By Vlad Yurlov
When businesses fail, they shut down. But when the government shuts down businesses, it simply increases taxes. More than 85% of Oregon businesses will pay higher unemployment insurance rates in 2021. This is after lockdowns and restrictions forced their workers to use unemployment benefits in the first place. Most businesses pay unemployment insurance taxes into Oregon’s Unemployment Insurance Trust Fund, which the state distributes to employees that are laid off without cause.
Oregon’s pandemic response shut down hundreds of businesses, but its effects will continue to dampen economic recovery. Higher unemployment insurance tax rates mean that fewer people can go back to work. And any delay in employment furthers economic instability.
Oregon boasts “one of the healthiest [trust funds] in the nation.” The reserves are meant to supply benefits for 18 months and there is $4.1 billion in the fund today. So why should businesses have to increase their unemployment taxes? If it were up to employers, they would gladly hire their workers back instead! As revenues struggle above break-even, businesses should not be responsible for government restrictions that increase the use of unemployment benefits.
Vlad Yurlov is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.
By Eric Fruits, Ph.D.
This year, Oregon passed a major milestone. In 2020, Portland became the city with the highest personal income taxes in the United States.
The news was delivered this week in testimony to the Oregon Legislature. The State Tax Research Institute reported that state and local income taxes in Portland total nearly 14% — a rate that’s higher than San Francisco or New York.
That means the average Portland resident must work almost two months just to pay their state and local taxes.
Are we getting our money’s worth? It sure doesn’t seem like it.
- Do we have great schools? No. We have the fifth worst graduation rate in the country.
- Do we have flourishing businesses? No. Over the past few years it seems more businesses are leaving than arriving.
- A lot of our taxes go to the Oregon Health Plan. Do we have great health care? According to U.S. News and World Report, our state ranks near the bottom in adult and child wellness visits as well as child dental visits.
Now that we have record shattering tax rates, it’s time for us to ask: When will we get our money’s worth?
Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research center.
Shelter space can be used effectively by tracking and reporting vacancies
If a homeless person asks you to find them shelter space, could you do it? It’s harder than you think. That’s because Portland lacks a key piece of a shelter system. No one knows which shelters have space or how much space is available. The first step in sheltering people is knowing where space exists. Without a tracking system, campsites spiral out of control, while their residents suffer. People with mental health problems and drug addictions are effectively cut off from recovery options.
If a homeless person were to ask an outreach worker for a place to stay, the best they could do would be to call each shelter individually. Oregon Housing and Community Services says agencies and local partners rely on 211, an information hotline which can provide only the location and contact information of shelters. Operators do not regularly maintain contact with shelters or receive vacancy updates, so they can’t report actual availability. This leaves people on public streets and away from resources. To solve these problems, Portland should implement a shelter tracking system that would allow outreach workers and officers to house homeless people quickly.
Shelter tracking systems have already helped other western states battle homelessness. Modesto, California successfully implemented a basic tracking system. It takes one person up to two hours each day to contact and receive information from emergency shelter providers in Stanislaus County. After the data is collected, it’s given to outreach workers and law enforcement officers who use it to find shelter for homeless people. Spokane, Washington goes a step further and tracks shelter capacity by having homeless shelters report their availability to a dispatcher. The city is also working on a public website that would allow easy data entry and near-real-time tracking. These examples show that a shelter tracking system is not only a possibility, but it is vital to optimizing local public resources.
Portland should implement a manual tracking system and make use of our local Homeless Management Information System. Effective tools are currently available. The Environmental Systems Research Institute (ESRI) has online applications which track homelessness resources through geographic information systems. The City of Portland already uses ESRI products to report and visualize campsite locations. Proper use of these resources would allow access to near-real-time data on shelter vacancies. By using available and familiar technologies, Portland could target its homelessness outreach and use shelters effectively.
A tracking system also would allow Portland to comply with the Ninth Circuit Court of Appeals ruling Martin v. City of Boise. In 2018, the Court ruled that local ordinances can’t ban sitting or sleeping in public spaces if there is no available shelter space. But if officers can show that nearby shelters have open beds, they could help people get access to life-saving resources and minimize the risks associated with camping outside. Both Modesto and Spokane have maintained compliance with the Martin ruling through their use of shelter tracking systems.
The bottom line is that people are needlessly sleeping on the streets in Portland, while shelters have vacancies that are difficult to find. Over the past few years, Portland and Multnomah County have opened many emergency shelters. Throughout the COVID-19 pandemic, six motels have housed people to help traditional shelters with social distancing. In order to effectively house individuals who have been left in the streets, we need to know what resources are available. By creating a shelter tracking system, Portland would be able to comply with the Martin ruling while providing outreach workers and officers with the right information to connect homeless people with housing. The worst thing someone seeking shelter can hear is, “We don’t know if there is space.” It’s time for answers.
Vlad Yurlov is a policy analyst at Cascade Policy Institute, Oregon’s free market public policy research organization. He co-authored a forthcoming report on Portland’s homelessness crisis.
By Rachel Dawson
As government-imposed shutdowns continue, more Oregonians are struggling to pay their electricity bills. Portland General Electric reported in June that arrears (when payment is 31 days past due or more) were up 41% compared to the same time last year. Economic hardship likely will persist for many people long after the COVID-19 vaccine is distributed.
It’s clear that Oregon ratepayers need relief. One way for legislators to provide such relief would be to eliminate the Public Purpose Charge (PPC) energy tax, or to allow Oregonians to opt out of it.
This 3% tax has been paid by PGE and PacifiCorp ratepayers since 2002. It was originally intended to last 10 years to help fund energy conservation and to subsidize the renewable energy industry until it became market competitive. The PPC has since been extended to 2026.
A recent Cascade Policy Institute report found the PPC’s ten-year mission has been met and recommends the tax should not be further extended. Just as intended, the most cost-effective programs were completed in the early years of the tax, leading to a 73% increase in costs per unit of energy saved. The cost of installing solar has decreased 76% between 1999 and 2019. Thus, it appears the solar industry no longer needs PPC subsidies to be market competitive.
Ending the PPC is long overdue. And doing this during a recession would be a great way to immediately aid many struggling Oregonians.
Rachel Dawson is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research center.
By Eric Fruits, Ph.D.
This week, the U.K. became the first western nation to vaccinate its residents against COVID-19. The recipient, a 91-year-old retired shop clerk, voiced relief, “I can finally look forward to spending time with my family and friends in the New Year.” Despite the fanfare greeting the vaccine rollout, authorities warned that the vaccination campaign would take many months. They warned the tough restrictions that have rattled daily life and cratered the economy are likely to go on into spring.
While many of us dream the vaccine will bring a return to normal life, for many people post-pandemic life will be a nightmare. The end of pauses, freezes, shutdowns, and lockdowns will mean the end of moratoriums on housing evictions, utility shutoffs, and student loan payments. During COVID-19, millions of Americans have racked up thousands—maybe tens of thousands—of dollars in unpaid rent, utilities, and student loans. For example, information presented to the Oregon Governor’s Council of Economic Advisors estimates unpaid rent in the state is between $250 million and $300 million. When the emergency ends, those bills will come due.
Elected officials have put themselves in an impossible position. If they allow masses of evictions and utility shutoffs, they will face torches and pitchforks from their constituents. If they try to pass laws wiping out the debt, they will face a revolt from some of their biggest donors. And, even worse, they will face years of constitutional challenges.
Both the U.S. and the Oregon constitutions forbid any laws “impairing the obligation of contracts.” Rental agreements are contracts. So are arrangements with utilities and student loan providers. Neither the federal government nor state or local governments can simply “wipe out” the payment provisions of these contracts. Our politicians are in a bind, but it gets even worse.
One way to work around the constitutions’ contracts clauses would be to establish a voluntary program of debt forgiveness. But for a program to be truly voluntary, the state must provide a compelling incentive for debt holders to forgive the debt.
An option promoted by Rep. Jule Fahey (D-Eugene) would provide state grants to certain property owners who forgive 80 percent or more of their tenants’ past due rent. It has been reported the proposed legislation would set aside $100 million for grants to renters and property owners. On the one hand, $100 million is a lot of taxpayer money. On the other hand, $100 million is less than half the total amount of unpaid rent in the state.
If such a fund is established, it will be an admission that the governor’s emergency orders have caused enormous damage to households and businesses. If the state is willing to admit it’s caused at least $100 million in damage to rental properties, how much damage has it done to restaurants, bars, retailers, manufacturers, nonprofits, and families?
In September, Portland attorney John DiLorenzo sent a letter to Governor Kate Brown demanding the state compensate several businesses for losses associated with her pandemic-related executive orders. Under Oregon law people are “entitled to reasonable compensation from the state” if their property is “taken” under the emergency powers Brown invoked to shut down most of the state. According to DiLorenzo, “What’s happened here is the governor has basically destroyed property for the purpose of furthering the policy behind the executive order.” Rep. Fahey’s draft bill would be the first piece of legislation to attach a dollar figure to the value that has been taken as a result of the executive orders.
It’s easy for politicians and policy makers to mindlessly remind us, “We’re all in this together.” But, too often they face no meaningful consequences for their decisions that affect millions of people. Oregon’s law requiring reasonable compensation for property taken under the governor’s emergency orders was designed to impose a consequence on the government. If the government has to pay a price for its emergency orders, then the government is more likely to make decisions that account for the costs it imposes on everyone else.
Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.
By John A. Charles, Jr.
President Trump is not the only one refusing to accept election results. The general manager of TriMet, Doug Kelsey, is claiming that the $3 billion Tigard light rail project is still alive, even though Portland-area voters rejected a proposed funding measure by a wide margin last month.
At a recent public meeting, Mr. Kelsey stated that Tigard light rail would be built eventually because “demand still exists.”
That is a complete fantasy. Peak-hour ridership on all MAX lines during October was down 72% from a year ago. Unlike driving levels, which have nearly returned to normal, transit ridership has remained depressed over the past 9 months. Transit riders have simply moved on to other options.
Rail transit in particular requires high levels of both residential and worker density, but COVID has induced a mass exodus of workers from downtown Portland. Many of these changes will become permanent. Employers have discovered that remote working is not only feasible, it’s preferred by many employees.
Where is the value proposition for a network of slow trains to the city center if few people need to go there?
The TriMet board should start downsizing the agency immediately, and the easiest first step would be to cancel a rail line that doesn’t yet exist.
John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free-market public policy research organization.
By Rachel Dawson
Do you want to enjoy a drink but don’t feel safe sitting in a bar?
If you live in one of the many states that have allowed “cocktails to-go” since the beginning of the pandemic (including our neighbors in California, Washington, and Idaho), you’re in luck! Oregon restaurants and bars, however, aren’t so fortunate, as our state legislators have thus far failed to similarly update our liquor laws.
In Oregon, restaurants may sell beer, cider, and wine for delivery and take-out orders; and distilleries can sell bottled liquor and cocktail-kits to-go. However, bars and restaurants are barred from selling pre-mixed, to-go cocktails in closed containers for offsite consumption.
Oregon lags behind other states across the nation in this regard. Since the beginning of the coronavirus pandemic, at least 33 states have allowed cocktails to-go. Florida and Mississippi authorized the sale of to-go cocktails on a limited basis before the pandemic began. While Texas restaurants can deliver coolers full of jello shots, Oregon restaurants can’t even include tequila with orders for margarita mix.
Restaurant and bar owners across the state have asserted cocktails to-go sales would be a lifeline for them, given that on-site capacity remains limited and many Oregonians are dining at home. In desperation, the Botanist House, a Portland restaurant, threatened to sell cocktails to-go in defiance of the law. In a public letter, the owner, Matt Davidson, explained his reasoning:
“The COVID-19 Pandemic has simplified our business priorities down to a single word, survival. Our protest is not about increasing our top line revenue, driving more dollars to the bottom line, or expanding our market share. It is simply about doing what 70% of the country is already doing to help struggling businesses survive.”
Ultimately, the protest never took place due to the possibility of a resolution in an anticipated emergency session of the Oregon legislature. State Representative Rob Nosse from the Southeast Portland area has drafted a bill legalizing the sale of to-go mixed drinks. Rep. Nosse’s bill would limit orders to two cocktails and require that cocktails be sealed and purchased in conjunction with food.
Those opposed to a change in legislation argue that this bill could harm people recovering from alcohol abuse and who are susceptible to relapse, or that it could lead to drinking and driving. Rep. Nosse responded that, if this is a concern, “why do we allow people to buy beer at Plaid Pantry and screw-top wine?” Further, 72% of Oregon adults said they would support a proposal allowing cocktails to-go, according to a survey conducted by the National Restaurant Association.
Although many states are allowing cocktails to-go temporarily through emergency orders, some—like Iowa—are taking steps to make them permanent. Iowa’s governor signed a bill legalizing cocktails to-go after it passed through the House with unanimous support back in June.
Oregonians are capable of safely enjoying cocktails to-go with their take-out orders even after pandemic restrictions are eased and restaurants open back up to full capacity. Oregon legislators can learn from Iowa and come together during the next session to pass a bill that will allow restaurants and bars to sell cocktails to-go for both immediate relief of their businesses and their patrons’ future enjoyment.
Rachel Dawson is a Policy Analyst at the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. She can be reached at firstname.lastname@example.org.
John A. Charles, Jr.
President & CEO
Cascade Policy Institute
November 29, 2020
Below is a summary and discussion of Cascade’s comments on the draft Elliott State Research Forest proposal, which can be found here.
The ESRF proposal is built on the following key assumptions:
- The state legislature will provide the financing to decouple the ESF from the Common School Fund in a way that would survive legal challenge from CSF beneficiaries;
- The $100 million in bond authorization previously approved is a legally sufficient down payment on that decoupling strategy;
- The total amount needed to decouple is $220.8 million;
- The state legislature or some other entity will provide $24.8 million in start-up funds;
- The ESRF will be a financially self-sustaining entity through annual timber harvests of 16.6 MMBF and the sale of carbon credits;
- If the ESRF is not able to be self-sustaining, OSU trustees will create a firewall to protect the university from incurring losses;
- The state of Oregon will successfully negotiate a multi-species HCP with the federal government that will allow OSU to harvest an annual average of 16.6 MMBF of timber; and
- There is a market demand by forestland managers, academics, and policy-makers for the research outputs promised by the ESRF.
It’s unlikely that any of these assumptions are valid, therefore this proposal has little chance of ever being implemented. In the meantime, the State Land Board is breaching its fiduciary obligations to CSF beneficiaries, and remains vulnerable to a lawsuit on the scale of the successful litigation brought by the Forest Trust Counties on similar grounds. Given this vulnerability, the Board should terminate any further work on the ESRF, and prepare to sell the Elliott State Forest in a public auction.
This section explores each of the points made above in greater detail.
Decoupling: No one on the SLB or at OSU has a vote in the legislature. Therefore it’s a mistake to assume that a decoupling strategy can work. Indeed, that was the reason why the Board agreed to sell the ESF back in 2015 – it was the only decision that the Board itself controlled. Until such time as a funding package is approved by the legislature and signed into law by the Governor, no one should assume that funding will be available.
Moreover, the assumption that tax-supported funding of $121 million will suffice to decouple is wrong, on both counts. Any financing that relies on taxing CSF beneficiaries is a breach of fiduciary trust by lawmakers. To put the matter plainly, the $100 million in bond funding previously approved by the legislature requires $145.9 million in debt service over the life of the bonds. The debt service in the current biennium is $15.59 million. Those payments are being made by Oregon taxpayers, and a large subset of that group include CSF beneficiaries – parents of K-12 students, school employees, and school board members.
In essence, the SLB has given money to the beneficiaries in one pocket, but is extracting an identical amount from another pocket. That is the opposite of “fiduciary trust.”
While SLB members may be rationalizing this on the assumption that it provides an arbitrage opportunity to borrow money at low rates, and then make a profit through CSF investments, that is purely speculative. Those investments could also lose money. A prudent person would certainly not choose this option when a private party has previously made a cash offer of $220.8 million to take the entire ESF liability off the Board’s hands.
In addition, at the same time the Board rejected the cash offer, it dissolved the ESF Sale Protocol that had resulted in the $220.8 million valuation. That valuation was deliberately depressed by the Board when it designed the protocol with four key sideboards. Previous valuations had been much higher, including the 2006 estimate of $344-489 million stated in the DSL Asset Management Plan, and the estimate of $850 million stated in DSL’s first AMP in 1995.
The only way to determine the true value of the ESF is to place it up for sale in a global auction, with no constraints. Since the Board has already rejected that course of action, while also reducing timber harvests levels to zero, there is no legally viable path forward. As the ESF continues to drain money from the CSF, it’s only a matter of time until beneficiaries sue the Board.
Start-up funding: The ESRF concept requires estimated start-up funding of $24.8 million. There is no indication of who will provide this. The legislature cannot provide it because appropriating tax revenues would inevitably harm CSF beneficiaries, which is illegal. It will also be difficult for OSU to provide the money because any fundraising effort risks diverting money from other OSU programs, which OSU has promised to protect. This concept paper does not provide any guidance that resolves this problem.
The ESRF will be financially self-sustaining: The pro forma offered in this proposal is based on two anticipated streams of revenue: timber sales averaging 16.6 MMBF annually; and carbon credit sales into the California cap-and-trade market. Neither of these assumptions holds up to scrutiny.
Over the past 30 years, preservation groups litigating under the ESA have reduced the annual timber harvest on the ESF to zero. The last time harvests exceeded 16.6 MMBF was in 2012, when the harvest was 28.54. During the period of 2013-2017, the average annual harvest was 7.09 MMBF. The strategy of ESA litigants has always been to halt timber cutting in the ESF, and they have succeeded. There is no reason to think that they will simply give back those gains.
In fact, shortly after the Board rejected the Lone Rock offer and embraced the ESRF concept as a substitute, a spokesman for Cascadia Wildlands told the Eugene Register-Guard, “If logging old public forests is going to be part of this experimental forest, we oppose it.”
Cascadia Wildlands has consistently out-maneuvered the Land Board both in the court of law and the court of public opinion. That will continue if the ESRF proposal relies on timber harvesting as a source of financing. Using timber revenue to finance a social good (in this case, research) has exactly the same built-in conflict of interest that the CSF has in relying on Trust Lands as a revenue source.
The second assumed source of revenue, carbon credits, is even more speculative. The pro forma is not based on a detailed analysis of ESF timber stands. As stated in the narrative, “Results are estimates. Actual credits available for registration require a carbon inventory, review of baseline assumptions by regulatory agencies and approval by California ARB.”
The ARB has approved the use of specific biomass equations generated by the US Forest Service Forest Inventory and Analysis (FIA) National Program to estimate biomass. All approved projects are required to use them. The equations differ depending on region as well as by tree type. These equations were not used in the draft research proposal in calculating biomass (which is then used to calculate carbon), nor are they referenced.
Instead, for biomass the proposal cites a 2003 national study by Jenkins et al. However, this is a national meta-analysis on hundreds of other equations and is not recommended for site specific use. Authors of the study state:
- There is a “…clear variability in tree C allocation from site to site and from study to study…This variability makes it difficult to estimate tree biomass accurately even when a site-specific regression equation is used.”
- “We found that many of the published equations were unusable for large-scale application because of inconsistencies in methodology and definitions, incomplete reporting of methods, lack of access to original data, and sampling from narrow segments of the population of trees in the United States. Our equations may be applied for large-scale analyses of biomass or carbon stocks and trends, but should be used cautiously at very small scales where local equations may be more appropriate.”
Another substantial barrier is the concept of “additionality.” As noted in the ESRF proposal, “Fundamentally, a landowner must sequester more carbon than would be sequestered under a business-as-usual approach.”
Since 2012, the “business-as-usual” approach on the ESF has been to harvest an annual average of 7 MMBF of timber. Since 2017, that has dropped to zero. Therefore, the 16.6 MMBF proposed in this concept paper is worse than the baseline, from the perspective of the California ARB. Why would California regulators spend taxpayer dollars in Oregon for the ESRF proposal when California residents are already getting a better carbon deal for free?
Moreover, any agreement with California would require that Oregon monitor and maintain tree stands for 100 years. Given the erratic behavior of the SLB over just the past decade – including the bizarre rejection of a $220.8 million cash offer – it’s unlikely that California regulators would trust the Oregon SLB to hold up its end of the contract for 100 years.
Finally, the concept paper provides two scenarios for obtaining carbon credit financing, based on the type of ownership. As explained in the concept paper, “The private protocol yields harvest levels that result in an average stocking equal to the common practice metric. The public protocol is so restrictive that the carbon offsets generated are about one fifth of the private protocol. The main reason the public protocol generates fewer credits than the private protocol is because ARB’s baseline requirements for the two protocols are different.”
The high-bound assumption of carbon credit revenue assumes that the “OSU ownership structure allows for use of private protocol.” Why is this being assumed? The concept paper is replete with statements that the ESF will remain a public asset with public governance. All of the political factors that have resulted in the ESF becoming a net liability to school beneficiaries over the past decade will still apply. There is no reason to create a high-bound assumption of revenue based on private protocol when the ESF is not a private asset.
OSU Trustees will create a financial firewall to protect the university: The ESRF narrative states, “As part of this structure, we anticipate that the OSU Board of Trustees will ensure OSU does not redirect university resources to cover shortcomings in ESRF revenue.”
This statement of intent is designed to assure students, faculty and donors of OSU that the ESRF will not become a financial albatross. Unfortunately, history suggests that this is a false hope. The ESF already has the strongest possible protection for K-12 beneficiaries – a Constitutional mandate for the SLB to maximize net revenue over the long term – yet Board mismanagement over the past 25 years has turned the forest into a CSF liability.
Given that the Constitutional mandate to do one thing is not being met, how does OSU expect to be protected from losses when the new mission statement described in this 107-page document includes multiple goals, many of which are conflicting?
This problem is referenced on page 10 of the proposal, in the following sentence: “We also acknowledge that not all commitments can be honored simultaneously in the same spaces, which will require a balanced and sustainable approach to forest research and management.”
The Land Board itself has been required by the Oregon Constitution to manage the ESF in a balanced and sustainable way, in pursuit of a single over-arching objective, and it has failed miserably. The most likely scenario going forward is that if the ESRF ever becomes reality, it will suffer immediate operating losses, and after years of procrastination, ownership will revert again to the SLB. That is not a long-term resolution; it simply prolongs the agony.
DSL will successfully negotiate a multi-species HCP with the federal government that will allow the ESRF to move forward: According to the ESRF narrative, DSL initiated the HCP process in 2018, contracting with IFC, Inc. Drafting the HCP is underway, with a draft “anticipated to be available for public review in early 2021 prior to submission to the federal agencies.”
Pursuit of the HCP is the triumph of hope over experience. This was noted by former Gov. Ted Kulongoski at his last SLB meeting. In a lengthy soliloquy at the end of the meeting, he reminded the audience, “We spent 10 years and $3 million trying to get an HCP, and we wound up with nothing.”
Eventually the SLB, including Gov. Kate Brown, reached the sober conclusion that there was no hope of negotiating an HCP that would allow the SLB to meet its constitutional duty to maximize net timber revenue over the long term. The desire to establish an ESRF with annual timber harvesting at levels more than 100% higher than the average achieved since 2013 is what football fans might refer to as a “Hail Mary” pass. Those plays sometimes succeed, but no team counts on them for points.
There is a compelling need for the proposed ESRF research among academics, forestland managers, and public policy-makers. When State Treasurer Tobias Read hastily proposed to transfer ownership of the ESF to OSU in early 2017, in order to justify the reversal of his prior vote to sell the forest to the Lone Rock consortium, he and his collaborators argued that the world of science was eager to carry out the envisioned research.
In fact, the OSU representatives who testified before the Board that day made it clear that they had other financial requests pending with the legislative Ways and Means Committee, all of which were more important. Conducting long-term, large-scale research as envisioned in this proposal was never a priority for the university. Under questioning, the OSU spokesmen stated that they would be willing to accept ownership of the forest, as long as it was given to them and operational expenses would not impinge on the business model of the university. Those sideboards remain to this day.
It’s evident that this is a shotgun wedding between OSU and the SLB, and that the “fundamental aspiration” for the ESRF is not something the academic community has been pining for. This is noted in the peer review section by Dr. Jerry Franklin, who states:
I find the concept of conducting an experiment that essentially involves the entire property at the outset of OSU’s stewardship to be inappropriate… I don’t consider an experiment about how to divide forest landscapes at any scale among production and conservation goals to be a high priority in our current world…There are so many important things to be done and this is not one of them.
The fact is, forest management practices are determined by ownership class, not science. Private landowners are motivated by fundamental business principles and don’t need any of the research being proposed herein. Public sector forestland owners are constrained by statutory requirements and litigation outcomes, especially related to the ESA.
Since timber harvest on the ESF has been reduced to zero, exactly as planned by Cascadia Wildlands and other ESA litigants, there is no need for the kind of research envisioned with this proposal. No matter how “pure” the research may prove to be, timber management on the ESF will always be driven by law and politics, as long as it remains in public ownership.
John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research center.
December 3, 2020
FOR IMMEDIATE RELEASE
Today, Cascade Policy Institute released an analysis of Oregon’s Public Purpose Charge (PPC), recommending that the tax be repealed as soon as possible. The report, Oregon’s “Public Purpose” Energy Tax: Mission Accomplished, or Mission Creep?, was authored by John A. Charles, Jr. and Rachel Dawson.
The PPC is a 3% tax enacted by the Oregon Legislature in 1999. The tax applies to ratepayers of Portland General Electric and PacifiCorp; most natural gas consumers also pay a similar tax that was imposed after 1999 by the Oregon Public Utility Commission.
The PPC went into effect in 2002, and it was supposed to end in 2012. In 2007 the legislature extended it to 2026.
The legislature directed that 56% of PPC revenue would pay for energy conservation; 17% for funding the above-market costs of renewable energy; 12% for low-income weatherization; 10% for energy conservation in schools; and 5% for construction of low-income housing. Since 2002, the PPC has collected more than $1 billion from electricity ratepayers.
The Energy Trust of Oregon receives 74% of PPC funds, for programs addressing energy conservation, renewable energy, and “market transformation.” Remaining funds are transferred to Oregon public schools within the service territories of the two electric utilities, and the Oregon Housing and Community Services (OHCS).
According to independent reports filed every two years with the legislature, the most cost-effective PPC programs were completed in the early years. In the 2003-04 biennium, PPC administrators spent $91.4 million to acquire 1.7 million British Thermal Units (BTU) of saved or generated energy. During the 2017-19 biennium, PPC expenditures had grown to $159 million, but the energy savings were still 1.7 million BTU. This represented a 73% increase in costs.
Trends in Cost-Effectiveness for PPC Expenditures by Energy Trust, OHCS and Public Schools
|Years||PPC Expenditures||Claimed savings or energy generated (MBTU)||Expenditure per MBTU|
During the 2019 Oregon legislative session, a bill was introduced to extend the PPC to 2036. That bill was never voted on but likely will be introduced again in 2021. The purpose of the Cascade study is to help inform state legislators about what has been accomplished with PPC funds since 2002.
Based on nearly a decade of research, the Cascade paper concludes that the original, ten-year mission of the PPC has been met, and the tax should not be extended again. If possible, it should be repealed prior to 2026. Ratepayers are reeling from the effects of COVID-19, and eliminating a costly sales tax would provide immediate relief. PGE reports that customer accounts in arrears (31 days or more past due) are up 41% this year.
If the legislature is unwilling to sunset the PPC program, then Cascade recommends that ratepayers be given a chance to opt out of the tax, since many of them will never benefit directly from PPC programs.
According to Cascade Policy Institute President and CEO John A. Charles, Jr.:
The Public Purpose Charge was enacted as a ten-year program to help fund energy conservation programs and subsidize the renewable energy industry so it could become market-competitive. That mission has been accomplished; the cost of installing solar energy – the most popular offering of the Energy Trust of Oregon – has dropped by 76% since the PPC was enacted. Clearly the renewables sector can stand on its own without further subsidization by tens of thousands of renters and low-income ratepayers who will never own solar energy systems.
The Cascade research paper, Oregon’s “Public Purpose” Energy Tax: Mission Accomplished, or Mission Creep?, can be downloaded here.
Founded in 1991, Cascade Policy Institute is Oregon’s free-market public policy research center. Cascade’s mission is to explore and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. For more information, visit cascadepolicy.org.
By John A Charles, Jr. and Rachel Dawson
The Oregon Public Purpose Charge (PPC) is a tax enacted by the Oregon Legislature in 1999, as part of SB 1149. The tax applies to ratepayers of Portland General Electric and PacifiCorp and is set at 3% of utility revenue.
The original reason for the tax was to create a revenue stream that could be used to subsidize energy conservation and renewable power projects within the service territories of the two electric utilities. Specifically, the PPC money was allocated as follows: 56% for energy conservation; 17% for funding the above-market costs of renewable energy; 12% for low-income weatherization; and 10% for energy conservation in schools. For political reasons, 5% of the PPC revenue was designated for construction of low-income housing, although this has nothing to do with energy conservation.
SB 1149 directed the two electric utilities to collect money from ratepayers and turn it over to various organizations to administer the required programs. The Public School Program is administered and overseen by the Oregon Department of Energy, with project implementation handled by school districts. The Oregon Housing and Community Services (OHCS) administers PPC funds for low-income weatherization and subsidized housing.
Almost 74% of PPC funds are designated for energy efficiency projects in homes and businesses, and the above-market costs of certain renewable energy projects. In 1999, no organization existed to administer such programs, so in November 2001 the Oregon Public Utility Commission (PUC) signed a grant agreement with a new nonprofit, the Energy Trust of Oregon (ETO). The Trust opened for business on March 1, 2002, and began receiving Public Purpose funds through the Oregon PUC.
Natural gas utilities were not affected by SB 1149. However, they were later brought into the fold by PUC stipulation.
During the 1999 legislative session, drafters of SB 1149 made it clear that this would be a temporary tax. The law stated that the PPC would go into effect in March 2002 and would end 10 years later in March 2012.
However, in 2007 a different group of legislators moved the sunset date for the PPC from 2012 to 2026, as part of SB 838. In addition, the new law authorized ETO to negotiate with the private utilities for an additional add-on tax that would pay for more energy efficiency work. The result was a combined energy tax (SB 1149/SB 838) that has grown to over 10% for many ratepayers who use both electricity and natural gas.
Total PPC Rates, 2016-2020*
|PGE||Pacific Power||NW Natural||Cascade Natural Gas||Avista Natural Gas|
*Includes assessments for schools, low-income and Energy Trust for electric utilities
From its inception in 2002 through July 2019, the original PPC collected roughly $1.33 billionfrom ratepayers for the “public purposes” laid out in the statute.However, the most cost-effective projects were done in the early years – exactly as the authors of SB 1149 envisioned. In the 2003-04 biennium, PPC administrators spent $91.4 million to acquire 1.7 million BTU of saved or generated energy. During the 2017-19 biennium, PPC costs had gone up to $159 million, but the energy savings were still 1.7 million BTU.
Trends in Cost-Effectiveness for PPC Expenditures by Energy Trust, OHCS and Public Schools
|Years||PPC Expenditures||Claimed savings or energy generated (MBTU)||Expenditure per MBTU|
The costs per unit of energy saved or generated in the most recent biennium were 73.03% higher than in 2003-04.
Moreover, the numbers above are heavily skewed by the fact that the Energy Trust claims 100% of the credit for any renewable energy or conservation project it subsidizes, even if the PPC funding is just a tiny part of the overall cost. If ETO took credit in proportion to its investment of PPC funding, the reported savings (or generation of electricity from renewable energy projects) would be much smaller.
Warning lights about PPC expenditures have been flashing for some time. In 2012, Oregon Secretary of State Kate Brown released an audit of PPC spending in schools, showing that almost $40 million of savings had been missed and that 70% more energy could have been conserved if school districts had implemented the measures identified by energy audits as having the highest payback.
In some cases, PPC money had been used for projects that would never pay for themselves. For instance, Newberg School District installed insulated roofing panels at an elementary school in 2005 that had an estimated simple payback of 110.5 years and an expected life of 25 years. The measure was estimated to lose $65,150 over its lifetime.
The peak years for energy conservation in schools were 2007-2008, when 604 energy-saving measures were implemented. For the most recent biennium, there were only 123 measures implemented – the lowest number since the program began.
The Oregon Housing and Community Services (OHCS) department is required to ensure that they maintain a 1:1 ratio of PPC expenditures to energy saved for installed conservation measures. From 2002-12, the agency was able to do that six out of ten years. Since 2012, OHCS has never met the required standard.
The Energy Trust of Oregon receives 74% of PPC funds. In ETO’s flagship program – electricity savings – the Trust spent $14.7 million in 2003 and achieved savings at a cost of $0.11 per kWh. In 2017, ETO spent $157 million, but savings had a cost of $0.26 per kWh – an increase of 136%.
ETO’s renewable energy program was severely affected by the passage of SB 838 in 2007, which prohibited the organization from spending any more PPC money on utility-scale projects. Confined to small projects, ETO’s cost per megawatt of renewable energy has gone up by more than 1,400% since then.
By legislative design, the Energy Trust of Oregon was incorporated as a nonprofit charity under section 501(c)(3) of the IRS code. However, it is not actually a charitable organization. Roughly 99% of ETO’s annual revenue comes from the PPC, which is mandatory.
Nonetheless, over the five-year period of 2014-2018, ETO reported PPC revenue to the IRS totaling $847 million under the category of “gifts, grants, contributions, and membership fees.”
If PPC payments by utility customers are considered charitable gifts by the IRS, then ratepayers should be receiving receipts and deducting the cost of the PPC from their federal tax filings. In fact, this was anticipated by the founders of Energy Trust. Article IV of ETO’s Articles of Incorporation states, “It is intended that the Corporation qualify as an organization which is exempt from federal income taxation under Code section 501(c)(3), contributions to which are deductible for federal income, estate, and gift tax purposes….”
We are not aware of Energy Trust or any other administrator of the Public Purpose Charge ever issuing receipts to utility ratepayers for their $1.33 billion dollars of “donations.”
Most energy activists believe that the PPC should become permanent, and PPC administrators tend to agree. In fact, the 2020-2024 strategic plan for ETO explicitly assumes that the PPC will be extended past 2025. A legislative bill for that purpose was introduced in the state legislature during 2019, but did not pass out of committee. It will likely be introduced again in 2021.
The time has come for legislators to decide whether the original mission of the PPC has been accomplished, or if it should be expanded. Based on nearly a decade of research, this paper makes the following recommendations:
- The Public Purpose Charge has fulfilled its original, 10-year mission, and should be ended as soon as possible. The Oregon economy is reeling from COVID-19. PGE reports that customer accounts in arrears (31 days or more past due) are up 41% this year. There is no reason to maintain a costly energy tax of 6-10% for a program that has already served its purpose.
- If the PPC continues through 2025 or longer, the SB 1149 mandate related to small-scale renewable energy projects should be repealed. ETO’s renewables program has been made obsolete by multiple laws passed since 1999, including several “green power” mandates and a new solar subsidy program.
More than 99% of all ETO renewable projects have been solar electric. Since the installation costs of those projects have dropped by roughly 76% since the passage of SB 1149, the original intent of helping renewables transition to market-competitiveness has been met.
- The SB 1149 mandate for market transformation should also be repealed. There is no way to adequately define or measure the term “market transformation.” Moreover, the preeminent market transformation organization is the Northwest Energy Efficiency Alliance (NEEA), which already has its own funding from over 100 utilities.
- Between now and 2026, ETO should switch its more costly program offerings from cash grants to no-interest loans. The best way to ensure that a project is worth doing is to require significant “skin in the game” by recipients of public assistance.
A loan program would provide the up-front cash often needed to start a project, while imposing much-needed fiscal discipline. A loan program would also mean that any ongoing public purpose charge could drop over time to zero, because debt service payments would eventually make the fund self-supporting.
- ETO should utilize its tax status as a nonprofit institution regulated under Section 501(c)(3) of the IRS code to seek foundation grants and individual contributions. ETO claims that its various programs have saved ratepayers more than $7 billion dollars. If that is true, it should not be difficult to persuade many of them to donate to the Trust.
- The legislature should examine why Energy Trust of Oregon lists all revenue on its federal tax filings as “gifts, grants, contributions, and membership fees received,” yet ratepayers receive no gift receipts for PPC payments. The legislature has created a service delivery model that provides tax-exempt status to only one entity: the Energy Trust of Oregon. Ratepayers receive no such treatment. That contradiction should be addressed by the legislature in 2021.
By Vlad Yurlov
Oregon’s government is finally feeling the pain of lockdowns. Last April, an executive order banned the eviction of tenants based on non-payment until June 30, 2020. This action has been extended twice and currently ends January 1st.
Now that the year is coming to a close, the Legislature is deciding whether to extend the moratorium for another six months or let it sunset. But this time, constituents have guided the current proposals to send $100 million from the state’s general fund to renters and property owners to relieve back rent.
Kate Brown initiated the moratorium because many people have lost jobs and are likely to miss rent. But it is largely due to lockdown mandates that have directly limited the ability of people to earn a living.
But it’s not only property owners that deserve compensation for the damages associated with government mandates. Lockdowns have restricted restaurants, cinemas, and offices all over Oregon from earning a living. To align the interests of the public and private sector, everyone damaged by government mandated lockdowns strategies should receive reimbursement for their losses. The politicians who say, “We’re all in this together” should put their money where their mouths are and face the financial consequences of their decisions.
Vlad Yurlov is a Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research center.
By Helen Doran
The Oregonian reported that an estimated 51,000 more Oregonians are expected to lose their jobs because of Governor Brown’s new state-wide freeze. To make matters worse, almost 70,000 Oregonians could lose their unemployment benefits the day after Christmas when the program for self-employed workers and an extended benefit program expire.
There is hope for small businesses. According to an Adobe survey, small businesses in the United States could expect a +107% boost in revenue for the season. In fact, 51% of shoppers plan to support small and local businesses on Small Business Saturday, and 38% of shoppers “will make a deliberate effort to shop at smaller retailers throughout the holiday season.”
Despite the governor’s freeze on many activities, entrepreneurs have found creative ways to provide support for Oregon businesses during the holiday season. Small businesses that are not equipped to make a profit online are provided an outlet through such non-profits as Built Oregon, which provides vendors a shared online marketplace to showcase their products. In true Oregonian spirit, you can buy anything from Willamette Valley wines to bamboo toothbrushes and leather toolkits.
Gyms have been shut down entirely during the governor’s winter freeze. But that hasn’t stopped gyms like Fulcrum Fitness, which has gone completely virtual with its workouts for customers.
Restaurants have suffered extraordinarily from the pandemic, and with the new freeze, some restaurants and bars are planning to close temporarily rather than switch to delivery and takeout. Others are hoping the holiday spirit will provide them a much needed boost. Andina’s in Portland offered a take-out Thanksgiving dinner for those not partial to imitating Gordan Ramsey in the kitchen. Bars like the Botanist House also provided beer, wine, and cider to-go the day before Thanksgiving.
Even the local arts community has found creative ways to share its passion. The youth orchestra, Metropolitan Youth Symphony, will be celebrating holiday music from around the world through a creative use of online tickets and YouTube. The local ballet company, Oregon Ballet Theatre, is reimagining its annual Nutcracker through a televised format on OBTV. Clearly, in the middle of a turbulent year, Oregon businesses’ innovation and creativity shine through, despite the heavy weight of lockdowns and restrictions. Even so, the next few months will be critical for many local businesses. Oregonians should rally behind their local businesses this holiday season. That might be the Christmas miracle we all need.
Helen Doran is the Program Assistant, External Affairs at Cascade Policy Institute, Oregon’s free-market public policy research organization.