and the State of Oregon diverted tax dollars to underwrite the majority of the cost for the first Seed Fund and a significant portion of the second Seed Fund. This totaled $3.4 million through 2014.

Another $100,000 was proposed in the requested budget for the Portland Development Commission (PDC) this year. The 2014-2015 budget has been adopted but does not specify whether funding for the PSF is included. The PDC has ignored multiple requests for comment. The City of Portland and the Oregon Growth Account are the two biggest sponsors, both putting in $1.5 million or more.

Portland obtains its money from taxpayers directly; the Oregon Growth Account is a state-run venture capital fund using dollars appropriated from the Oregon Lottery.

The Seed Fund was promoted as a way for public entities to help private companies get started, with the expectation that the Fund would eventually earn money. However, it is not possible to determine whether the Seed Fund is earning a positive rate of return, or even what is being done with its money, despite the fact that it utilizes public funds.

The Seed Fund does not publicize which businesses are still open, and even when contacted did not respond to requests for its return on investment (ROI). The public entities were unable to provide the Fund’s ROI as well. The City of Hillsboro communicated that it was not able to invest directly, but had used an intermediary that would also receive any ROI. Various people at the City of Portland, including several at the City Budget Office and the PDC, were also unable to supply an ROI; some did not know what the ROI was and others have simply not responded to information requests.

Out of the 46 companies funded, most appear to still be open; but one has closed, another has moved to California, and two more appear to have closed, lacking corporation status, websites, and offices.

Regarding the funds spent by Hillsboro and Portland, Article XI Section 9 of the Oregon Constitution states: “[n]o county, city, town or other municipal corporation, by vote of its citizens, or otherwise, shall become a stockholder in any joint company, corporation or association, whatever, or raise money for, or loan its credit to, or in aid of, any such company, corporation or association.” Portland and Hillsboro got around this provision by giving their initial offerings to the Oregon Entrepreneurs Network, which then gave the money to the Seed Fund.

For the second Seed Fund, the City of Portland created its own intermediary, the Portland Economic Investment Corporation, which will be the group that handles the investment.

When asked, the City of Hillsboro said that it is not an investor; but by any standard of common sense it is. The city appropriated money for the Seed Fund, and the intermediary is just a screen. The money was always intended for the Seed Fund.

The managers of the Fund have admitted “[t]he Seed Fund could exist without public money.” This begs the obvious question: Then why is public money involved? If a private enterprise can exist without public money, for what reason is the public money involved?

The Portland Seed Fund is an example of “mission creep” in government. The three jurisdictions that launched this Fund have important work to do in such areas as law enforcement and protection of property. There is no reason to spend public money on non-essential and highly risky tasks such as equity investing in new private companies. The Portland Seed Fund should be shut down, and a full accounting of its spending should be provided to taxpayers.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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A Prescription for Affordable Housing in Portland

A new issue faces Portland. City Hall is considering waiving development fees for developers of market-rate housing in the Old Town Chinatown district. Chinatown is Portland’s oldest neighborhood and has earned an unpleasant reputation. City Hall claims that waiving these fees, which cover a project’s impact on urban infrastructure, can stimulate building in Chinatown. In the past, only developers of so-called “affordable housing” have been granted this waiver.

Critics argue that this is an expensive subsidy for big businesses which aren’t providing affordable housing. However, they assume that market-rate rent is permanent, no matter how much housing is built. This may not be true. As the supply of market-rate apartments increases in Chinatown, the market rate can be expected to decrease. Essentially, housing is made affordable by supplying more of it.

Waiving fees deprives certain city bureaus of funds; but perhaps these funds could be better spent, in this case, by private developers. If the City wishes to revitalize Chinatown, it needs to encourage more people to live there, and the best encouragement is lower rent. This can be accomplished by decreasing development fees and encouraging construction. More housing and lower rents could be good for Portland.

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Oregon’s Prescription-Only Cold Medicine Law Needs a New Look

In recent years, Cascade Policy Institute has tracked and analyzed the effectiveness of a 2006 Oregon state law that requires all citizens to obtain a doctor’s prescription before buying pseudoephedrine-based cold and allergy medication.

Overall, our analysis found that the law produced a minimal impact on the state’s methamphetamine problem, based on the fact that not only did Oregon see a significant decline in meth lab incidents prior to the law’s passage, but that Oregon’s neighboring states experienced a similar decline in meth labs over the same time period without enacting such a prescription law.

Since Cascade published our study in 2012, Oregon’s meth problem has shown no signs of improvement.

Last month, Oregon’s High Intensity Drug Trafficking Area (HIDTA) program released its 2015 Program Year “Threat Assessment and Counter-Drug Strategy.” Within the report, a number of new data points and law enforcement survey findings cast fresh doubts on the 2006 law. Among the most troubling findings:

  • While the number of meth lab seizures remains low, volume confiscated in Oregon has grown dramatically since 2007. Ninety percent of law enforcement officials indicate crystal meth was highly available in their area.
  • Meth-related arrests in Oregon nearly doubled from 2009 to 2014.
  • According to Oregon law enforcement officials, meth is the drug that contributes most to violent crime and property crime and is the primary funding source for major criminal activity.
  • According to the Oregon State Medical Examiner Division, the number of fatalities related to meth use rose to a historic high of 123 deaths in 2013, over twice the number of fatalities in 2001.

By any reasonable measure, the 2006 law has failed in spectacular fashion. The newly released 2015 HIDTA report should compel Oregon policymakers to reexamine the law and look for anti-meth measures that actually will lead to progress in the fight against meth.

Oregon’s pseudoephedrine prescription requirement law is poor policy because it fails to address the fundamental causes of meth crime. Clearly, Oregon’s meth users and dealers have been able to bypass the prescription requirement in the same manner criminals have done so relative to prescription medicines, despite strict controls on those products. Meanwhile, law-abiding Oregonians live in one of two states in the entire country that prohibit over-the-counter purchases of popular and effective pseudoephedrine-based cold and allergy medicines. Those products offer powerful relief that allows patients in other states to avoid the costly hassle of making a doctor’s appointment and asking for a prescription.

It doesn’t have to be this way.

A number of other states, including Oklahoma, Alabama, and Kentucky, have experienced drastic success against meth criminals due to targeted legislative solutions that penalize criminals, not consumers. Each of those states employs an electronic pseudoephedrine tracking system that automatically blocks illegal pseudoephedrine purchases and provides law enforcement with critical evidence that leads to meth busts and arrests. Oklahoma, for instance, uses a meth-offender block list, which prohibits certain drug offenders from being able to buy pseudoephedrine products. Since 2012, the state has seen a decline in meth-lab incidents of more than 50 percent.

Oregon’s law enforcement officers regularly put their lives on the line to make our communities safer. Given what is at stake, elected officials have a responsibility to debate and pass legislation that fixes problems and improves the quality of life for the people they serve. Equally important, however, is the responsibility to make changes to laws that have failed to deliver results, especially when those laws inconvenience law-abiding consumers without solving crime-related problems.

It’s time to take a look at the prescription requirement law. The stakes are too high not to.

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

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U.S. Has the Worst Health Care? Not by a Long Shot

By Sally C. Pipes

Few complaints about the U.S. health care system are as common as the claim that we spend too much on health care and get too little for all that spending in return—especially compared to other industrialized nations.

A new Commonwealth Fund report is the latest to indict U.S. health care. It pegs the American system dead last in a survey of 11 developed countries. But like virtually every other study that trashes the U.S. health care system, Commonwealth’s rankings rely on questionable assumptions, like giving weight to those systems that treat people equally rather than well. At the same time, Commonwealth ignores the problems that countries with socialized health care systems have actually treating people once they’re sick. And on that metric—that is, actually delivering care to those who need it—the United States is without peer.

The Commonwealth Fund report begins by asserting that the U.S. health care system “is the most expensive in the world.” It’s true that the United States spends a larger share of its Gross Domestic Product—17.9 percent, or almost $3 trillion—on health care than other countries. But by itself, that statistic means nothing.

The United States also happens to be one of the richest countries in the world. Once basic needs are taken care of, an increasing share of each extra dollar will go to what were once considered luxuries. That’s borne out by national spending data. Between 1990 and 2012, for example, spending on health care climbed 290 percent, significantly faster than overall GDP growth of 171 percent.

But household spending on live entertainment went up more than 500 percent over those same years, while spending on pets climbed 353 percent. By the Commonwealth Fund’s logic, America also faces a pet-care spending crisis. In contrast, spending on staples like food, clothing, housing, and furnishings climbed more slowly than overall GDP.

The Commonwealth Fund concludes that the United States “underperforms relative to most other countries on most other dimensions of performance” despite having the most expensive health care system in the world. But a closer look at those “dimensions” calls that claim into question.

Take infant mortality rates, where the United States typically places far down the list behind France, Greece, Italy, Hungary, even Cuba.  This comparison is notoriously unreliable, because countries either use different definitions of a live birth—or fudge their numbers. The United States, for example, counts every live birth in its infant mortality statistics. But France only includes babies born after 22 weeks of gestation. In Poland, a baby has to weigh more than 1 pound, 2 ounces to count as a live birth. The World Health Organization notes that it’s common practice in several countries, including Belgium, France, and Spain, “to register as live births only those infants who survived for a specified period beyond birth.”

What’s more, the United States has significantly more pre-term births than other countries. That fact alone accounts for “much of the high infant mortality rate in the U.S.,” according to a report from the Centers for Disease Control and Prevention (CDC). The CDC found that if the United States had the same pre-term birth rate as Sweden, our infant mortality rate would be cut nearly in half.

What about life expectancy, where the United States ranks below its peers as well? International measures of longevity typically fail to account for differences in obesity, accidental deaths, car accidents, murders, and the like, all of which shorten lives no matter how good a nation’s health care system is. The U.S. murder rate, for example, is far higher than all the other countries in the Commonwealth Fund study. The United States has a worse highway death rate than all but one of them. And U.S. obesity rates are more than double Canada’s and more than four times Switzerland’s.

A far more meaningful comparison of international health systems would take stock of how people afflicted with diseases such as cancer fare in different countries. And on this measure, there’s no question the United States stands above the rest. Five-year survival rates for breast cancer are higher in the United States than England, Denmark, Germany, and Spain, according to the American Cancer Society. In the United States, the survival rate for prostate cancer is 99.1 percent. In Denmark it’s 47.7 percent. For kidney cancer patients, the survival rate here is 68.4 percent. It’s just 45.6 percent in England—which the Commonwealth Fund ranked as the number-one health care system in the world.

Finally, the Commonwealth Fund study also ignores massive problems with actual access to care in the countries it heralds. Every citizen of a country with socialized medicine may have insurance. But that doesn’t mean they can get the care they need.

Treatment delays were so chronic in the United Kingdom, for example, that the government had to issue a formal requirement that patients shouldn’t have to wait more than four months for treatments authorized by their general practitioner. The Royal College of Physicians found that poor care—including doctors trying to keep costs down—caused nearly two-thirds of asthma deaths in the U.K. in 2012.

In Canada, the average patient seeking an elective medical service has to wait four-and-a-half months between being recommended for treatment by their primary care physician and actually receiving it. Waiting for care is the norm in Canada, even though Madam Chief Justice Beverley McLachlin of the Canadian Supreme Court declared nine years ago, in a ruling holding a ban on private health insurance in Quebec illegal, “Access to a waiting list is not access to health care.”

The Commonwealth Fund is right about one thing—the U.S. health care system is too expensive. But rationing care—as Commonwealth’s favored systems do—is not the answer. Oregonians should pay special heed to this warning since your “Bold Experiment That Failed,” the Oregon Health Plan rationing scheme, is still seen by many as a model for all of you.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published by Forbes.

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Leave Lodging Alone

By Everet Rummel

On July 2, the Portland City Council held a hearing on proposed amendments to the Zoning Code concerning short-term rentals. The council chambers were packed with citizens who support legalizing renting one or two bedrooms from a primary residence.

An emerging sector of many local economies is “homesharing,” or renting space in your home to strangers on a short-term basis, usually for a few nights. Smartphone apps such as Airbnb allow owners to list their homes for renters to see. Homesharing is controversial because it remains informal in most places and presents a challenge to the status quo of residential living and conventional hotels.

In Portland, homesharing falls under traditional bed and breakfast regulations. These may be too expensive for the typical homeowner short on cash, so many homesharers operate illicitly.

In an effort to regulate homesharing and make compliance cheaper, the City Council has taken testimony from citizens. Sharers say renting provides them with supplementary income, allowing them to keep their homes or enjoy their retirement years. Renters benefit from low prices and a more authentic atmosphere compared with hotel rooms. Opponents of homesharing fear increased noise, diminished neighborhood safety, and that lucrative short-term rental prices would attract landlords to the market, making long-term rentals less affordable.

However, noise and safety issues probably can be solved by talking to your neighbors and complaining to the police if things get out of hand. A study by the Rosen Consulting Group shows that short-term rentals make up a small fraction of the total rental housing stock in San Francisco, so they are unlikely to affect rents.

With many benefits and low costs, the City should embrace homesharing and interfere with it as little as possible. Council members are infatuated with the idea of requiring sharers to have their homes inspected and licensed and to display their license numbers if they post an ad on Airbnb. But maintaining a listing of high-quality rentals is in the best interest of Airbnb. The site already offers refunds to guests who cancel due to rentals that fail to meet health, safety, and legal standards. Online branding is a powerful tool that may be preferable to city codes for promoting high standards among homesharers.

 

The hotel industry has expressed a desire for “fairness.” It wants short-term rentals to face the same tax and regulatory burdens as conventional hotels. However, hotels are in a better position to comply with taxes and regulations, which will disadvantage cash-strapped homesharers. A truly fairer route would be to reduce the burden on both hotels and homesharers alike.

The City’s discussions so far have ignored the fact that many short-term rentals include entire homes; and no one is sure how to address the question of rentals in apartments or condos, either. Portland is instead leaning toward working out these crucial details later. Given the enormous costs of regulating such a diverse and informal industry as homesharing, Portland should step back from over-regulating it.

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Portland Public Schools’ New Ombudsman Should Be Independent

By Joel Grey

In response to parent complaints, Portland Public Schools will create a new ombudsman position. An ombudsman is a person within an organization who provides accountability and investigates complaints.

It’s a good thing for public schools to have an ombudsman. An ombudsman is dedicated to listening to parents’ concerns and preventing abuses within the system. Accountability is important because people will often get away with whatever they are able to, and an ombudsman makes it harder to escape independent oversight.

The problem here is that the school district has placed the ombudsman within the public relations department, reporting directly to chief of community involvement and public affairs, rather than to the superintendent. The job of public relations isn’t to investigate and stop abuses within the system; it’s to improve the public’s view of the schools. Placing an ombudsman in a PR department makes it appear to parents that the position is just for show.

An ombudsman should be as independent as possible and report to the highest level of an organization―in this case, directly to the superintendent. This is what Newark Public Schools does, and it is a common practice. Without independence, the ombudsman may appear to parents to be simply a tool to placate their criticisms without effecting real reform.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Milton Friedman’s Education Savings Accounts: The Future of Oregon Education?

By Stephanie Linn

“So that the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by the free-enterprise system.”

Milton Friedman

That quote from Dr. Friedman speaks to how evidence and inquisitiveness truly drove the Nobel laureate’s work—and how open he was to change, even if it involved an idea he supported…or created.

The “father of school choice” accurately predicted the modern voucher programs in Ohio and Wisconsin would spread to other states as vouchers demonstrated their effectiveness. Evidence, anecdotal and empirical, from such programs have ignited the interest of parents nationwide to demand similar opportunities for their children. Two decades after Friedman’s prediction, there are 51 school choice programs in 24 states and Washington, D.C.

Historically, vouchers have been the “face” of school choice and the most effective means of delivering education “so far discovered.” But with the advent of a new type of school choice—which might not even involve actual schools—that could change. And, for Friedman, that would be okay.

“Vouchers are not an end in themselves,” Friedman wrote. “The purpose of vouchers is to enable parents to have free choice, and the purpose of having free choice is to provide competition and allow the educational industry to get out of the 17th century and get into the 21st century.”

“Why not add partial vouchers?” Friedman asked. “Why not let (parents) spend part of a voucher for math in one place and English or science somewhere else.”

Education savings accounts (ESAs) do exactly that—and more—which is why the newly discovered ESAs best represent and drive Dr. Friedman’s vision for American education.

ESAs came into existence in 2011, when Arizona policymakers, with the help of the Goldwater Institute, enacted what are called Empowerment Scholarship Accounts. The ESA program allows parents to purchase a range of educational services, including therapies, tutoring, books, curriculum, and online learning programs for their child, using a portion of the funds that would have been spent on his or her public schooling.

Thanks to that policy in Arizona, we now have a customizable education system similar to what Dr. Friedman proposed toward the end of his life. Take, for example, Dr. Friedman’s thinking on how students could be using computers and the internet for academic purposes, which, at the time, was relatively an outside-the-box—more like outside-the-school—approach:

“The availability of computers has changed the situation, but not fundamentally,” Friedman said. “Computers are being added to public schools, but they are typically not being used in an imaginative and innovative way.…Innovative uses of computers and the internet would offer new paths to learning.”

Arizona’s ESAs are doing exactly that: Using data from the Arizona Department of Education, Lindsey Burke found that 34.5 percent of Arizona parents use ESAs to purchase multiple educational services to accommodate their children’s’ diverse needs. That is, they did not limit their children’s education to a traditional school building. Parents purchased online learning programs, tutors, therapies, and more. In their current form, vouchers and tax-credit scholarships, although valuable and effective for many families, do not allow such customization.

And Arizona parents have reported they are grateful for the flexibility ESAs afford them and the resulting improvement in their children’s lives. In fact, 90 percent of families reported they are “highly satisfied” or “satisfied” with the program (the remaining 10 percent were “somewhat satisfied”; none were dissatisfied). That is significant, considering 49 percent of families using ESAs were not happy with the services and educational opportunities afforded to their children in public school before they started using the ESA program.

 

Given the success of Arizona’s ESAs, it should come as no surprise more states are considering similar programs. It’s Dr. Friedman’s voucher prediction all over again: As such programs demonstrate their effectiveness, they spread.

In 2014, Oregon―along with eight other states―introduced ESA proposals. The most significant news this year came out of Florida, which last month became the second state in the nation to adopt ESAs. The Florida Personal Learning Savings Accounts will give children with special needs the opportunity to receive educational services outside of a traditional public or private schoolhouse setting. Florida families may soon experience the transformational power of customizable school choice programs in the same way ESAs have changed the lives of one Arizona family, the McMurrays.

Lynn and Tim McMurray’s youngest daughter, Alecia, now receives occupational therapy and other educational services using an ESA. Alecia’s sister, Valerie, has a mild form of cerebral palsy, which Lynn and Tim are able to treat via one-on-one tutoring, made possible by an ESA. Valerie has become so enthusiastic about her education that she will stop people on the street and tell them what she is learning, for which her mom is incredibly grateful.

“The freedom ESAs give our family is the biggest blessing ever,” Lynn said.

Oregon’s proposed ESA program could offer that same opportunity by giving parentsthe ability to find new ways to meet their children’s needs. That is why ESAs so effectively speak to Milton Friedman’s vision for education and its future: the freedom to choose and discover, both of which, together, improve the lot of everyday people.


 

Stephanie Linn is State Programs and Government Relations Director at the Friedman Foundation for Educational Choice. She is a guest contributor at Cascade Policy Institute, Oregon’s free market public policy research organization.

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The “Sharing Economy” Benefits Homeowners, Guests

By Everet Rummel

An emerging sector of many local economies is “homesharing,” or renting space in your home to strangers for a short term, usually a few nights. Smartphone apps such as Airbnb allow owners to list their homes for renters to see. Homesharing is controversial because it remains informal in most places and challenges the status quo of residential living and conventional hotels.

In Portland, homesharing falls under traditional bed and breakfast regulations. These may be too expensive for the typical homeowner, so many homesharers operate illicitly.

In an effort to regulate homesharing and make compliance cheaper, the Portland City Council has taken testimony from citizens. Sharers say that renting provides them with supplementary income, allowing them to keep their homes or enjoy their retirement years. Renters benefit from low prices and a more authentic atmosphere compared with hotel rooms. Opponents of homesharing fear increased noise, diminished neighborhood safety, and that lucrative short-term rental prices would attract landlords to the market, making long-term rentals less affordable.

However, noise and safety issues can probably be resolved by talking to your neighbors and complaining to police if things get out of hand. A study by the Rosen Consulting Group shows that short-term rentals make up a small fraction of the total rental housing stock in San Francisco, so they are unlikely to affect rents. With many benefits and low costs, Portland should embrace homesharing and interfere with it less.

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Seattle’s Giant Job Killer

By Erin Shannon

The city of Seattle made history last month with an ordinance that will force every employer in the city to pay every worker a $15 per hour minimum wage, which is the highest in the nation. But before progressives in Portland try to hold up Seattle as a model, they should watch what happens to workers there. The controversial wage mandate passed by Seattle’s City Council has not even been enacted yet, but it is already having a chilling effect on jobs.

Small business owners are expressing deep worry over the coming super-high minimum wage. Many of these job creators say they are holding off on opening new ventures or expanding their current business in Seattle, while others say they are delaying plans to hire new workers. A commercial property landlord says several of her tenant business owners may not renew their leases if the $15 wage becomes law.

As she puts it, “It’s just too expensive to operate in the city.”

Even business owners who have supported a higher minimum wage are having a change of heart. Jody Hall, owner of Cupcake Royale and respected progressive activist, initially supported a $15 minimum wage. But now she says the proposed policy is “keeping me up at night like nothing ever has.”

Hall told KUOW/NPR radio she now has “serious second thoughts” about a $15 minimum wage, especially since Seattle would be “going it alone” with a wage that is significantly higher than any other minimum wage in the nation.

Her second thoughts about a $15 minimum wage mandate have led to second thoughts about expanding her business. She had planned to open a new business in Seattle this year but has tabled the idea for now. Hall says if she considers any new locations in the near future, they will be outside the city limits.

That is one way a high minimum wage often kills job opportunities, by eliminating them even before they are created.

A city-commissioned study says a $15 minimum wage would help low-wage workers and reduce poverty. But the mandate can help only people who have jobs; this study omitted any estimations of the impact on employment. A subsequent study by a Seattle economist predicted significant job losses.

 

It would seem the Seattle economist has been proved right early. The $15 wage is not yet in effect, and it is already pushing businesses into neighboring cities and killing jobs in Seattle, as business owners stop growing their companies and hiring new workers.

Employers cannot pay workers more than the value of their output. If an employer must pay a worker $15 per hour, he must ensure the worker produces at least that amount in economic value, or the employer will be forced to reduce the cost of labor in the only legal way remaining, by cutting benefits or hiring fewer people.

That’s what is happening in SeaTac.

Northwest Asian Weekly reports employees subject to the narrowly passed $15 minimum wage law in that Seattle suburb say they have lost benefits such as 401(k) plans, paid holidays, paid vacation, free food, free parking and overtime hours. One hotel waitress said she is earning less now because tips have decreased since the high wage law. In many cases these benefits, plus the previous minimum wage, added up to more than workers receive under the $15 wage law.

As one SeaTac worker put it, “It sounds good, but it’s not good.”

SeaTac’s $15 minimum wage has been in effect less than six months, and workers in that city are discovering the high-wage mandate comes with a steep cost. In Seattle, a minimum wage has not even gone into effect, and employers are already adjusting by canceling plans to expand and hire new workers. We can expect many Seattle businesses to cut benefits as SeaTac employers had to. Others, especially small businesses, will be forced to lay off workers.

“$15 Now!” is the battle cry of activists in Seattle. A more accurate slogan would be, “It sounds good, but it’s not good for workers.”

The last thing workers need is fewer jobs.


 

Erin Shannon is Director of the Center for Small Business at Washington Policy Center in Olympia, Washington. She is a guest contributor at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in the Puget Sound Business Journal.

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Common Sense this Independence Day

I’ve taken two tours of Independence Hall in Philadelphia. Though it was full of vivid history about the signers of Thomas Jefferson’s Declaration, I don’t recall seeing much about a relatively unsung hero of the American Revolution, Jefferson’s friend Thomas Paine, who stirred the new nation to action.

In the months before our country declared independence from his native England on July 4, 1776, Paine anonymously published what became an instant bestseller, his pamphlet Common Sense. Later that year, after the war for independence had started, Paine began publishing a series of pamphlets known as The American Crisis, which began with these now-famous words:

“These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country, but he that stands now, deserves the love and thanks of man and woman.”

In Common Sense, Paine wrote,

“Society in every state is a blessing, but government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.”

He argued for free trade and individual liberty with phrases that captured the imagination of his adopted countrymen.

Paine and Jefferson realized that government and society are not synonymous. They argued that government’s purpose is to protect the inalienable rights of the individuals that make up society—so-called negative rights that don’t put a burden on other individuals beyond their obligation not to violate them. They understood that any positive rights granted by government must be paid for by diminishing someone else’s right to life, liberty, or property. What would they think of today’s politicians in Washington, D.C. and Salem, Oregon who propose law after law ordaining right after right?

In the introduction to Common Sense, Paine wrote,

“[A] long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defence of custom. But the tumult soon subsides. Time makes more converts than reason.”

Paine and Jefferson didn’t wait for time to convert people. We at Cascade aren’t waiting either; we’re providing the intellectual ammunition today’s freedom fighters need to win new peaceful battles for liberty.

Many Americans believe modern society requires more government control; we believe just the opposite. Free individuals are perfectly able to run their own lives today, just as they were in 1776. Paine and Jefferson would be dismayed at the size of modern governments, and so are we.

Read Common Sense and The American Crisis this Independence Day, and remember what the holiday is really all about.


 

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

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Supreme Court Says: Starting a Business Doesn’t Make You Lose Your Religious Freedom

Do you lose your religious freedom because you’re running a family business? On June 30, the U.S. Supreme Court said no. In a 5-4 decision, the Court ruled that David and Barbara Green and their family business, craft chain Hobby Lobby, cannot be required by the government to include forms of contraception to which they object on religious grounds in their company health insurance policy.

The Affordable Care Act (ObamaCare) currently directs most employers to include coverage of all contraceptives, sterilization procedures, and some potentially abortion-inducing drugs and devices, at no cost to the user, in their employee health insurance plans. If employers don’t comply, they face fines of $100 per day, per employee. For Hobby Lobby, that would have added up to about $475 million a year.

Until now, the Obama Administration has not allowed any conscience accommodation to owners of for-profit companies who object to the contraceptive services mandate. Even the Administration’s religious exemption is so narrow that it does not apply to most religiously affiliated institutions, including communities of Catholic sisters. The only government accommodation for which most religious employers could qualify is the ability to have a third party provide contraceptive services outside the employer-provided insurance program, if the religious employer objects to providing them itself and is willing to sign a waiver authorizing this arrangement. However, this option is not available to for-profit employers.

The Becket Fund for Religious Liberty, the nonprofit public interest law firm representing Hobby Lobby’s owners, explained its clients’ suit this way:

“The Green family has no moral objection to the use of 16 of 20 preventive contraceptives required in the mandate, and Hobby Lobby will continue its longstanding practice of covering these preventive contraceptives for its employees. However, the Green family cannot provide or pay for four potentially life-threatening drugs and devices. These drugs include Plan B and Ella, the so-called morning-after pill and the week-after pill. Covering these drugs and devices would violate their deeply held religious belief that life begins at the moment of conception, when an egg is fertilized….

“The Green family respects the religious convictions of all Americans, including those who do not agree with them. All they are asking is that the government give them the same respect by not forcing them to violate their religious beliefs.”

Under the Religious Freedom Restoration Act (RFRA), passed by Congress in a nearly unanimous vote in 1993 and signed by President Clinton, the government must demonstrate that a law serves a “compelling interest” and is the “least restrictive means” of achieving that interest before it can burden someone’s free exercise of religion. It appears that this standard was key for the majority ruling in Burwell v. Hobby Lobby this week. The Green family had argued that by forcing the federal contraceptive services mandate on their company, the government was requiring them to run their company at odds with the way they live out their faith, thus unduly burdening their free exercise.

By ruling in the Greens’ favor, the Court has recognized for the first time that a for-profit corporation can have religious rights under federal law or the Constitution. Justice Samuel Alito stated on behalf of the Court: “The plain terms of RFRA make it perfectly clear that Congress did not discriminate…against men and women who wish to run their businesses as for-profit corporations in the manner required by their religious beliefs….Our responsibility is to enforce RFRA as written, and under the standard that RFRA prescribes, the HHS contraceptive mandate is unlawful.”*

“This is a landmark decision for religious freedom,” said the Greens’ attorney, Lori Windham. “This ruling will protect people of all faiths….You can’t argue there are no alternative means [of accommodating employees who want full access to no-cost birth control] when your agency is busy creating alternative means for other people.”

Justice Anthony Kennedy, concurring with the majority, said, “Among the reasons the United States is so open, so tolerant, and so free is that no person may be restricted or demeaned by government in exercising his or her religion.”

Americans shouldn’t have to fear that they would have to run their family businesses in ways that seriously conflict with their faith and moral values just because they incorporated. As Timothy Sandefur of Pacific Legal Foundation succinctly put it before the ruling, “Whatever one thinks of the constitutionality of the ‘contraception mandate’ itself, the Supreme Court should make clear that the First Amendment applies to everyone.” In affirming that business owners have religious rights, the Court appears to have done that.

*The Court specified that its ruling in Burwell v. Hobby Lobby applies only to “closely held” companies. Closely held companies are owned and controlled by a small number of investors, perhaps five or fewer individuals, who are often family members or the founding management. The Wall Street Journal reports that about 90% of companies in the U.S. are closely held.

 

Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Understanding and Defending Your Property Rights—And Why It’s So Important

Please join us for Cascade’s monthly Policy Picnic led by Pacific Legal Foundation’s Christina Martin on July 14, at noon. An attorney, Christina was a project director at Cascade Policy Institute before joining Pacific Legal Foundation.

For decades, your property rights have faced major challenges from local, state, and federal regulations. Now, the U.S. Supreme Court has begun to push back. Come learn about recent property rights cases to better understand your rights, why they are important, and what you can do to protect them.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

Sponsored By

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The Portland Seed Fund: Boom or Bust?

By Joel Grey

The Portland Seed Fund started as a public-private venture intended to close a funding gap for small loans to entrepreneurs. The City of Portland, the City of Hillsboro, and the State of Oregon provided a majority of the funds for the first Seed Fund and a significant portion of the second Seed Fund. It was sold as a way for public entities to help private companies begin, with the expectation that the Fund would earn money.

At this time, it is impossible to say whether the Fund has earned a profit because that information is not publicly available, and none of the public entities involved could give an answer when asked what the return on investment had been. The first person I contacted at the Portland Development Commission said the Seed Fund didn’t sound familiar. The City Budget Office also didn’t initially recognize the name of the Seed Fund, but a budget analyst eventually contacted someone at the PDC. However, that person has not responded.

The conclusion from all of these conversations is that there is little or no accountability in place to ensure that taxpayer money is being well spent, nor is there a way for taxpayers to see how their money is being spent.

Ultimately, there are professionals who risk private money in venture capital firms. Government entities shouldn’t play venture capitalists with taxpayer funds.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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U.S. Supreme Court rules that freedom of association trumps public sector union demands

The U.S. Supreme Court today ruled in Harris v. Quinn that home health care workers in Illinois cannot be forced to pay public sector union dues because that violates their freedom of association as protected by the First Amendment. The decision should help similar workers in Oregon who are being forced to pay dues to the state’s largest public sector union, SEIU.

The Court ruled that requiring in-home health care workers to pay so-called “fair share” fees for public sector union collective bargaining costs violates their constitutional rights by compelling them to associate with the union. The Court has previously found that freedom of association is an essential part of Freedom of Speech, which is protected in the First Amendment.

Even though it is narrowly crafted, today’s decision should apply to other states like Oregon in which public sector unions are allowed to force in-home health care workers to either join their union or pay “fair share” dues. And, the arguments used by the Court to uphold the constitutional freedom of association rights of home health care workers should be expanded in future cases to workers in general who object to being forced into paying fees for union services they don’t want.

In Oregon, for example, more than 30 percent of union households would opt if they could, and some 30 percent of SEIU public employees have already opted out of membership but are required to pay “fair share” dues for collective bargaining costs. While today’s Court decision may not free them from that financial burden, it will bolster the case that their freedom of association is being violated. At some point, the Court will need to further clarify who can and who cannot exercise their First Amendment rights when faced with paying fees to an organization they would choose not to support.

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Private Lenders Could “Pay-It-Forward” in Oregon

By Everet Rummel

The Oregon Higher Education Coordinating Commission is proposing a pilot program called “Pay-It-Forward.” Oregon residents could attend an in-state public university or community college tuition-free in exchange for paying a portion of their income annually for 20 years after graduation. The program, set to cover 1,000 students, is projected to cost the state between $5 million and $20 million per year for the next 20 years before becoming self-sustaining.

Proponents of “Pay-It-Forward” want to alleviate the problem of overwhelming student debt loads and make a college education more affordable. But should taxpayers cover students’ tuition when they are already directly funding public universities and student aid programs? Instead of microscopic pilot programs that throw more public money at the problem of rapidly rising tuition, there is a potential private solution to help finance higher education.

Milton Friedman originally proposed the concept of human capital contracts (HCCs) for the purpose of financing higher education. HCCs are privately funded financial instruments through which students receive funding for their tuition. In exchange, they pledge to pay a set percentage of their income annually for a set period of time after graduation. If they are ever unemployed or unable to pay, then they pay nothing until they have an income. If the payback period ends before the student has paid back the entirety of the sum loaned, the rest of the debt is forgiven. HCCs would go far beyond publicly funded “Pay-It-Forward”-type programs and traditional student loans by incentivizing informed educational decisions, forcing institutions to compete by controlling costs, and transferring financial risk to those who are better able to bear it.

HCC rates, the percentage of income that students must pay annually, and funds loaned would vary by the school attended, program of study, and academic achievement. Students attending schools and programs whose graduates tend to do poorly in the labor market would face lower rates but fewer funds. Students with lower academic achievement may have access to less funding. Those attending more expensive schools would receive more funds and higher rates only if their expected earnings are high relative to the costs of the education. Thus, rates and funds would incentivize students to seek more bang for their buck. Institutions, no longer reliant on seemingly unlimited government (taxpayer-funded) aid, would have to rein in costs and focus on improving academic quality. In sum, the availability of HCCs alone would tell consumers a lot about the economic value of various degree programs.

Most importantly, risk and financial burden would be borne by borrowers and lenders, not the state and taxpayers. The majority of the risk would be transferred to lenders, who are in a better position than student borrowers to bear it. Meanwhile, students would be free to pursue their chosen career paths without worrying about fixed monthly payments that could ruin their future financial prospects. The risk of default would be arguably lower than what we face now. These points should be remembered as policymakers in Oregon and across the country consider the crisis of higher education debt. Perhaps the market―not the government―has  solutions. Human capital contracts may be one of them.


 

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Portland Should Be Fair to Taxis by Setting Them Free

By Everet Rummel

This issue affects almost all city-dwellers, and cities around the world are taking action. Some view it as their own livelihoods being at stake. It has even sparked mass protests in Europe. The issue? Whether or not cities should allow Uber, and other GPS-based ridesharing services, to operate within their jurisdictions.

Ridesharing apps like Uber and Lyft connect commuters with certified drivers willing to offer rides for a fare. The idea sounds innocent enough, but Portland and other cities strictly limit the number of taxis and for-profit drivers who are allowed to operate, how small each cab company can be, and how much or little they can charge.

Across the U.S., governments have rushed to regulate ridesharing and sometimes ban it altogether. California has warned ridesharing companies to stay clear of the airports. Virginia and Austin, Texas have banned them completely.

The European protesters claim it isn’t fair that ridesharing services can operate unregulated, while taxis are heavily regulated; the playing field isn’t level. And they’re right. But rather than cooking up expensive regulations and restricting taxis and ride-sharers in cities, which hurts customers, let’s make taxi and ridesharing drivers free to operate and earn a living. Let’s deregulate so more drivers are on the road and more customers are getting rides. As Portland and other cities consider allowing Uber to operate legally, we should keep these points in mind.


 

Everet Rummel is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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“Pay-It-Forward” Is a Step Back

By Joel Grey

The Oregon Higher Education Coordinating Commission is considering a proposal called “Pay-It-Forward.” This pilot program would give free tuition at a state university to one thousand high school graduates each year, beginning in 2016. In exchange for free tuition, students would cede 3-5% of their paychecks over a twenty-year period. Although the program is intended to become self-sustaining, it would cost between $6.5 and $20 million each year for the first twenty years until that happened.

This is an example of a government proposal that is not well thought out. Yale tried a similar experiment in the 1970s and eventually forgave much of the debt years later. Many students overpaid for their education, while 20% defaulted. Oregon shouldn’t repeat Yale’s mistake.

Furthermore, having a third-party payer for college reduces students’ incentive to decide whether to attend college or to pursue other options, like technical schools. It also makes students less sensitive to the prices of institutions, likely increasing the cost of college over the long run.

Education should be an investment, but students and their families should invest and then reap the benefits. That way, talented students can succeed based on merit, rather than government funding students at great cost to taxpayers, with no guarantee a pilot program like “Pay-It-Forward” will work as intended.

Government simply can’t make decisions as well as the individuals who are affected by those decisions.

Joel Grey is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Friedman Legacy Day 2014

Cascade Policy Institute cordially invites you to participate in this year’s Friedman Legacy Day. This annual, international event provides fans of Milton Friedman and lovers of liberty the opportunity to learn about the late Nobel laureate, to share his ideas, and to celebrate the impact they had on our country and the worldwide movement for freedom.

4 pm – 5 pm Policy Picnic on Milton Friedman with Steve Buckstein (SOLD OUT. Register below for our main event!)

5 pm – 7pm Complimentary food and beverages

We will also be holding a book fair and video showing!

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Are You Being Scammed on Your Electric Bill?

During the past decade, it has become popular for individuals, businesses, and universities to brand themselves as “green power” supporters. Some have done this by installing actual generating facilities such as solar panels. However, for most people, this is too costly, so a new option has arisen for them: renewable energy certificates (RECs).

A REC is not a physical thing. It is simply an accounting mechanism purporting to represent the “environmental amenities” associated with one megawatt-hour of electricity generated at certain qualifying facilities. Every time a megawatt-hour of power is produced, the electricity is sold as one commodity, and a REC is created as a separate commodity. The two are not necessarily sold at the same time, or to the same buyer.

What are these “environmental amenities”? No one actually knows. To take a hypothetical example: If you bought a REC associated with a new hydroelectric facility, a potential environmental benefit would be the lack of air pollution from that facility. But the hydro dam probably would have several environmental “disamenities” such as fish mortality and loss of recreational opportunities to river users. The net effect might be zero environmental gain, depending on how one values the trade-offs.

The question becomes much more complicated for intermittent sources such as wind and solar. Since those generators don’t produce any useful output most of the time, they must be continually backed up by other sources (known as “spinning reserve”). This is a requirement of the electrical grid, where electricity demand and supply must be in equilibrium at all times to avoid blackouts.

If wind and solar facilities must be backed up, then in order to quantify the “environmental amenities” of an individual REC, we would need to know exactly where the back-up came from. In order to learn more about this last year, I assigned a number of bright college students the task of identifying specific RECs (by the unique number assigned each one) and then investigating what sources (if any) were being used as spinning reserve. It turns out that finding such information is impossible. We asked electric utilities, REC brokers, and state utility regulators. All denied our requests.

The contrast between the green energy field and the “sustainable agriculture” industry on this point is stark. If you walk into almost any fine restaurant or supermarket and ask where the produce or beef came from, the information will be readily available. In fact, managers are likely to launch into an extended dissertation about the virtues of “local sourcing,” “organically grown” crops, and “humanely raised” animals.

However, if you ask similar questions about the qualities of a REC you just purchased, you will hear the sound of silence.

The evidence shows that RECs are actually a fake commodity, created out of thin air, and that consumers who purchase them are being bilked. This is all documented in a Cascade report released in May.

As a follow-up to this research, Cascade has asked Attorney General Ellen Rosenblum to investigate the REC market for fraud under the terms of the Oregon Unfair Trade Practices Act. As of this writing she has yet to respond.

In the meantime, consumers would do well to steer clear of the REC scam. A prominent circus promoter once claimed, “A sucker is born every minute.” There is no need to be part of the evidence that proves him right.

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

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Oregon’s Self-Service Gas Prohibition Probably Won’t End—But It Should

Only two states prohibit motorists from pumping their own gasoline: New Jersey and Oregon. I’m not sure what excuses the powers-that-be use in New Jersey, but here they in-effect warn that “you’ll set yourself on fire.” The ban went into effect in 1951, and the only attempt to end it failed at the polls in 1982.

The Oregonian published a provocative editorial last week making fun of our self-serve ban, but prohibitionists came out of the woodwork to make argument after argument in favor of keeping the ban.

The three most popular arguments for keeping the ban seem to be:

I don’t want to pump my own gas, so you can’t either;

The ban is a good “make-work program” that keeps people employed and tax revenue flowing; and,

Employing attendants doesn’t make our gas more expensive anyway.

First, I don’t want to pump my own gas either, but that doesn’t give me the right to prohibit you from pumping yours. If there is enough demand for station attendants, someone will fill that demand in a free market.

Second, sure, creating jobs is a good thing. But government “make-work programs” often misallocate resources, costing taxpayers more than any tax revenue they might generate.

And third, if labor costs have no impact on prices, then why not mandate one attendant for every pump? Or, mandate one checkout clerk for every customer at the grocery store? Lots of jobs will be created at apparently no cost to consumers; what could go wrong?

In short, it seems that too many Oregonians see our self-serve gas ban as something that makes our state unique. The ban probably won’t end, but it should.

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

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Seattle’s $15 Minimum Wage: A Wolf in Sheep’s Clothing

By Erin Shannon

On June 2 the Seattle City Council made Seattle the first city in the nation to mandate a $15 minimum wage for all workers. But far from being a victory for workers, a super-high minimum wage is likely to cause more harm than good by destroying businesses and reducing workers’ options.

Effective April 1, 2015, all businesses must pay $10-$11 per hour, with the remainder of the $15 wage phased in over seven years for small businesses (those with less than 500 employees), and three years for large businesses (those with 500 or more employees).

While supporters of the $15 wage say it will have no negative impact on the city’s employment or economy, the reality is it is already killing jobs. Some business owners in Seattle say they are holding off on opening new business or expanding their current business, delaying plans to hire new workers and even moving into neighboring cities. In SeaTac, where some employers have been paying a mandated $15 minimum wage for six months, the benefits workers used to receive have been reduced or eliminated and prices have increased for consumers.

Restaurants, in particular, will be hit hard by Seattle’s new wage. The Puget Sound Business Journal reports that one restaurant owner calls the $15 wage a “mortal threat” and has halted plans to open another location. The CEO of a restaurant chain says his company is also holding off opening new locations in Seattle, and will likely be forced to reduce employees’ health benefits. The company currently offers health care coverage to employees who work at least 25 hours per week, but that may now be increased to 30 hours per week. That company will also likely eliminate tips for servers, and instead automatically charge customers a service charge or gratuity that would be split between servers and other restaurant staff, such as kitchen workers.

And it is not just Seattle workers who are losing potential jobs and reduced benefits. In a twist, the $15 wage is impacting job creation and worker benefits in other cities.

A pizza franchise with 11 locations, six of which are in Seattle, that employs 430 workers has tabled plans to open another location in Lynnwood over concerns the new location and its new jobs would bump the company into the “big business” category. Under the new law, “big businesses” have a shorter phase-in of the high wage; they must begin paying all workers $15 over the course of three years. By

staying under the 500-employee threshold, the company remains a “small business” and has up to seven years to phase in and adjust to the new wage for its six Seattle stores. That is 70-plus jobs workers in the city of Lynnwood just lost.

The company that says it may reduce health benefits in response to the $15 wage would have to do so for all of its workers, even those outside Seattle. Federal law requires companies to offer the same health benefits to all employees. So if the company is forced to increase the threshold to qualify for health benefits in order to offset the new high wage of employees in Seattle, it must increase the benefit threshold for all employees, including those earning a lower minimum wage in other cities.

The CEO of the chain restaurant warns that many small, mom-and-pop businesses will go out of business as a result of the increased labor costs: “Successful downtown restaurants will find a way to make it work, but smaller restaurants will die.”

This sentiment is echoed by the CEO of CKE Restaurants, which owns Carl’s Jr. and Hardee’s. Andy Puzder, author of the book Job Creation, says the push for a higher minimum wage is the one of the greatest threats facing restaurants: “I think you’ll see a lot of restaurants closing. I don’t think that restaurants can operate profitably if they’re paying a $15-an-hour minimum wage.”

Some of Portland’s leaders want to imitate Seattle, but they should think again. Those who support higher minimum wages may not have bad motives, but good motives in support of bad policy still result in driving job creators out of our communities and hurting the very people they want to help.


 

Erin Shannon is Director of the Center for Small Business at Washington Policy Center in Olympia, Washington. She is a guest contributor at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Understanding Oregon’s Common School Trust Lands and the Financial Crisis on the Elliott State Forest

Please join us for Cascade’s monthly Policy Picnic led by Cascade Policy Institute President and CEO John A. Charles, Jr. and attorney Katie Walter on Thursday, June 26, at noon.

The Common School Trust Lands serve as an endowment fund for Oregon’s public schools. Unfortunately, the most valuable asset within the Trust Land portfolio – the Elliott State Forest – lost $3 million during 2013. This seminar will discuss the history of the Trust Lands, the legal requirements to manage them for the benefit of students, and the crisis on the Elliott State Forest.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

Sponsored By

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What Should Have Happened with Cover Oregon

By now, people around the country know our state’s attempt to create a health insurance exchange website was a colossal failure. Fingers of blame are pointing in all different directions; and last month the U.S. Attorney’s office issued broad subpoenas seeking information from Cover Oregon and the Oregon Health Authority about who did what, who knew what, and when.

On May 29 Governor John Kitzhaber spoke at a legislative committee hearing to announce that he blamed the prime website contractor, Oracle Corporation, for failing to deliver a working website. He asked Oregon’s Attorney General to consider suing Oracle to “get our money back.” Of course, the money he’s talking about isn’t really “our money” because we got it from the federal government. And, that same federal government is considering whether to ask Oregon for “its money” back as well.

Later in that same hearing, Oregon’s new Chief Information Officer made an interesting observation.* Alex Pettit wasn’t here when Cover Oregon began its long march toward failure in 2011. Legislators asked him if anything would have been different if he had been overseeing Oregon’s IT projects back when the ObamaCare state exchanges were being born.

Mr. Pettit discussed how he viewed such big IT projects, how he evaluated them, and how he decided if they should proceed or not. He noted that, as Governor Kitzhaber and others have admitted, Cover Oregon was a very ambitious project with a very broad scope. Pettit said that to be successful, such projects must instead have a narrow scope.

He explained that since he came to Oregon in January, he has acted to slow down other big projects until they met his criteria, even though they might be priorities of the Governor as Cover Oregon was. He then explained that in 2011 he was the Chief Information Officer in the state of Oklahoma when it applied for and received a $134 million federal grant to build that state’s health insurance exchange.

Pettit noted that his team evaluated the proposal for the Oklahoma exchange and they decided that “We did not have the capacity to do this.” And so, as he told Oregon legislators, they “sent the money back.”

If Oregon officials had made a similar decision in 2011, we wouldn’t be where we are today, having spent some quarter billion tax dollars on a project that caused nearly everyone involved nothing but grief and heartache. In the future, let’s hope that we follow Mr. Pettit’s advice when he or his successors determine that we should simply “send the money back” or, better yet, not ask for it in the first place.


 

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

* Audio of the entire Joint Committee On Legislative Audits, Information Management and Technology (5-29-14) hearing is here:http://www.leg.state.or.us/listn/archive/archive.2013i/JLAIMT-201405291400.ram

The questions leading to Mr. Pettit’s answer about what happened in Oklahoma begin at about 1:48, and his answers run to about 1:55.

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Small Business Owners Say: $15 Minimum Wage Is a “Mortal Threat”

This week Seattle became the first city in the nation to mandate a $15 minimum wage. But far from being a victory for workers, a super-high minimum wage is likely to cause more harm than good by destroying businesses and reducing workers’ options.

Washington Policy Center’s Erin Shannon writes: “Some business owners in Seattle say they are holding off on opening new business or expanding their current business, delaying plans to hire new workers and even moving into neighboring cities. In SeaTac, where some employers have been paying a mandated $15 minimum wage for six months, the benefits workers used to receive have been reduced or eliminated and prices have increased for consumers.” A restaurant CEO (whose employees already make $18-22 per hour) told The Puget Sound Business Journal that the increased labor costs will be “a mortal threat” to Seattle businesses.

Some of Portland’s leaders think we should imitate Seattle. We should not. Cutting off the lower rungs of the economic ladder with a super-high minimum wage makes it that much more difficult for young people and those with less education to even reach the first rung on the ladder―and then move on to higher skilled, better paying jobs. Those who support higher minimum wages may not have bad motives, but good motives in support of bad policy still result in driving job creators out of our communities and hurting the very people they want to help.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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Just Say No to the Oregon Opportunity Initiative

The cost of obtaining a college degree is rising rapidly, leading some people to advocate that taxpayers subsidize even more of the cost. They assume that the state will benefit economically if more of its citizens obtain higher educations.

And yet, as one researcher puts it, “One of America’s most durable myths is that the more people who graduate from college, the more the economy will grow.”[1] In fact, that conclusion may depend on how those educations are paid for. Richard Vedder, author of the book Going Broke by Degree,[2] found evidence that states which provide more higher education funding actually have slightly lower economic growth rates than states which provide less.[3] That is likely because individuals know their needs better than politicians do, so leaving the money in private hands produces better results.

Professor Vedder also concludes that higher education prices are rising rapidly because of the predominant role of third-party payments, including federal and state support for institutions and students: “When some[one] else is paying a lot of the bills, students are less sensitive to the price, thus allowing the colleges to care less about keeping prices under control.”[4] This leads to even higher overall costs, just as it does in K-12 education and health care, both of which rely on a growing amount of funding from governments, rather than from consumers of the services.

Oregonians will vote on such a proposal this November. The Opportunity Initiative [Measure 86] was referred to voters by the state legislature at the request of State Treasurer Ted Wheeler.[5] It is a Constitutional Amendment allowing the state to issue General Obligation Bonds to create a permanent fund to subsidize student higher education costs. Principal and interest on the bonds will be paid back over 30 years out of the state General Fund, which means primarily out of the pockets of individual income tax payers. The fund will be invested, presumably at higher rates of return than the interest rate on the bonds, and the returns will be used to provide some form of student subsidies.

When first proposed in 2012, the initial “ask” of the legislature would have been to borrow $500 million.  The fund would be projected to grow to $6 billion in 30 years, primarily through investment earnings and some future borrowing. That “ask” has since been pared down to a possible $100 million in the first biennium.

Putting the questionable investment assumptions aside for now, this proposal is flawed for another reason. It assumes higher education costs will continue to rise into the foreseeable future. The recent housing bubble should remind us that, as good investment advisors warn, “trees don’t grow to the sky.” America’s large, growing student debt load may very well be the next great bubble. As more than one noted scholar says, America’s higher education industry “…is showing every indication of a bubble that is about to burst.”[6]

If the higher education bubble is about to burst, why should Oregon taxpayers be saddled with repaying perhaps $100 million or more in bond debt, plus interest, over the next thirty years?

What would make this bubble burst? There is a combination of possibilities, but one of the most intriguing is suggested by Opportunity Initiative chief sponsor Ted Wheeler himself. During a public talk last October, Treasurer Wheeler was asked if large donations to our universities for sports programs are properly used, and by inference if the money from the Opportunity Initiative would be properly used.[7]

The Treasurer first responded that if wealthy alumni want to donate to build sports stadiums, and the universities say they need them, he thinks that’s fine. Then, he said this:

“That said, I do criticize the university system for being very slow to adapt the opportunities around technology. 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.

[Pulling out his smartphone] “I have an entire program on my phone called iTunes University and I can listen to lectures from all around the world from some of the most noted academics in the world, and it doesn’t cost me a cent. All I have to do is have a long commute, which I do.

“And this is one example of—and I hate to use the word game-changer too much—but this undercuts the entire economic model of the university system as it currently exists today.”

To repeat, “this undercuts the entire economic model of the university system as it currently exists today.” This answer seems to undercut Treasurer Wheeler’s own arguments in favor of the measure. iTunes University is just one of many online higher education options available today, and more are coming tomorrow. [8],[9] If this technology will drive down higher education costs for students, why saddle Oregon taxpayers with perhaps $100 million or more of debt to subsidize the old, high-cost economic model? The answer is we shouldn’t.

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


 

[1]George Leef, “Higher Education: The Conventional Wisdom Is Wrong,” Forbes.com, 10-13-2013, forbes.com/sites/georgeleef/2013/10/17/higher-education-the-conventional-wisdom-is-wrong/

[2] Frank Donoghue, Richard Vedder on the Ills of Higher Education,” The Chronicle of Higher Education, 2-25-2011, chronicle.com/blogs/innovations/richard-vedder-on-the-ills-of-higher-education/28716

[3] Richard Vedder, “Going Broke by Degree:Why College Costs Too Much,”2004, pp 128-145, amazon.com/Going-Broke-Degree-College-Costs/dp/0844741973

[4]Richard Vedder and Matthew Denhart,“Why does college cost so much?”,CNN.com, 12-2-2011, cnn.com/2011/12/02/opinion/vedder-college-costs/

[5] Ted Wheeler, Oregon State Treasurer, “The Opportunity Initiative,” oregon.gov/treasury/AboutTreasury/Pages/Opportunity-Initiative.aspx

[6] Arthur C. Brooks, “My Valuable, Cheap College Degree,” New Your Times, 1-31-2013, nytimes.com/2013/02/01/opinion/my-valuable-cheap-college-degree.html

[7] 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 dot com/watch?v=l1hYXGA3CLA. Relevant question starts at 52:16.

[8] iTunes University, apple.com/education/ipad/itunes-u/

[9]“Massive open online forces,” The Economist, 2-8-2014, economist.com/news/finance-and-economics/21595901-rise-online-instruction-will-upend-economics-higher-education-massive

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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

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Should Portland Residents Pay Another Fee to Cover Basic Road Maintenance?

Portland Mayor Charlie Hales is proposing a new transportation tax for 2015. He claims this is needed to offset a decline in revenue.

However, the facts show a different story. Total revenue for transportation has been growing for decades. For example, from 1996-2007, Portland transportation revenue grew by 60%. According to the city auditor, that was the largest increase among all city agencies during that period.

Portland’s general fund has also been flush. Between 2003 and 2012, the amount of annual tax revenue the city received from each Portland resident increased from $2,292 to $2,656. Total property taxes grew by 27% during that time.

Despite all this money, the city’s streets are poorly maintained. The problem is that local politicians have preferred to spend vast amounts on frivolous toys like the eastside streetcar and Milwaukie light rail, rather than taking care of basic maintenance. As a result, transportation debt service has increased from 10% of discretionary spending to 20% in just the past four years. The charge card is getting maxed out.

Instead of demanding more tax dollars for shiny new objects, the City Council should maintain and improve the basic road network. If this task is too difficult, taxpayers should ask why we bother to have a city government at all.

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

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Report Questions Legality of Renewable Energy Certificates

PORTLAND, Ore. – Cascade Policy Institute issued a report today, questioning the legality of renewable energy certificates (RECs) and calling for the state Attorney General to investigate possible violations of the Oregon Unfair Trade Practices Act.

RECs are tradable commodities purporting to represent the “environmental amenities” of producing electricity from a select list of renewable energy sources. A REC is created electronically for each megawatt-hour of electricity produced by qualifying sources, and a unique number is assigned to the REC. It can then be bought or sold as a product that is either bundled with the actual electrical output of the facility, or sold separately.

However, nowhere in the transaction process are the so-called “environmental amenities” associated with each REC verified. The REC market is shrouded in secrecy; relevant data about individual RECs such as the power facility it is associated with cannot be obtained from utilities, REC brokers, or the Oregon Public Utility Commission. This is the major finding in the Cascade report entitled “Renewable Energy Certificates: A Costly Illusion.”This lack of transparency is a problem because not all “renewable power” sources are benign. Intermittent sources such as wind and solar require back-up power at all times to ensure reliability of the regional grid, and most of those sources create environmental problems such as air pollution or fish mortality. It is impossible for any consumer to know where their purchased RECs came from, and therefore impossible to know if there are any net environmental benefits.

“We believe that statements made by REC producers and brokers violate the Oregon Unfair Trade Practices Act by representing that the purchased RECs have benefits and qualities that they do not have,” Cascade’s President and CEO John A. Charles, Jr. stated in the letter to Attorney General Ellen Rosenblum.

There is no direct link in time or location between the payments a customer makes for “renewable” energy and the production of that electricity or its delivery to the customer paying for it. According to Charles, “The REC market is a Trojan Horse. Purchasers of RECs such as universities and businesses are buying these certificates to provide a ‘green glow’ for themselves, yet the alleged environmental benefits probably do not exist.”

In 2007, the Oregon legislature approved a law that would require at least 5 percent of power generated by electricity utility companies to come from “renewable resources,” like solar and wind power. This required percentage increases to 15 percent by 2015, 20 percent by 2020, and 25 percent by 2025. Instead of having to actually produce this electricity themselves, the law allows electricity companies to purchase or produce RECs.

The Cascade report recommends that the Oregon Legislature amend the 2007 statute to prohibit the use of RECs for compliance purposes if they are associated with intermittent power sources.

Click here to read the report.

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The Last Communist City: Havana or Portland?

It’s clearly a stretch to describe Portland as a communist city, but there is an eerie similarity between Portland and the real communist city of Havana.

 

Portland-based independent journalist Michael J. Totten recently traveled to Cuba to see for himself the Havana that most tourists never see. He published his fascinating account in a long column he titled “The Last Communist City.”

 

He explains what happens when “…one of the world’s richest countries…rather than rais[ing] the poor up…shoved the rich and the middle class down. The result was collapse.”

 

Among his many insights are these:

 

  • “In the United States, we have a minimum wage; Cuba has a maximum wage—$20 a month for almost every job in the country.”

 

  • “As for the free health care, patients have to bring their own medicine, their own bedsheets, and even their own iodine to the hospital.”

 

  • “Leftists often talk about ‘food deserts’ in Western cities, where the poor supposedly lack options to buy affordable and nutritious food. If they want to see a real food desert, they should come to Havana.”

 

Coincidently, last week The Oregonian published an editorial  critical of Portland’s almost fanatical (my word, not theirs) anti-Walmart policies.

 

I couldn’t help thinking that Totten’s insights about Havana should stand as a warning to those who support so-called social-investment and related policies in “progressive” Portland.

 

Read Totten’s column and then ask yourself whether Havana residents wouldn’t be much better off with a Walmart, or any similar store, in their midst.

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

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2014 Spring Newsletter

See what Cascade Policy Institute has been up to in the Spring of 2014 in our latest newsletter.

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How Jefferson Explained the Constitution to Louisiana Nuns

This week in 1804, Thomas Jefferson wrote to an Ursuline nun in New Orleans, who had asked him to clarify her religious community’s rights under U.S. law after the Louisiana Purchase. President Jefferson assured her that the American government would never interfere with the nuns’ property, ministries, or way of life.

 

Jefferson wrote, “The principles of the constitution and government of the United States are a guarantee to you that it will be preserved to you, sacred and inviolate, and that your institution will be permitted to govern itself according to its own voluntary rules, without interference from the civil authority.”

 

Two hundred ten years after Jefferson wrote that letter, a community of sisters who care for the elderly is defending in court their right to carry out their ministries in accordance with their faith. Under current federal regulations, the Little Sisters of the Poor don’t qualify for a religious exemption from the ObamaCare insurance mandate which requires most employers to provide contraception and abortion coverage.

 

Like the Ursuline nuns of Jefferson’s time, Catholic sisters today should not lose their religious freedom while working in their own ministries. We can imagine what Jefferson might think of American women having to sue the government to defend their First Amendment rights. But can we doubt he would be dismayed by how intrusive and coercive the federal government has become since the day he explained the safeguards of the American Constitution to a group of French nuns?

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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ObamaCare Inflates Enrollment—And Premiums

By Sally C. Pipes

HealthCare.gov has officially closed and, despite months of technical hiccups, enrollment appears to have finished strong.

The Obama Administration estimates that 8 million people have signed up for coverage through the marketplaces. The president cited the figure as proof that “this law has made our health care system a lot better.”

Hardly. His enrollment numbers are artificially inflated. And the real rate of coverage may decline even further once consumers find out how much they’ll have to pay for insurance thanks to ObamaCare.

For starters, the administration’s 8 million enrollees include everyone who picked a plan—not just those who have actually paid for their coverage.

Insurers are reporting that 15% to 20% of those who have signed up haven’t paid their first premium. In other words, about 1.5 million people that the Administration counts as “enrolled” may still be uninsured.

Just because a consumer pays his first premium doesn’t mean he’ll make his second payment.

Insurance industry consultant Bob Laszewski has reported that 2% to 5% of enrollees haven’t paid their second month’s premium. If that sort of attrition continues, thousands of “enrollees” could end up uninsured before summer.

Further, many of ObamaCare’s 8 million enrollees previously had insurance—they just swapped out their existing policies for ones issued through the exchanges.

A recent RAND Corp. survey found that only one-third of exchange enrollees were previously uninsured.

The Congressional Budget Office reports that ObamaCare will spend $17 billion on exchange subsidies this year. A big chunk of that money will no doubt go to the two-thirds of exchange customers who previously secured coverage on their own.

Not exactly the wisest stewardship of taxpayer dollars.

Meanwhile, about a million of the 5 million people whose policies were canceled because they did not meet ObamaCare’s new rules remain uninsured.

The demographic composition of the exchange population also presents a problem.

Because the law forbids insurance companies from charging the old and sick more than three times what they charge the young and healthy, insurers must attract enough young, low-cost people to keep premiums down.

That hasn’t happened. Just 28% are between the ages of 18 and 34—well below the 40% the Administration said would be needed to keep ObamaCare’s exchange pools financially stable. It’s already clear that the exchange population is sicker than average.

According to a report from pharmacy benefit manager Express Scripts, exchange enrollees use 47% more specialty medications than the general insured population.

Demand for HIV meds is four times higher in the ObamaCare pool than in the existing commercial pool. Anti-seizure medication prescription rates are 27% higher.

Those drugs are more expensive. As Express Scripts puts it, “Increased volume for higher cost specialty drugs can have a significant impact on the cost burden for both plan sponsors and patients.”

Insurers will adjust to this reality by raising premiums. WellPoint predicts “double-digit-plus” rate increases across the country. In some areas premiums could go up 100%.

Cigna CEO David Cordani says his company has already brought up the coming “rate shock” with the Administration—and is pushing for changes to mitigate it.

ObamaCare’s exchanges appear to have survived their first enrollment period. But the government health-insurance platforms are far less healthy than the administration claims—and may crumble when they next open for business this fall.

Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute in San Francisco. She is a guest contributor for Cascade Policy Institute. A version of this article was originally published by Investors Business Daily.

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There’s a Sucker Born Every Minute

Last month, Oregon’s first commercial “wave energy” project near Reedsport was officially abandoned.

The lead developer, New Jersey-based Ocean Power Technologies, had been promoting a utility-scale power project featuring 100 buoys, each weighing 260 tons. That plan was downsized to 10 buoys―and then to none.

The company had previously received a subsidy of $430,000 in Oregon lottery funds, along with millions more from the federal government. Apparently, this wasn’t enough; the company announced plans to move its operations to Australia, where it has been promised $62 million in handouts by the government.

This is just the latest in a string of Oregon fiscal blunders. The state wasted more than $200 million on a non-functioning health insurance website. Another $180 million disappeared in planning studies for a bridge over the Columbia River than never got built. And Governor Kitzhaber hired an “education czar” who was compensated some $400,000 before taking off for New York after less than a year on the job.

Investors all over the world understand that Oregon is the place to come for easy money. The business plan is simple: Profits flow to private companies, while losses are bone by Oregon taxpayers.

A 19th-century circus impresario once remarked, “There’s a sucker born every minute.” He wasn’t talking about Oregon, but maybe this should be our new state slogan.

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

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Cover Oregon: Out of the Frying Pan

 

*This event is currently sold out. You can add your name to the waiting list by clicking the “Add to Waitlist” link in the Eventbrite registration box below.

 

Please join us for Cascade’s monthly Policy Picnic led by Cascade Policy Institute founder and senior policy analyst Steve Buckstein on Wednesday, May 21st, at noon.

Cover Oregon’s board has admitted its $200 million plus website failure, but the decision to move Oregonians to the healthcare.gov website could backfire big-time. Not only might the board not have the authority to pull the plug on Oregon’s health care exchange, but a federal court case threatens to deny Oregonians the tax credits that ObamaCare promised would make our insurance premiums “affordable.”  What else could go wrong?

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

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Cover Oregon: Out of the Frying Pan…

On April 25th, after wasting more than $200 million in federal cash, Cover Oregon’s Board voted to pull the plug on Oregon’s failed ObamaCare health insurance exchange and go with the federal exchange technology as the “core” of its system. The first open enrollment period for Oregonians ends today. Oregon hopes to be back in business using the federal technology when the next enrollment period opens up on November 15.

The only problem is that―as I testified before the Board―the Affordable Care Act states some nine times that only individuals signing up through “state established exchanges” qualify for federal tax credits to make their insurance premiums more “affordable.” Those using the federal exchange aren’t eligible for these credits, although the Obama Administration has ignored the clear wording of the law and granted them anyway.

On March 25 the Federal D.C. Circuit Court of Appeals heard arguments on this in the Halbig v. Sebelius case. One judge seemed to telegraph how he might rule by stating, “There is an absurdity principle, but there is not a stupidity principle. If the law is just stupid, I don’t think it’s up to the court to save it.”

If the courts eventually rule against granting tax credits to those using the federal exchange, Cover Oregon’s Board may have just pushed many Oregonians out of the frying pan and into the fire.

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

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Beaverton’s Renewable Energy Purchase: Well Intentioned, Little Impact

By William Newell

The decisions we make are often greatly influenced by the information and advice we receive from other people. The same is true for elected officials, who generally seek the advice of experts in order to make important public policy decisions. Unfortunately, the system fails when decision makers receive information and advice that fail to tell the full story. By not taking into account all the necessary factors, policy makers can create unintended consequences that run counter to their intentions.

In 2007, the City of Beaverton began purchasing renewable energy “offsets” as a way to show the city’s commitment to sustainability and green energy. This year, Beaverton announced its success in purchasing renewable energy equivalents for all city operations. The city claims that its purchase offsets emissions from fossil fuel plants, thus providing a social and environmental benefit. Unfortunately, Beaverton’s well-intentioned policy has mixed results for the environment and the taxpayers.

The City of Beaverton purchases its renewable energy equivalents through Portland General Electric’s Green Power Program. The program charges a premium price for the purchase of renewable electricity. The cost on top of regular electric services goes to the purchase of renewable energy certificates, as well as program administration and marketing.

Purchasing RECs is intended to encourage the production of renewable energy, but RECs are too inexpensive to act as a real market incentive. The payments RECs generate aren’t required to be used for expanded production, either. Green energy producers themselves consider RECs to be little help in financing their green projects. RECs are largely a way for ratepayers to burnish their “green” credentials while paying power producers very little. Furthermore, little of the money spent on RECs actually gets to energy producers, due to green power marketers who act as middlemen in the REC marketplace.

If RECs represent the “positive environmental qualities” of renewable energy, they also represent the negative ones. Energy sources like wind and solar create negative externalities for ratepayers and the environment. Wind and solar are intermittent sources of power and must be backed up when the sun isn’t shining and the wind isn’t blowing. This means utilities must have non-intermittent energy sources such as hydropower or natural gas generators. Oregon’s hydropower system is already complex, and adding wind has made operating the system more difficult. Due to that fact, utilities must rely on other generation sources like natural gas peaking plants and possibly even coal plants for backup power.

When gas and coal plants are used as backup power, maintenance costs and generator inefficiency rise. This can be monetarily costly but also worse for the environment. If power plants designed to operate continually are used to make up for intermittent generators, their fuel consumption rises while overall electricity output stays the same or falls. Wind turbines, the main energy source supported by RECs, damage sensitive bird and bat populations with their large spinning blades.

In the end, Beaverton is faced with two facts. If RECs don’t encourage new renewable energy, the city has wasted taxpayer money and made false claims. If, on the other hand, RECs spur more renewable energy development, then more grid variability and environmental externalities will occur, mitigating the positive benefits of that energy. The City of Beaverton needs to faithfully represent its residents by eliminating the dubious purchase of RECs and return to straightforward policies that are transparent and effective.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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“Do Business Owners Have Religious Freedom Rights?”

Please join us for Cascade’s monthly Policy Picnic led by Cascade Policy Institute publications director Kathryn Hickok on Wednesday, April 30th, at noon.

Do we give up our 1st Amendment rights when we start a business? The Supreme Court just heard oral arguments in Sebelius v. Hobby Lobby, determining whether individuals lose their religious freedom when they open a family business. At issue is the ObamaCare Health and Human Service (HHS) Mandate, which requires David and Barbara Green and their family business to provide and facilitate potentially life-terminating drugs and devices in their health insurance plan, against their religious convictions, or pay severe fines to the IRS. The Obama Administration argues that companies can’t have religious convictions, but other cases have upheld business owners’ 1st Amendment free speech rights. Should free speech be protected but not religious freedom? We’ll talk about the arguments before the Court, which is expected to rule in June.

Admission is free. Please bring your own lunch. Coffee and cookies will be served. Space is limited to sixteen guests on a first come, first served basis, so sign up early.

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Green Data Center Bill Is Just More “Greenwashing”

By William Newell

In February, the Oregon Legislature passed House Bill 4126. This bill would allow utilities to purchase renewable energy certificates, or RECs, to meet Oregon’s renewable portfolio standards, rather than actually purchasing electricity produced by renewable sources.

The bill is simply “greenwashing.” “Greenwashing” is a tactic for companies, in this case large data centers, to burnish their environmental credentials without actually being any “greener.”

Many RECs are sold separately from renewable electricity and are meant to give energy producers extra income. While buying RECs allows purchasers to claim the use of renewable electricity, this notion is deeply flawed. The low price of the certificates (one to five dollars) prevents such commodities from realistically encouraging an increase in renewable energy production. RECs alone are not the reason renewable energy is generated or new plants are built. It is simply selling the right to claim that your electricity is renewable. Not only that, but RECs generally support solar and wind energy, which can negatively impact grid reliability, other generation sources, and the environment. Oregon-based Nike backed off from purchasing RECs because of their controversial nature.

The Legislature needs to alter course to avoid costing ratepayers boatloads of money with little actual return. It is time to stop the forced subsidization of energy sources that do more harm than good to our electric grid and our environment.

William Newell is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization. He is a graduate of Willamette University.

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Do You Know Taxes Take 30% of Your Year?

If every penny earned since the beginning of the year went to pay federal, state, and local taxes, by April 21 Americans would have worked long enough to pay this year’s tax bills (April 20 for Oregon). Tax Freedom Day is a calendar-based illustration of the cost of government which divides all taxes by the nation’s income. By this calculation, Americans will work 111 days in 2014 and pay 30.2% of their earned income to all levels of government.

But this is only what Americans actually pay, not what government spends. According to the nonpartisan Tax Foundation: “Since 2002, federal expenses have exceeded federal revenues….If we include this annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur on May 6, 15 days later.” That’s an additional two weeks of federal government spending paid for by borrowing.

Americans pay more in taxes ($4.5 trillion) than they do on food, clothing, and housing combined. The saying goes, you should “work to live, not live to work.” But the more government grows, the more Americans are working less to live and more to pay for runaway government spending. That leaves fewer resources to invest in the real engines of economic growth: private sector businesses that create jobs and produce goods and services for a market fueled by Americans’ hard-earned purchasing power.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Portland program at Cascade Policy Institute.

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