Month: July 2020

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School Choice Means Equitable Funding

By Cooper Conway

Last week, the United States officially surpassed 4 million documented coronavirus cases. With only a few weeks before students return to school, parents in Oregon are scrambling to find—or create—a safe and effective learning environment for their children.

Of the options available, some parents believe they have found the best solution for their family with micro-schools.

Micro-schools are small groups of children that learn at home. The parents of children in micro-schools pool their resources to hire a teacher, or instead become teachers themselves by obtaining teaching materials through homeschooling programs.

However, some families cannot afford a private teacher’s salary, even if they pool their funds with other parents. Parents who can’t or won’t send their children to public schools deserve to get their kids’ share of state instruction funds.

It’s a matter of equity. If public schools can’t safely and effectively provide education, the funds should flow to families so they can find a solution that works for them and their children. Putting schooling funds directly into the family’s hands allows for maximum flexibility when the local government school is unable to provide an option that parents feel comfortable with.

Parents know what options are best for their children, and Oregon lawmakers should allow all families, not just wealthy ones, to have the same access to those options.

Cooper Conway is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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COVID-19 is limiting classroom access; it’s time to stop limiting Oregon’s online charter school enrollment

By Cooper Conway

The Oregon Education Association (OEA) recently penned a letter to legislators urging them to maintain a strict limit on the number of children who may transfer to online charter schools. A 2011 Oregon law caps the number of students allowed to transfer to an online charter school at 3 percent of local district enrollment. The union argues that the cap was generous because only 1 percent of students were actively looking to switch at the time the cap was set.

However, that was 2011. We are now living in 2020, during a worldwide pandemic in which learning in person is impossible for most children.

Parents of more than 300 Oregon students recognized this new reality and completed paperwork to transfer their children to an online charter school soon after Governor Kate Brown suspended in-person classes on March 16. In addition to those 300 students, thousands more looked to transfer to one of Oregon’s 22 online learning programs after the shutdown of brick-and-mortar schools. Instead of receiving a quality education in a setting that embodies social distancing, Oregon’s Department of Education stepped in on behalf of teachers’ unions and denied the transfers of any more students looking to continue full-time learning.

Nevertheless, the OEA claims raising the cap by as little as one-half of one percent would be too much. The union argues the state’s Department of Education and local Education Service Districts are currently working to provide a better, hybrid program for students during COVID-19. In contrast, nearly two dozen online charter schools have had distance learning curricula in place for years.

Encouraging the switch to charter schools is more bang for the Oregon taxpayer’s buck, too. Charter schools historically operate with 80 to 95% of what public schools receive from the state school fund. The money saved by districts from the transfer of students to charter schools could help their budgets across the state—all while empowering students to get an education in the setting of their choice.

The union’s forceful defense of the 3% cap raises a key question: Why is there a cap at all? Such an arbitrarily low cap forces charters to rely on admission lotteries, turning education into a game of chance. In no other setting in America does this happen. For example, 41 million Americans have applied for unemployment since the start of the coronavirus pandemic. The government is not allowed to put a 3% cap on the number of citizens claiming unemployment, so why is the Oregon state government allowed to take away students’ choice to attend an online charter school?

The government school bureaucracy can’t parent a child better than the child’s parents do. Parents should choose where their children attend school—not politicians, not bureaucrats, and certainly not a union.

Moving forward, Oregon legislators not only should raise the charter school enrollment cap, but they should get rid of it entirely. A child’s education is not something that should be politicized.

Cooper Conway is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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TriMet’s decreasing ridership makes the SW Corridor project obsolete

By Rachel Dawson

TriMet’s weekly system boardings were down 68% in May compared to last year due to the Coronavirus, and ridership will likely stay down since the CDC is recommending that people avoid transit altogether. But it’s not just the pandemic; ridership has been dropping for years.

TriMet’s revenues have increased by 171 percent since 2000, while the agency’s ridership (number of originating rides) has increased by only 18 percent. However, ridership peaked in 2012 and has since dropped by 7 percent between 2012 and 2019.

The negative trend for ridership is primarily due to a drop in light rail utilization. Since the peak in 2012, bus ridership has decreased by 2% while light rail has decreased by 12% (a difference of just under one million for bus and 4.2 million for light rail).

Since 2000, TriMet has constructed four new light rail lines: the Red Line (2001), Yellow Line (2004), Green Line (2009), and Orange Line (2015). However, the costly increase in light rail capacity has not corresponded with a similar increase in ridership.

TriMet seems to have learned the wrong lesson from this underperformance. The agency is proposing a $2.6-2.8 billion light rail line from Downtown Portland to the Bridgeport Village mall, nearly $1 billion of which TriMet expects will be paid for by Metro’s Get Moving 2020 transportation measure.

The Southwest Corridor project is the wrong investment for our region. Portland Metro area voters should vote “no” on Metro’s transportation measure this fall.

Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Regulating Third Party Food Delivery Services is Hurting, Not Helping, Portlanders

By Rachel Dawson

Based on the passage of a 10% cap on commission fees collected by third-party food delivery services from Portland restaurants, it’s unclear if Portland City Councilors understand the basic principles of economics.

This new rule also bars food delivery companies from making up the lost revenue from delivery drivers and will end 90 days after Portland ends its state of emergency order.

However, there’s no such thing as a free lunch; someone will have to make up the difference. And that someone is the customer. UberEats has already added a $3 fee to all customer receipts from Portland businesses.

This fee isn’t applied to restaurants outside Portland city limits, so customers can simply avoid the added cost by ordering meals from businesses in surrounding cities. This likely will make Portland restaurants worse off, as many area residents will purchase food from neighboring cities or forego using food delivery apps entirely.

No one requires restaurants to use third-party apps like UberEats or Postmates; such services didn’t even exist more than 5 years ago. The fact that businesses use them demonstrates the value the apps provide to restaurants who no longer have to maintain their own delivery services. That value was reflected in the delivery fee previously charged to restaurants.

Portland officials should support economic activity, not make it more difficult or more expensive. They can do just that by rescinding this 10% commission fee cap.

Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Coronavirus Shouldn’t Stop Learning

By Cooper Conway

On March 16, Governor Kate Brown directed Oregon schools to stop in-person classes to slow the spread of COVID-19. Facing an uncertain future for “brick and mortar” schooling, 300 Oregon students completed the process to transfer to one of Oregon’s 14 online charter schools.

Eleven days after the shutdown of in-person schools, the Oregon Department of Education (ODE) prevented additional student transfers to online charter schools. Jeff Kropf, the founder of Oregon Connections Academy, estimated that around 1,600 students were unable to move to his school because of ODE’s decision to freeze further transfers.

ODE’s decision curtailed thousands of students from reaching their full learning potential this past semester. However, policymakers have a rare chance to right these wrongs going forward.

Nine states have reported spikes in COVID-19 this past month, and a similar situation may occur this coming fall. Given the uncertainties about the safety and feasibility of reopening all Oregon schools, lawmakers should allow parents to choose what kind of school in which to enroll their children. The resulting increase in competition among charter, private, and public schools will encourage all education providers to adapt to the current circumstances to provide the best education possible for students.

In addition to increasing the educational opportunities that will be available for students, rolling back unnecessary regulation of charter schools will put more power over education choices into the hands of parents, where it belongs.

Cooper Conway is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Energy Reform Is Needed to Combat Rising Energy Bills in Oregon

By Rachel Dawson

After 42 years, the Public Utility Regulatory Policies Act (PURPA) may be finally getting the update it has needed for years.

President Carter signed PURPA into law in 1978 when the U.S. was between the energy embargo of 1973 and the 1979 oil crisis, when the price of crude oil nearly doubled. Congress created this legislation with the aim of reducing the U.S.’s dependence on oil from international markets and encouraging fuel diversity.

PURPA requires electric utilities to purchase electricity from qualified facilities (QFs) such as small solar, wind, and biomass renewable resources at the utility’s “avoided costs.” A utility’s avoided cost is “the cost a utility would incur if it chose to generate the electricity itself or purchase it from another source.” The utility is locked into paying this cost for the contract’s length, which in Oregon is 20 years.

PURPA’s mandatory purchase obligation essentially forces utilities to purchase energy they do not need at rates that are higher than what is available on the market.

The Federal Energy Regulatory Commission (FERC) has proposed changes to PURPA that will help to decrease the law’s current purchase mandates and long contract terms. Included in the changes is the elimination of fixed rates currently afforded to QFs and the expansion of what is known as the “one-mile rule.”

Eliminating the fixed rates granted to QFs will give states more flexibility to account for time, dates, and market price fluctuations when calculating the avoided cost rate. A recent study from Concentric Energy Advisors shows that PURPA’s locked-in contracts now increase the cost of energy by as much as $216 million a year. The Oregon legislature isn’t forcing residents to purchase 42-inch plasma TVs at their average 2004 price of $4,000 when they can now buy them for under $500, but PURPA’s locked-in contracts with state utilities follow the same logic.

Under the current “one-mile rule,” QFs using the same energy resource and owned by the same entity are considered to be the same site if they are located within one mile of each other. Many renewable energy supplies have taken advantage of this rule by separating their facilities and forcing utilities to purchase their power at avoided costs. This PURPA rulemaking will expand that rule to ten miles.

The U.S. energy industry has come a long way since PURPA was created. American ingenuity has increased the production of renewables by over 115 percent since 1980, and solar costs have dropped in Oregon by 76 percent since 1999. Moreover, recent legislation passed in Oregon on renewable energy, such as our state’s community solar program, make PURPA obsolete.

Since energy rate increases are inherently regressive, Oregon’s low-income families suffer the most from PURPA’s added burdens. This is especially important now when ratepayers are finding it increasingly difficult to pay their energy bills due to COVID.

PURPA forces utilities to buy power at high prices, then locks them in for decades. Consequently, ratepayers are being overcharged. Since the renewable energy industry is now quite mature and market-competitive, we should get rid of those mandates so ratepayers can obtain the cheapest electricity possible. This effort led by FERC Chairman Neil Chatterjee represents a significant step in the right direction to reducing ratepayer bills.

Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Metro’s Transportation Package: Progressive Politics Mask Regressive Tax

By Eric Fruits, Ph.D.

While much of the region is stuck at home under the governor’s “stay home, stay safe” order, the Metro regional government is charging ahead with a $7 billion “T2020” transportation package focused on an expensive and unneeded light rail line. Unlike Metro’s recently passed taxes for housing services, T2020 will impose hundreds of dollars in new taxes on just about every working person in the region.

To fund its massive spending plan, Metro has settled on a new poll-driven tax: a payroll tax anticipated to cost about $250 million a year. Approximately 925,000 people work in Metro’s jurisdiction, so the payroll tax will be about $270 a year per employee. Where will that payroll tax money come from?

In most cases, the payroll tax will fall on the workers. A review of the research on payroll taxes concludes that workers tend to bear nearly all of the burden of payroll tax, even if the tax is levied on their employer: “virtually all applied incidence studies assume that both the employee share and the employer share are borne by the employee (through a fall in the net wage by the full amount of payroll tax).”

Research published earlier this year concludes “the employment effects of payroll taxes are concentrated among low-skilled workers and workers performing routine tasks.” In other words, payroll taxes are regressive and disproportionately burden low-wage workers. There are several ways workers would bear the full burden of the payroll tax.

Employers will reduce wages. They may not directly cut workers’ wages; instead, workers may find that they don’t get the annual pay raise they expected. Employers may cut workers’ hours. Wage reductions can come in the form of making workers pay more for employer provided benefits such as health insurance. Wage reductions can also come in the form of reduced benefits like less vacation pay. There are many ways to push the costs onto employees.

Employers will reduce the number of workers. Hiring plans can be put on hold, and retiring workers may not be replaced. Evidence indicates some firms replace low-skilled workers with higher-skilled workers. Other firms replace low-skilled workers with technology, as seen with restaurants replacing employees with computer ordering kiosks. With the pandemic, some firms have learned there’s no special benefit to doing business in the metro region. Why not move to Bend, Vancouver, or Boise?

Proponents of the payroll tax argue the money will come out of company profits. This is simply not true. Currently, Metro’s payroll tax would be assessed on all employers, including nonprofits and government agencies which have no profits to tax. Portland-area businesses have already had their profits extracted with Oregon’s Corporate Activities Tax, Portland and Multnomah County’s business income taxes, Portland’s Clean Energy Fund tax, and Metro’s new business income tax that goes into effect next year. There are no more profits to tax.

Unlike Social Security, Medicare, and unemployment payroll taxes, workers paying Metro’s payroll tax receive no direct benefit. Most of the tax will be used to build a light rail line from Portland to Bridgeport Village—a light rail line that will worsen road congestion. The project anticipates tearing up Barbur Boulevard and adding congestion to dozens of intersections and highway ramps. Workers will be handing over a chunk of their paycheck for projects that will make their lives worse, not better.

For years, TriMet has been violating its contractual obligations with the Federal Transit Administration regarding operations of the Yellow, Green, and Orange light rail lines. For example, TriMet promised both the Yellow Line and the Green Line would run 8 trains during peak hours in 2020. In contrast, before the pandemic TriMet was running only 4 trains an hour on these lines. TriMet promised the Orange Line would run 6 trains during peak hours in 2020; instead, before COVID-19 it had been running 23% below the promised levels.

Metro’s transportation package is a monument to misplaced priorities, and its reliance on regressive payroll taxes makes it an abomination. It’s time to tell Metro enough is enough.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Metro’s $700,000 Sentiment

By Helen Cook

On June 25th, Metro approved $700,000 in taxpayer money for what is best entitled a nice sentiment: Metro’s Nature in Neighborhoods program. The program hopes to improve water quality and wildlife habitats through grants to local organizations that promote racial and cultural equality.

But the program has a serious flaw: Success is not easily measured, despite the large amount of taxpayer dollars flowing into the grants.

Metro’s approved recipients for 2020 demonstrate the subjectivity of the program. Objectives include bringing “healing to the community and landscape through Traditional Indigenous healing practices” as well as building “youth of color’s relationship around the water and waterways.”

Perhaps an important question is whether our local government should be exploring these objectives with taxpayer dollars, especially during this time of economic instability. Ironically, Metro councilor Craig Dirkensen came close to this question when he asked whether Metro’s grant program was unique. The simple answer was “no.” Similar programs do exist, just not at taxpayers’ expense.

Metro should get out of the grant business and into the park-building business. The Nature in Neighborhoods program is yet another example of how Metro consumes taxpayer dollars without measurable benchmarks for success.

Helen Cook is a Program Assistant for External Affairs at Cascade Policy Institute, Oregon’s free market public policy research organization.

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The Big Jobs Squeeze of 2020

By Eric Fruits, Ph.D.

This is a terrible time to own and run a business. While the past three months have been dismal, the next few months could be even worse. Worse because no one knows what’s coming next. Even though many businesses have been allowed to reopen, many others have hesitated out of fear for the health of themselves, their employees, and their customers—and the fear of overbearing regulators and overeager plaintiff attorneys. No one should be surprised that so many businesses have decided to close permanently.

Reopening “the economy,” or even a single business, is a tough decision that can’t be boiled down to a FOX News or MSNBC talking point. It’s not as simple as, “We gotta open now!” or “You’re gonna kill grandma!” The world is much more complicated; and the coronavirus spread is so complex and uncertain that, put simply, no one knows what’s next. Anyone who says the science is settled one way or the other is gaslighting themselves and others.

Aside from the health and liability risks, CARES Act policies designed to protect family finances have made it especially challenging for firms to get back to work. Businesses that want to reopen have found it difficult to bring back their furloughed employees. Those employees who have successfully obtained unemployment benefits have also received a $600-a-week bonus provided by the CARES Act. When public health risks point to a policy of keeping people away from work, a government-funded bonus provides a financial incentive to stay away from work. That’s good policy, but there are side effects.

For millions of out-of-work Americans, the bonus has been a lifeline, allowing them to safely distance themselves without falling into destitution. For others, however, the bonus has been a windfall. For example, Portland Public Schools carefully structured its furlough program so that nearly every furloughed employee made more money being furloughed than they would if they continued working full time. Research from University of Chicago economists estimates 68% of unemployed workers eligible for CARES Act benefits would have lower incomes if they return to work.

This isn’t just theory or wild-brained economics estimates. Portland restaurateur Kurt Huffman has said he doesn’t plan on opening his restaurants any sooner than August 1, because the bonus payments have made it so difficult to bring back and hire employees. Kyle Freres, vice president of operations at Freres Lumber, says his company has 30 job openings that cannot be filled because of the pandemic and the CARES Act’s incentives to stay away from work. At Cascade Policy Institute, an intern turned down our summer job offer in part because she would make more money collecting unemployment.

The CARES Act’s $600-a-week bonus runs out at the end of July, and Congress is considering an extension to the program. Senate Majority Leader Mitch McConnell predicted, “If there’s another [stimulus package], it will come together in July.” Some members want the extra benefits to expire as scheduled. Others want to extend the current provisions through the end of the year. A proposal from Sen. Rob Portman (R-Ohio) would pay people who return to work an extra $450-a-week “back-to-work” bonus.

Hoover Institution economist John Cochrane suggests Congress tighten restrictions on who qualifies for bonus payments. For example, if a laid-off employee is called back by her former employer, then the bonus payments dry up. Or, if a county or metro area has a sufficient number of job vacancies, then workers in that area would no longer qualify for bonus payments. Proposals such as these allow flexibility across regions roughly in line with how well those regions are recovering.

Every policy has its problems or unintended consequences. That’s a big reason why we should limit the number of government regulations, policies, and programs we have in place. It’s like squeezing Jello. Squeeze it one place, and it squirts out another. A lifeline to help out-of-work employees can squeeze the life out of struggling employers. Any unemployment benefits must be tied to incentives to return to work safely as soon as possible.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

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July Minimum Wage Increase Means Maximum Uncertainty

By Cooper Conway

On July 1st, the Portland area’s minimum wage will increase from $12.50 per hour to $13.25. This wage increase is part of a multi-year phase-in of Oregon’s three-tiered minimum wage law, passed by the State Legislature in 2016.

Andy Ricker, Michelin star chef and owner of Portland’s Pok Pok restaurant, foresaw the adverse effects of raising the minimum wage in 2016 when he told the Portland Business Journal that three of his restaurants would close partly due to the hikes in the minimum wage.

Four years later, his prophecy came true—and then some—with an Instagram post on June 15th announcing the closure of four of his restaurants based in Oregon. Sadly, Ricker’s former employees will join more than 41 million workers who have filed for unemployment since the coronavirus pandemic started.

Now is not the time to increase the costs of running businesses in Portland. Oregon lawmakers should extend a helping hand to those who are hurting and embrace free-market policies, not price job creators out of the market. Oregon should stop the economic bleeding and roll back regulations that were ill-conceived in the first place. Continuing to add to them when so many businesses are struggling to reopen their doors will only worsen the economic downturn and hurt Oregonians for years to come.

Cooper Conway is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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