Category: Reports

Reject Ordinance 20-1449-cm

Press Release: Eric Fruits, Vice President of Research at Cascade Policy Institute, urges Metro Council to reject Ordinance 20-1449

October 4, 2020

FOR IMMEDIATE RELEASE

Media Contact:
Eric Fruits, Ph.D.
(503) 242-0900
eric@cascadepolicy.org

PORTLAND, Ore. – On Thursday, October 1, Cascade Policy Institute’s Vice President of Research, Dr. Eric Fruits, testified before the Metro Council, urging them to reject Ordinance 20-1449. The ordinance would authorize the sale of up to $28 million in revenue bonds. The funds would be used to implement, impose, and collect Metro’s new personal and business income taxes.

Fruits also pressed the Council to delay implementation of Metro’s Supportive Housing Services income taxes scheduled to go into effect January 1, 2021.

“Metro has completely misplaced its priorities,” Fruits says. “Instead of focusing on its core obligations, it has spent the last two years expanding its mission by chasing expensive new programs funded with new and increasing tax burdens on its constituents.

“The Council must step back from the messes it has made for itself and Metro as a whole. It should spend the next two years recovering from the pandemic’s financial hit and focusing on the organization’s mission, not its mission creep.”

Cascade Policy Institute’s Vice President of Research, Dr. Eric Fruits, testified before the Metro Council

Click here to read Eric Fruits’ full testimony.

###

Contact Dr. Eric Fruits by email at eric@cascadepolicy.org for more information or to schedule an interview.

About Cascade Policy Institute:

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.

###

Read Blog Detail
Business-people-finding-solution-together-at-office-cm

Press Release: Report shows possible benefits to workers, employers, and unions from increased competition in representation

December 30, 2019

FOR IMMEDIATE RELEASE

Media Contact:
Eric Fruits, Ph.D.
(503) 242-0900
eric@cascadepolicy.org

PORTLAND, Ore. – Research published by Cascade Policy Institute concludes workers, employers, and unions could benefit from increased competition among labor unions. Competition among unions and workplace freedom would lead to improved choice and representation for workers, reduce costs for employers, and may lead to increased union membership.

Introducing competition among unions can be accomplished in several ways. States, such as Oregon, could pass legislation allowing for competing bargaining units and forbidding “no raiding” pacts among unions. In addition, litigation challenging exclusive representation on First Amendment grounds would present a logical next step after the U.S. Supreme Court’s Janus decision.

Inter-Union Competition and Workplace Freedom: Ending Exclusive Representation was authored by Eric Fruits, Ph.D., a Portland-based economist. Fruits is president and chief economist at Economics International Corp., a consulting firm specializing in economics, finance, and statistics. He is also Vice President of Research at Cascade Policy Institute and an adjunct professor at Portland State University.

Fruits says, “First principles of freedom of association dictate that workers should be allowed to choose whether to be represented by a union and should be allowed to choose which union represents them. Aside from first principles, workplace freedom provides individual employees the opportunities to negotiate the wages, benefits, and working conditions that work best for him or her as an individual.”

Labor unions exist to improve compensation and working conditions for their members. While unions themselves benefit from increased membership, individual workers see varied levels of benefit from the services provided by a union. In particular, the one-size-fits-all nature of most collective bargaining agreements—along with the take-it-or-leave-it vote to approve the agreement—means that many employees are covered by contracts that do not reflect their preferences.

Under current collective bargaining practices, employment arrangements are negotiated between an employer and a union with the union acting as the exclusive representative for the workers. As a condition of this exclusive representation, the union has a duty to fairly represent all workers subject to the agreement it negotiates.

Because all employees presumably benefit from the duty of fair representation, this duty has been invoked to justify the imposition of union fees on non-union employees whom unions deride as “free riders.” At the same time, exclusive representation by a single union unjustly reduces freedom of speech and association for workers and stifles individuals’ ability to negotiate employment agreements in both parties’ economic interests. The U.S. Supreme Court in Janus highlights this tension between the unions’ view of a “free rider on a bus headed for a destination that he wishes to reach” versus an employee’s opinion that he or she is “a person shanghaied for an unwanted voyage.”

Unions could avoid the duty and costs associated with representing members and non-members alike by giving up exclusive representation and allowing additional unions to compete for members. Since each union would represent its own members’ interests, individual unions would escape the obligation to represent the differing interests of other unions’ members or of non-union employees. Individual workers would have the freedom to join any one of several competing unions or to negotiate directly with his or her employer.

Empirical analysis indicates states with compulsory collective bargaining in the public sector have higher per-person government spending. This suggests that mandatory collective bargaining may drive up the costs of government. Thus, the elimination of mandatory collective bargaining and the introduction of inter-union competition and freedom of association for public employees may slow the growth of state and local spending.

Inter-union competition and workplace freedom can be implemented via several avenues, including lawsuits challenging exclusive representation on First Amendment grounds, the voiding of “no raiding” pacts, or the implementation of state-level legislation allowing for competing bargaining units.

The full report, Inter-Union Competition and Workplace Freedom: Ending Exclusive Representation, can be downloaded here.

###

Contact Eric Fruits by email at eric@cascadepolicy.org for more information or to schedule an interview.

About Cascade Policy Institute:

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.

###

Read Blog Detail
Business-unity-concept-cm

Inter-Union Competition and Workplace Freedom: Ending Exclusive Representation

By Eric Fruits, Ph.D.

EXECUTIVE SUMMARY

Labor unions exist to improve compensation and working conditions for union membership. Consequently, unions act to increase their own members’ wages and benefits. While unions benefit from increased membership, workers themselves see varied levels of benefit from the services provided by a union. Workers recognize the tradeoff between wage gains, benefits, employment opportunities, working conditions, and the nature of the political activities in which the union engages. The one-size-fits-all nature of a collective bargaining agreement, along with the take-it-or-leave-it vote to approve the agreement, means that many employees are covered by contracts that do not reflect their preferences. The exclusive representation by a single union in collective bargaining unjustly reduces freedom of speech and association for workers and stifles individuals’ ability to negotiate employment agreements in both parties’ economic interests.

Under current collective bargaining practices, employment arrangements are negotiated between an employer and a union acting as exclusive representative for the workers. As a condition of exclusive representation, the union has a duty to fairly represent all workers subject to the collective bargaining agreement. The benefit all employees theoretically gain from this duty of fair representation has been invoked to justify the imposition of agency fees on non-union employees. Janus, however, prohibits public sector unions and employers from collecting agency fees from non-union employees.

Unions could avoid the duty and costs associated with representing members and non-members alike by giving up exclusive representation and allowing additional unions to compete for members. Since each union would represent its own members’ interests, individual unions would escape the obligation to represent the varied interests of other unions’ members or non-union employees. Individual workers would have the freedom to join any one of several competing unions or negotiate directly with his or her employer.

  • Research indicates unions exert greater effort to attract and retain members when they are competing with other unions. Competition and the threat of membership “raids” provides an incentive for union leadership to be more responsive to its members’ demands.
  • Because of the moderating effect on wages, inter-union competition is expected to be associated with increased employment.
  • Evidence points to ambiguous effect of inter-union competition on union membership. In the United States, competition was associated with increased union membership. In New Zealand, the introduction of competition along with the ability for workers to negotiate directly with their employers was associated with decreased union membership.

Empirical analysis indicates states with compulsory collective bargaining in the public sector have higher per-person government spending. This suggests that mandatory collective bargaining may drive up the costs of government. Thus, the elimination of mandatory collective bargaining and the introduction of inter-union competition and freedom of association for public employees may slow the growth of state and local spending.

Inter-union competition and workplace freedom of choice can be implemented via several avenues, including lawsuits challenging exclusive representation on First Amendment grounds, the voiding of “no raiding” pacts, or the implementation of state-level legislation such as Tennessee’s Professional Educators Collaborative Conferencing Act.

READ THE FULL REPORT

Eric Fruits, Ph.D. is president and chief economist at Economics International Corp., a consulting firm specializing in economics, finance, and statistics. He is also Vice President of Research at Cascade Policy Institute and an adjunct professor at Portland State University, where he teaches in the economics department and school of business.

 

Read Blog Detail
Bare-Trees-and-Ferns-cm

Press Release: Cascade Policy Institute Publishes Comprehensive Study of Metro’s Parks and Nature Program

October 15, 2019

FOR IMMEDIATE RELEASE

Media Contacts:
John A. Charles, Jr.
Eric Fruits, Ph.D.

PORTLAND, OR – In the next week or so, Portland area voters will receive their November ballots. One of the items is Measure 26-203: a $475 million bond measure by Metro, the regional government for the Portland area. Metro wants the money so it can buy more land for its so-called parks and nature program. Measure 26-203 will raise the region’s property taxes by about $60 million a year. The $475 million request is larger than the two previous Metro natural areas bonds combined, which were $135.6 million dollars in 1995 and $227.4 million dollars in 2006.

Cascade Policy Institute has published a comprehensive study of Metro’s parks and nature program, with the following conclusions:

  • Metro’s natural areas program began as a vision to increase and preserve parks and natural areas to a region facing increased population growth and density.
  • As the program evolved, the mission moved from providing parks for people to locking land away from the community that paid for it. The initial promise in 1995 to “provide areas for walking, picnicking, and other outdoor recreation” has shifted to the 2019 bond measure promise to “protect water quality, fish, wildlife habitat, natural areas.”
  • Over the nearly two decades since the first parks and nature bond measure, Metro has made, broken, and delayed its promises to voters.
    • In 2002, Metro imposed a solid waste tax enacted to pay for the operating costs of new parks. In 2006, Metro diverted the parks money into Metro’s general fund. In subsequent years, Metro put two operating levies on the ballot, increasing property taxes.
    • Chehalem Ridge was pitched as a regional park for Metro’s west side, but current plans are for a few miles of walking trails and a small picnic area. The park is more than seven miles from the nearest TriMet stop.
  • After spending hundreds of millions of dollars and acquiring more than 14,000 acres of land, less than 12 percent of Metro’s acquisitions are accessible to the public.
  • More than 80 percent of the acquisitions are outside the UGB.
  • Much of the land acquired by Metro was never at risk of development because Metro manages the region’s Urban Growth Boundary.
  • Metro’s restoration objectives, efforts, and results have been opaque and uncertain. Metro has provided no measurable documentation of changes to water quality or fish and wildlife populations.

Information was obtained from publicly available resources, interviews, and on-site visits to every natural area and nature park identified by Metro. Cascade paid thousands of dollars in public records requests to Metro.

Cascade’s report is available for download.

For more information on Measure 26-203 and Metro’s parks program, contact Cascade Policy Institute at 503-242-0900.

# # #

Contact Eric Fruits or John Charles at 503-242-0900 or by email at eric@cascadepolicy.org or john@cascadepolicy.org for more information or to schedule an interview.

About Cascade Policy Institute:

Founded in 1991, Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. For more information, visit cascadepolicy.org.

###

Read Blog Detail
walkway-with-street-lamp-in-garden-cm

Hidden Lands, Unknown Plans: A Quarter Century of Metro’s Natural Areas Program

By Vladislav Yurlov, Helen Cook, and Micah Perry with Eric Fruits, Ph.D., research advisor

  1. Executive summary 

In June 2019, Metro’s Council referred to voters a $475 million bond measure for the acquisition and restoration of natural areas as well as future recreational opportunities. If passed, the measure will cost the region’s taxpayers approximately $60 million a year in property taxes. The $475 million request is larger than the two previous Metro natural areas bonds combined, which were $135.6 million dollars in 1995 and $227.4 million dollars in 2006. 

Cascade Policy Institute researched Metro’s management of its natural areas program. Information was obtained from publicly available resources, public records requests, interviews, and on-site visits to every natural area and nature park identified by Metro. Several areas were more thoroughly examined as case studies because of their location, size, acquisition price, and length of time owned by Metro. These case study areas comprise about 20 percent of the land acquired by Metro in the 1995 and 2006 bond measures. 

Cascade’s findings lead to the following conclusions: 

  • Metro’s natural areas program began as a vision to increase and preserve parks and natural areas to a region facing increased population growth and density. With increasing population density, local governments would offset the loss of backyards with more parks to meet, play, and offer “nature in neighborhoods.” It was an expensive vision that would require hundreds of millions of dollars. 
  • As the program evolved, the mission moved from providing parks for people to locking land away from the community that paid for it. The initial promise in 1995 to “provide areas for walking, picnicking, and other outdoor recreation” has shifted to the 2019 bond measure promise to “protect water quality, fish, wildlife habitat, natural areas.” Parks are to be “maintained” rather than built, expanded, or improved. 
  • Over the nearly two decades since the first parks and nature bond measure, Metro has made, broken, and delayed its promises to voters.  
  • Metro promised that a solid waste tax enacted to pay for the operating costs of new parks would protect residents from additional taxes for the same purpose. Nevertheless, it swept that money into Metro’s general fund and put two operating levies—increasing property taxes—on the ballot.  
  • Metro assured the region that Clear Creek would become a regional park. More than a decade later, it has no plans to make the area publicly accessible and has removed it from its maps of parks and natural areas. 
  • Chehalem Ridge was pitched as a regional park for Metro’s west side, but current plans are for a few miles of walking trails and a small picnic area.  
  • After spending hundreds of millions of dollars and acquiring more than 14,000 acres of land, less than 12 percent of the acquisitions are accessible to the public.  
  • Even the land that is open to the public is out of reach of many Portland residents.  
  • Seventy percent of Metro’s acquisitions have been outside Metro’s jurisdiction.  
  • More than 80 percent of the acquisitions are outside the Urban Growth Boundary 
  • A statement in the 2019 Voters’ Pamphlet from a group of bond supporters admits that many of Metro’s acquisitions “exist as places on a map but not places you can actually go.”  
  • Much of the land acquired by Metro was never at risk of development because Metro manages the region’s UGB 
  • Metro’s restoration objectives, efforts, and results have been opaque and uncertain. Metro has provided no measurable documentation of changes to water quality or fish and wildlife populations.  
  • Metro has promised a strategy focused on racial equity. Even so, minority communities’ desire for parks that serve as “gathering places, places to eat, security, and places for kids to play, exercise and cool off during the summer” have been overlooked in favor of natural areas amenable only to “passive recreation.” 

Metro has acquired more land than it can manage. The focus for the next decade should be on making current lands available for public use. Metro’s largest planned park—Chehalem Ridge near Gaston—has been in Metro ownership for nine years, and there is still no public access. Metro also owns about 1,400 acres in the Sandy River Gorge. These holdings are not shown on any of Metro’s parks and nature maps and Metro has no plans at all to make these properties available for swimming, boating, hiking, or family cookouts. Metro needs to turn these and other areas into parks its residents actually use before seeking more money to acquire more land.

Vladislav Yurlov, Helen Cook, and Micah Perry are Research Associates at Cascade Policy Institute. Eric Fruits, Ph.D., is Vice President of Research at Cascade.

Click here for the full report in PDF:

2019-10-Hidden_Lands_Unknown_Plans_A_Quarter_Century_of_Metro’s_Natural_Areas_Program

Read Blog Detail
Sellwood-Bridge,-Portland-Oregon-cm

The New Sellwood Bridge: Promises Unfulfilled

By John A. Charles. Jr.

Executive Summary

Portland has an international reputation for successfully integrating land-use and transportation planning. The primary goals of such planning are to limit the physical size of the city and reduce the daily use of private motor vehicles by encouraging alternative modes of travel.

Many transportation policies have been developed in support of these goals. One of the most visible has been the policy of slowing vehicle speeds through “traffic calming” and “road diets.” Advocates claim that reducing road capacity for motor vehicles has only minor effects on travel time. They also assert that future demand for road space can be mitigated through mode-shifting from single-occupant driving to walking, biking and transit.

In the late 1990s the Sellwood Bridge and its eastside connector, Tacoma Street, provided a perfect opportunity to test both the concept of integrated planning as well as the strategy of implementing a road diet. The original Sellwood Bridge opened in 1925, and over the next 60 years it became the most heavily traveled two-lane bridge in the state. By the mid-1980s the Bridge was badly in need of either major remediation or replacement.

Multnomah County, which owned and operated it, imposed vehicle weight limits in 1985 and again in 2004. After the second reduction, all heavy vehicles (including transit buses) were prohibited.

With traffic levels continuing to rise, it was clear that Multnomah County needed to either build a wider replacement bridge or a two-lane replacement plus another bridge nearby to the south. Local planners, however, believed the Portland region to be overly reliant on the private automobile and decided to place a moratorium on any new Willamette River bridge capacity. They assumed that if the region simply stopped building bridges, they could persuade people to switch from driving to some other mode.

Soon thereafter, the City of Portland undertook a study of Tacoma Street in the Sellwood-Moreland neighborhood, with the goal of making it more pedestrian-friendly. The result of that process was a recommendation to downsize Tacoma from a four-lane collector to a two-lane “Main Street,” even though Tacoma was already a two-lane road except for four hours each weekday – 7-9 a.m. and 4-6 p.m. – when street parking was disallowed so that traffic flowing to and from the bridge could move faster. Striped crosswalks were also recommended in three locations between SE 6th and 13th, to allow pedestrians to safely cross mid-block.

Tacoma Street was put on a “road diet” in 2002, in which two travel lanes in each direction became one travel lane each way along with a center turn lane.  These changes meant the Sellwood Bridge replacement would also inevitably be limited to two traffic lanes. While the new bridge was designed to be more than twice as wide as the original, more than half the through-lane capacity was allocated to non-motorized uses. The County made this decision even though 98% of all peak-hour passenger-trips on the old bridge had taken place in motorized vehicles.

The new Sellwood Bridge opened for travel in February 2016. The north side cycling/walking facilities were open, but the south side bikeway and shared-use sidewalk did not open until 2017.

Now that the bridge has been fully operational for more than two years, it’s possible to measure actual travel patterns and compare them with the forecasted results. It turns out that the transportation planners were wrong in their prediction of how future travel needs would be met.

Traffic congestion is worse than before. Cycling and walking levels have not gone up as predicted, and transit service is far below the levels promised in the planning documents. Moreover, peak-hour vehicle throughput on the bridge has been permanently reduced due to new traffic signals at either end of the bridge and lowered speed limits.

Since bridge “supply” was reduced but motorized travel “demand” went up with population growth, motorists have increasingly resorted to cutting through side streets north and south of Tacoma in order to gain access to the bridge. In fact, the Tacoma Street downsizing made this practice easier by creating a middle turn lane that creates shelter for motorists trying to enter the traffic queue from side streets. This has degraded the quality of life for nearby residents.

Although the new Sellwood Bridge was marketed as a cutting-edge example of the Portland commitment to “multi-modalism,” the bridge itself is not even a multi-modal facility. Heavy trucks are prohibited, and there is no bus service most of the time. Average daily travel is actually more reliant on the private automobile than it was in 1993.

This paper examines the rationale for putting the Sellwood Bridge/Tacoma Street corridor on a road diet and compares actual travel data with pre-construction forecasts. It offers a cautionary note for city leaders who are planning for growth by shrinking important arterials such as Naito Parkway, Foster Road, and NE Broadway.

READ THE FULL REPORT

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, a position he has held since 2004. He received a BA degree with honors from University of Pittsburgh and an MPA degree from Portland State University. He has been writing about transportation policy for more than 30 years. The focus of his research is utilizing field studies to determine how the built environment influences urban travel behavior. He has co-authored case studies of transit-oriented developments in the Portland region related to the South Waterfront district, Hillsboro’s Orenco Station, and Steele Park in Washington County. His most recent paper is entitled, Why Cities and Counties Should Consider Leaving TriMet.

Read Blog Detail
Sellwood-Bridge-Sunset-cm

Press Release: Multi-year case study of Multnomah County’s Sellwood Bridge explains the history behind worsening traffic congestion in the SE Portland bridge corridor

June 6, 2019

FOR IMMEDIATE RELEASE

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

PORTLAND, OR – Today Cascade Policy Institute released the results of a seven-year case study of the Sellwood Bridge reconstruction, The New Sellwood Bridge: Promises Unfulfilled.

The evidence shows that even though the new Sellwood Bridge is more than twice as wide as the original bridge, it moves fewer people at peak hours. Moreover, use of the bridge by cyclists and pedestrians has not increased significantly, despite the generous facilities provided for them.

As a result, traffic congestion in the bridge corridor is worse than it was in 2012, and cut-through traffic in the Sellwood neighborhood has seriously degraded the quality of life for those living and working there.

The increase in traffic congestion was actually planned for by Metro more than 20 years ago, when the regional agency placed a moratorium on any new Willamette River bridge capacity for motor vehicles between the Marquam Bridge and Oregon City. Metro believed that if a bridge cap was imposed, significant numbers of people could be diverted from auto travel to biking, walking, or transit.

Their assumptions were wrong. During two years of intensive field monitoring by Cascade Policy Institute, the combined travel share for biking and walking never exceeded three percent, as shown below:

Sellwood Bridge Travel Patterns, 2017-18

Based on hourly sampling

Year Total observed passenger-trips Auto share Transit share Bike share Pedestrian share
2017 13,593 95.1% 2.2% 2.2% 0.5%
2018 19,888 95.2% 1.9% 2.4% 0.6%

 

Although the new Sellwood Bridge was marketed as a cutting-edge example of the Portland commitment to “multi-modalism,” the bridge itself is not even a multi-modal facility. Heavy trucks are prohibited, and there is no bus service most of the time. Average daily travel is actually more reliant on the private automobile than it was in 1993.

According to Cascade Policy Institute President John A. Charles, Jr., who directed the study,

“Portland-area planners have long believed they could change travel behavior by starving the road system while promoting alternative modes such as transit, walking, and biking. The evidence from the Sellwood Bridge reconstruction shows that wider sidewalks are not a substitute for increased road capacity.”

John Charles is President and CEO of Cascade Policy Institute and has written about transportation policy for more than 30 years. The focus of his research is utilizing field studies to determine how the built environment influences urban travel behavior. Charles received a BA degree with honors from University of Pittsburgh and an MPA degree from Portland State University.

The full report, The New Sellwood Bridge: Promises Unfulfilled, 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.

###

 

Read Blog Detail

Education Savings Accounts: Fiscal Analysis of a Proposed Universal ESA in Oregon

By Eric Fruits, Ph.D.

Executive Summary

Education Savings Accounts deposit a percentage of the funds that the state would otherwise spend to educate a student in a public school into accounts associated with the student’s family. The family may use the funds to spend on private school tuition or other educational expenses. Funds remaining in the account after expenses may be “rolled over” for use in subsequent years.

Empirical research on private school choice finds evidence that private school choice delivers benefits to participating students—particularly educational attainment.

Currently, Arizona, Florida, Mississippi, North Carolina, and Tennessee have active ESA programs that are limited to particular groups of students such as those with special needs. The proposed Oregon ESA bill would introduce a universal ESA program for all K–12 students.

ESAs are frequently designed so the amount of funding provided to families is less than the amount the state would otherwise pay for a student to attend public school, with the state recouping the difference. In this way, ESAs can be designed to produce a net fiscal benefit (i.e., cost savings) to state and local government budgets.

A fiscal analysis of the proposed Oregon ESA bill finds that it would cost the state approximately $128 million a year but would lead to savings of about $130 million a year to local school districts, for a net state and local impact of approximately $2.2 million in reduced costs. There is virtually no net impact on per-student spending for students who choose public K–12 education. ♦

READ THE FULL REPORT

CLICK HERE FOR A ONE-PAGE FACT SHEET ON SB 668

Eric Fruits, Ph.D. is president and chief economist at Economics International Corp., an Oregon-based consulting firm specializing in economics, finance, and statistics. He is also an adjunct professor at Portland State University, where he teaches in the economics department and edits the university’s quarterly real estate report. His economic analysis has been widely cited and has been published in The Economist, the Wall Street Journal, and USA Today. 

Dr. Fruits has been invited to provide analysis to the Oregon legislature regarding the state’s tax and spending policies. He has been involved in numerous projects involving natural resources and Oregon forest products such as analysis for Ross-Simmons v. Weyerhaeuser, an antitrust case that was ultimately decided by the United States Supreme Court. His testimony regarding the economics of Oregon public employee pension reforms was heard by a special session of the Oregon Supreme Court.

Dr. Fruits has produced numerous research papers in real estate and financial economics, with results published in the Journal of Real Estate Research, Advances in Financial Economics, and theMunicipal Finance Journal.

 

Read Blog Detail
US-dollar-in-a-money-bag,-small-residential,-house-model-on-table-against-green-nature-background-cm

Press Release: Report shows Oregon’s “smart growth” policies make housing less affordable for Oregonians

FOR IMMEDIATE RELEASE

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

PORTLAND, Ore. – Cascade Policy Institute has released a new report examining the links between anti-sprawl, “smart growth” regulations and increasing housing costs in Oregon. The report measures the extent of supply restrictions in Oregon and their impact on housing prices. It concludes that “smart growth” policies contribute substantially to the decrease in affordable housing and single-family housing options in Oregon.

The report, The Housing Affordability Crisis: The Role of Anti-Sprawl Policy, was written by Randall Pozdena, Ph.D. Pozdena is president of QuantEcon, Inc., an Oregon-based economics consultancy.

Over the last fifty years, many states have adopted “smart growth” or “anti-sprawl” policies. Enough time has elapsed for the effects of these policies to be studied. The evidence shows that many urban areas now have housing prices that make either home ownership or rental increasingly unaffordable.

In the face of resulting “affordable housing crises,” cities and states are currently considering additional regulations and subsidy policies to attempt to provide residents with more affordable housing options. There is virtually no public policy discussion of whether regulatory interventions precipitated the housing crisis in the first place, let alone consideration of abandoning these damaging policies.

In The Housing Affordability Crisis, Pozdena examines the links between anti-sprawl regulations and the spectacular increases in housing costs and the virtual disappearance of affordable housing in many markets. Specifically, he measures the extent of site supply restrictions and its impact on housing prices using an economic model of housing markets, data on the economic conditions in housing markets, and trends in development revealed in satellite inventories of U.S. land uses. At the national level, using state and Metropolitan Statistical Area data, Pozdena concludes:

  1. Twenty-three of the 50 states studied fail to provide housing units at a volume adequate to keep housing prices and incomes growing at a rate consistent with affordability. On average, these states under-provided housing units by 6.4 percent of their current stock of housing units.
  1. Those states that fail the affordability and supply adequacy test are overwhelmingly those with documented adoption of one or more aggressive anti-sprawl growth regulatory initiatives.
  1. Annual housing price inflation exceeded annual income growth by 14 percent each year during the study period in those states that failed to provide housing in sufficient quantity to keep it affordable. Extrapolating the findings to the nation, the housing stock is smaller by as much as 4.5 million housing units than it should have been to preserve affordability.

Cascade Policy Institute President and CEO John A. Charles, Jr. said, “Oregon land-use planners have long pretended that Urban Growth Boundaries and other site restrictions have no real effect on housing supply. Dr. Pozdena’s analysis clearly shows that this is wrong. We cannot solve the housing crisis by simply ‘throwing money’ at public housing projects; growth controls need to be reduced or repealed if we want to make the American Dream affordable.”

The full report, The Housing Affordability Crisis: The Role of Anti-Sprawl Policy, 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.

###

 

Read Blog Detail

The Housing Affordability Crisis: The Role of Anti-Sprawl Policy

By Randall Pozdena, Ph.D.

Executive Summary

So-called smart growth policies are advocated as a means of avoiding sprawl.  These policies have at their heart a policy of reducing the availability of land for housing in urban areas. In Oregon and some other states, anti-sprawl policy is implemented by regulations that impose urban growth boundaries (UGBs).  Other regulations impose minimum density policies and others reduce spending on highways and increase spending on transit service—especially light rail—as an alternative.  Advocates of anti-sprawl policies argue that such regulations would allow urban growth to proceed at a lower overall cost.

Many states adopted smart growth policies in the last five decades—enough time for the policies to have demonstrated their purported advantages.  The evidence, at least on the housing front, is that the cost-containment claims have not materialized.  Instead, many urban areas are finding themselves with home prices that make ownership and rental of housing increasingly unaffordable.  Cities and states are thus using or considering additional regulations and subsidy policies to provide their residents with more affordable housing.  There is virtually no discussion of whether anti-sprawl regulatory interventions precipitated the housing crisis, let alone consideration of abandoning the policy.

The purpose of this study is to examine the links between anti-sprawl regulations and the spectacular increases in housing costs and the virtual disappearance of affordable housing in many markets.  Specifically, we measure the extent of site supply restrictions and its impact on housing prices using an economic model of housing markets, data on the economic conditions in housing markets, and trends in development revealed in satellite inventories of US land uses.

We apply the analysis to data from all 50 states and identify those states whose development policies reflect constrained site supply and those that do not.  Because Oregon has among the longest-standing and most aggressive implementations of smart growth land use policy, we pay particular attention to the state, and drill down with analyses at the Metropolitan Statistical Area (MSA) level in Oregon to demonstrate that the state-level findings are corroborated for all of its MSAs.

The primary metrics examined in this study are the rate of housing price appreciation, the degree of rigidity (“inelasticity”) of the supply of new homesites, and the degree to which the housing stock has failed to increase enough to affordably provide additional housing services.  Since we note that the adverse trends in house price inflation and slowing of site supply took greatest effect the last 30 years or so, we scrutinize market behavior subsequent to this period.  Because of the onset of the Great Recession in 2007, however, we estimate our models on this period.  This is because we do not wish to conflate the effects of anti-sprawl policy with the collapse of mortgage markets and home construction that persisted for the next half decade.

After establishing the linkage between constrained site supply and housing prices and affordability, we turn to the evaluation of the various policies that are in place or proposed to redress these problems.  This analysis is performed for the state of Oregon only.  The State’s wide-ranging and aggressive policies and proposals make it broadly representative of the nature, cost, and effectiveness of these policies—both those in place and those recently proposed.  With theory as a guide, and our acquired knowledge of the reactivity of the housing market to various stimuli, we can then opine on the likely effectiveness of these policies.  We also offer our own suggestions.

At the national level, using state and MSA data, we find the following:

  1. Twenty-three of the 50 states studied fail to provide housing units at a volume adequate to keep housing prices and incomes growing at a rate consistent with affordability. On average, these states under-provided housing units by 6.4 percent of their current stock of housing units.
  2. We demonstrate that those states that fail the affordability and supply adequacy test are overwhelmingly those with documented adoption of one or more aggressive anti-sprawl growth regulatory initiatives.
  3. Annual housing price inflation exceeded annual income growth by 14 percent each year during the study period in those states that failed to provide housing in sufficient quantity to keep it affordable. Extrapolating the findings to the nation, the housing stock is smaller by as much as 4.5 million housing units (in 2015 likely) than it should have been to preserve affordability.

Because Oregon has aggressively pursued anti-sprawl policy, it was given special attention in the study.  We found the following:

  1. All eight of Oregon’s MSA housing markets failed the test of affordability and adequacy of supply over the various study periods for which data was available. The estimated total shortfall in supply equals approximately 18 percent of the existing stock—virtually identical to that found for Oregon using state-level data.
  2. We analyzed the current and proposed housing policies of the state of Oregon. At present, proposals include approximately $2.3 billion by the State and the Department of Housing and Urban Development (HUD) to assist housing access and over $600 million in new affordability-related programs. This study finds that there is little hope that these policies can redress the scale and extent of Oregon’s affordable housing problems and, in some cases, may worsen them by burdening developers of housing with new regulations.

In summary, this study finds anti-sprawl policy to have been implemented in a manner that has pernicious effects on housing affordability.  Specifically, regulatory constraints on site supply have caused an on-going crisis of housing supply and affordability.  In many markets, the development of land for housing is regulated too aggressively.  Additionally, existing and new programs for addressing housing affordability rely on other regulation and spending programs that will not have the designed effect of providing affordable housing.  This study strongly recommends, instead, relaxation of regulations that limit the land area available for housing development.  Any residual concerns about sprawl should be addressed by reforming current highway and transit pricing and finance practices, which are known to be economically inefficient.

READ THE FULL REPORT

 

Read Blog Detail

Press Release: Report shows ride-hailing services would be a viable solution for TriMet’s high-cost bus lines

FOR IMMEDIATE RELEASE

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

PORTLAND, Ore. – Today Cascade Policy Institute released a report that recommends TriMet pursue a one-year pilot program which replaces one or more high-cost and low-ridership bus lines with ride-hailing services. The program would be supported by a subsidy funded by the costs saved by eliminating the bus line.

The report, Ride-Hailing as a Solution for TriMet’s High Cost Bus Lines: A Proposal for a Pilot Project, was authored by Eric Fruits, Ph.D., an Oregon based economist and Portland State University adjunct professor.

The proposed pilot program would offer riders point to point service from ride-hailing companies like Uber and Lyft within a ride-hail zone, when and where within the zone would be most convenient to the rider. The two high-cost bus lines suggested by Fruits include lines 97 (Tualatin-Sherwood Rd) and 63 (Washington Park/Arlington Hts). These lines intersect other bus lines and MAX stops, so the proof of the transaction should be used as a 2.5-hour TriMet pass. Doing so would allow passengers to connect to other buses or light rail in the area.

Cascade President and CEO John A. Charles, Jr. stated, “TriMet should embrace the benefits ride-hailing services offer instead of viewing them as a threat. Pairing services like Uber and Lyft with TriMet’s bus services would give riders a convenient and affordable way to commute while saving TriMet considerable money.” Indeed, the cost of subsidizing 75% of a user’s ride-share fare would be 55% lower than the current cost of operating proposed bus lines 97 and 63.

This proposal comes with its own set of challenges in the form of barriers to access. Services such as Uber and Lyft are hailed through an app on an individual’s smartphone and paid for by linking an individual’s bank account to the app. Some TriMet users do not own either a smartphone or a bank account. Jurisdictions which have adopted similar programs have handled this challenge by creating call centers available to riders without smartphones and by giving unbanked riders prepaid gift cards.

Ride-hailing services also contract out wheelchair accessible rides to third-party companies which would allow disabled riders to continue to commute in the corridor.

Similar pilot projects have been implemented in cities across the United States as transit authorities have recognized and taken advantage of the benefits ride-hailing services offer. TriMet should follow suit and engage in a low-stakes, one-year pilot project in order to cut costs that are rising due to declining ridership in certain areas. Doing so will serve riders, TriMet, and taxpayers alike.

The full report, Ride-Hailing as a Solution for TriMet’s High Cost Bus Lines: A Proposal for a Pilot Project, 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.

###

Read Blog Detail

Ride Hailing as a Solution to TriMet’s High-Cost Bus Lines

A Proposal for a Pilot Project

By Eric Fruits, Ph.D.

Summary and recommendation

This report recommends TriMet pursue a one-year pilot project that replaces one or more of its high-cost bus lines with ride hailing services supported by a subsidy funded with the cost savings from eliminating the high-cost bus line.

  • A subsidy covering 75 percent of the fare to eligible riders would be straightforward and relatively easy to understand, implement, and use.
  • TriMet bus lines 97 (Tualatin-Sherwood Rd) and 63 (Washington Park/Arlington Hts) would be reasonable candidates for the pilot project. These lines provide the best combination of lower user costs and cost savings to TriMet.
  • The average rider’s cost would be slightly lower than current TriMet fares. Because the customer is paying a portion of the fare, riders would be more likely to weigh the benefits and costs of using the ride hail service as a connection to the TriMet system (first mile/last mile, a complement to TriMet service) versus door-to-door (a substitute for TriMet service).
  • The cost of the 75 percent subsidy on lines 97 and 63 would be approximately 55 percent lower than the current costs of operating the high-cost bus lines.

Each of the bus lines identified in this report intersects with other bus, MAX, and WES stops or overlaps TriMet transit centers. Uber found that nearly 25 percent of Uber trips in suburban Portland began or ended within one-quarter mile of a MAX or WES station, as shown in Figure 1 and Figure 2 of this report. To encourage use of ride hailing services as a complement to the TriMet system, proof of fare payment should also serve as a 2.5 hour TriMet pass.

More than a dozen cities in the United States have programs similar to the proposed pilot project. Many of these cities have developed procedures to accommodate users who do not have a smartphone and users with ADA-related needs. Several of the programs began as pilot programs that have been extended because of the success of the pilot.

TriMet faces a challenge of declining ridership in conjunction with rising costs. In addition, the agency operates a number of high-cost bus lines. At the same time, ride hailing services, such as Uber and Lyft have grown in popularity since their introduction to the Portland region in 2015, providing convenient, reliable, low-cost service to millions of riders.

Recent research finds that ride hailing services have the largest positive complementary effect on rail service in cities with large public transit systems already in place, such as Portland. For these cities, the researchers found a small, but statistically significant, complementary effect on bus ridership.

The pilot project recommended in this report would be a low-cost, low-risk test of potential synergies between public transit and private ride hailing. If successful, the lessons learned can and should be applied to additional high-cost transit lines.

READ THE FULL REPORT

 

Read Blog Detail
Regrowth-in-logged-area--cm

A Proposal To Generate Adequate Returns From Common School Trust Lands

By Eric Fruits, Ph.D.

Summary of Conclusions

Across the Western States, approximately 80 percent of Trust Lands are managed for the benefit of the states’ “common schools”—public primary and secondary (K-12) schools. In most Western States, a Land Board is required to act as a prudent investor and obtain market value from the sale, rental, or use of trust lands. Generally, revenues generated from Trust Lands are deposited into a common schools fund managed by the state’s treasurer, an investment board, or a combination of the two. Rather than running the risk of mismanagement of Trust Land and/or reliance on global commodity prices, states could sell the Trust Lands and place the proceeds in a fund managed by the state’s investment managers, with payments to beneficiaries under the states’ current distribution approach. This report uses a Monte Carlo approach to analyze the impacts of such a proposal. The analysis indicates that most of the states analyzed would benefit from a sale of their Trust Lands.

 

READ THE FULL REPORT HERE.

Eric Fruits, Ph.D. is president and chief economist at Economics International Corp., an Oregon based consulting firm specializing in economics, finance, and statistics. He is also an adjunct professor at Portland State University, where he teaches in the economics department and edits the university’s quarterly real estate report. His economic analysis has been widely cited and has been published in The Economist, the Wall Street Journal, and USA Today.

Read Blog Detail

Study: School Trust income would go up by 600% if lands were sold

FOR IMMEDIATE RELEASE

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

PORTLAND, Ore. – Cascade Policy Institute released a study today showing that revenue generated for schools by the Oregon Common School Trust Lands (CSTL) likely would go up by 600% if the lands were sold and the net income added to the existing Common School Fund.

The study, A Proposal to Generate Adequate Returns from Common School Trust Lands, also showed that Oregon is only making $4.25/acre from its CSTL portfolio, the lowest among nine Western states. The state of Washington is earning the most, at $37/acre.

Management of Oregon’s 1.5 million acre portfolio of CSTL has long been a contentious issue. In 1992 Oregon Attorney General Charles S. Crookham issued an opinion clarifying that CSTL must be managed primarily for revenue maximization. Advocacy groups representing non-school interests have worked to subvert that directive ever since.

Environmental groups have repeatedly lobbied and litigated to eliminate revenue generation from the Trust Lands, claiming that commodity production is an outdated concept. They finally succeeded during the three-year period of 2013-15, when Oregon’s Trust Land portfolio actually lost $360,000/year in net operating income. Those losses had to be paid for by Oregon public school students.

The Oregon Land Board voted in 2015 to sell most of the Elliott State Forest in order to remedy this problem. However, the Board reversed itself in 2017, and Governor Kate Brown subsequently sought bonding authority from the Legislature to allow her to borrow $101 million (requiring $199 million in debt service) in order to “buy out” a portion of the Elliott so that it no longer would be subject to the Constitutional mandate to earn money for schools.

Those bonds have not yet been sold, and the Elliott is expected to incur more losses during 2018.

Last year Cascade Policy Institute commissioned economist Eric Fruits, Ph.D. to do a comparative analysis of nine Western states with large CSTL portfolios to determine under what circumstances it might make sense for states to sell these lands and invest the net proceeds into stocks, bonds, and other financial instruments. Dr. Fruits concluded that six states (including Oregon) likely would be better off selling CSTL assets; two states would be better off maintaining ownership; and one state likely would benefit from divestment, but more information is needed.

Cascade President John A. Charles, Jr. stated, “The Oregon Land Board has a fiduciary obligation to manage CSTL assets for the benefit of schools. Losing money every year violates that obligation. The Trust Lands have a market value of over $700 million, and students would be best served if the Land Board simply sold its real property portfolio and turned the proceeds over to the Oregon Investment Council, which has earned an average of 8.2% annually from the Common School Fund since 2010. In fact, there is no management option that would earn more money for students than selling these lands.”

The full report, A Proposal to Generate Adequate Returns from Common School Trust Lands, can be downloaded here.

Founded in 1991, Cascade Policy Institute is Oregon’s premier 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.

###

 

Read Blog Detail

TriMet Shows That Public Pension Reform Is Possible

By Scott Shepard and John A. Charles, Jr.

The Oregon Legislature is currently meeting, and the conventional wisdom is that reform of Oregon’s overly generous Public Employee Retirement System (PERS) is impossible. According to Governor Kate Brown, we signed contracts with public employee unions, a deal is a deal, and we should just quietly accept our fate that the massive cost of PERS will lead to layoffs and service cuts at schools and other service providers.

There is another way.

The Portland regional transit district, TriMet, is not part of PERS and has been slowly reforming its pension program since 2002. As a result, 100% of all new employees are now in 401(k)-style pensions that have no long-term liabilities for employers. These are referred to as “defined-contribution” (DC) pensions in which monthly payments are made by management into personal accounts owned by employees. Once those payments are made, the employer has no further financial obligations. The eventual pension payouts will be a function of the market performance of whatever investments are chosen by individual employees.

This stands in contrast to “defined benefit” (DB) programs like PERS in which employees are promised various levels of retirement payments calculated through arcane formulas that leave management mostly clueless about the level of funding obligation they’ve agreed to. In many cases, those liabilities turn out to be much larger than expected.

The advantages for taxpayers of moving public employees into DC pensions is now evident in the actuarial valuations done for TriMet. According to the most recent valuation, projected annual benefit payments for TriMet DB pensions will peak in 2034 at $74.6 million, and then steadily decline to $6 million in 2072. They will hit zero by the turn of the century.

This was not something that TriMet did casually. Management was forced into it because of decisions made a decade earlier that caused long-term retiree obligations to explode. TriMet Board members are appointed by the governor. In the early 1990s, Governor Barbara Roberts and TriMet General Manager Tom Walsh wanted public approval of a massive expansion of TriMet’s light rail empire and the tax funding to pay for it. They feared that controversy about a union contract could endanger public support.

In their efforts to avoid strife, in 1994 they granted expensive concessions to the Amalgamated Transit Union Local 757 (“the ATU”) on behalf of its represented employees. Loren L. Wyss, the long-serving president of TriMet, objected and his battle with Walsh became public. In back-channel communications with Gov. Roberts, Walsh made it clear that either he or Wyss needed to go. In August 1994, Wyss met with Gov. Roberts, where he submitted his resignation.

As later explained in The Oregonian,

“…the contract just approved by Tri-Met union employees will protect all its members from additional contributions to their pensions for 10 years. It will also guarantee 3 percent minimum wage increases in the future…every single dollar of health, welfare, dental and vision plans will be paid for by the public employer; [and] the retirement age will decline to 58 within 10 years….”

The die was set for cost escalation. In the decade from 1994 to 2004, salaries and wages increased 72 percent; annual pension costs went up 160 percent; and the cost of health care benefits rose 116 percent. These increases plus stagnant revenues in the latter half of the period resulted in a tripling of unfunded pension liabilities, from $38 million in 1993 to $112.4 million in 2002.

Fred Hansen followed Tom Walsh as General Manger; and he moved new, non-union hires into DC pensions after 2002. This was a first step towards fiscal sanity. Resistance from the ATU kept TriMet from moving its new unionized workers to DC plans for another decade, by which time a citizens’ committee of Portlanders had issued a report declaring TriMet “on the brink” of disaster.

During a protracted negotiation with the union in 2012, TriMet CFO Beth deHamel testified at a binding arbitration hearing,

“TriMet’s union defined benefit plan would be placed on critical status and under federal oversight if it were a private pension plan subject to ERISA.” She also stated that unless something was done to shore up the plan, “TriMet could be forced to default on its pension obligations or its other financial obligations in the future.”

Union leadership eventually agreed to move all new members to DC pensions by 2013, while protecting existing members from reform. As a result of this delay, the union workers’ DB fund remained only 59 percent funded in 2013.

Nevertheless, the trends were now moving in the right direction. The number of active employees still accruing DB pension benefits fell from 1,580 to 1,460 from 2016 to 2017 alone. In 2017 the unionized workers’ DB account reached nearly 80 percent funding, with unfunded liability falling by nearly $50 million in a single year.

Neil McFarlane was TriMet General Manager during that era. He commented recently, “The shift [to DC pensions] has been a success. TriMet is paying more than the required annual contribution every year right now” because the system is closed. “We will be fully funded within the next few years: five to ten for the union plan, fewer for the non-union.”

The DC plan to which TriMet moved new workers has been recognized as one of the best in the country. It features low costs, high returns, and a guaranteed employer contribution that is paid irrespective of employee matching contributions. As a DC plan it does not create open-ended, unpredictable public liabilities to be paid by generations as yet unborn.

TriMet has not fully banished the ghosts of unsustainable employee-benefit promises past. It still faces a massive and escalating unfunded liability driven by health care costs, known in accounting jargon as “other post-employment benefits,” or OPEB. The health care benefits that TriMet granted away in the 1994 contract debacle have been described as “universal health care into the afterlife.”

The description is only a minor exaggeration, as the plan offered TriMet’s unionized employees health care without premiums and with mere $5 co-pays, and benefits that ran not only throughout retirement, but to the employees’ spouses and dependents for fully 16 years after the employees’ deaths. Total unfunded liability for OPEBs reached an astonishing $769 million dollars in 2016.

Compare: State Paralysis on PERS 

TriMet’s pension reform efforts offer a valuable guide to the Oregon legislature on how to contain and reverse the spiraling PERS disaster. The unfunded liabilities for PERS have grown from $16 billion to more than $25 billion in less than ten years, even with the far-too-optimistic 7.2 percent assumed-savings rate (i.e., discount rate) in place. Were the rate adjusted down to its actuarially appropriate level, PERS’ unfunded liability would explode to $50 billion or more at a stroke.

Even at the current recognized rate, funding status has fallen below 70 percent, even while mandatory payments to PERS by government employers have passed 26 percent of payroll.

Municipalities are laying off workers, depleting public services, and raising fees in order to fund the present level of recognized PERS unfunded liabilities. Some reduction in pension benefits will have to happen, one way or another. All parties will benefit from an orderly effort to reform benefits while there is still time. 

The Way Forward

The state should follow the tracks laid by TriMet by moving its employees from DB to DC plans as soon as possible. As TriMet has demonstrated, this move will begin to stanch the fiscal wounds that have been inflicted by a generation of recklessly overgenerous pension benefit promises.

Unfortunately for everyone, PERS reform has been hamstrung for more than 20 years by a wayward state Supreme Court, which has thwarted previous attempts at thoughtful change with erroneous interpretations of the federal Contract Clause. The legislature will be obliged to make bigger changes than would have been required years ago. It will have to move all current workers, whenever they were hired, to DC plans for all work performed after the date of the effective legislation.

While this reform will be significant, it also will be deeply equitable. Right now, older workers are receiving higher benefits for each hour worked than ever will be available to younger workers. This isn’t fair, and it may violate civil rights laws: Younger workers are more diverse than their older peers, which means that benefit reductions that affect only new workers have a disparate impact on women and minorities.

The reform will also pass constitutional muster. As the Oregon Supreme Court finally recognized in its Moro decision, correcting its long-held error, the legislature may change any benefits for work not yet performed, even for current employees.

The Oregon Legislature can and must follow TriMet’s example. The sooner this is done, the less drastic any later steps will be. According to TriMet General Manager McFarlane, solving a pension crisis “doesn’t get any easier with passing time.”

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free-market research center. Scott Shepard is a lawyer and was a visiting law professor at Willamette University during 2016. This essay is a summary of a case study of TriMet’s pension reform written by Mr. Shepard for Cascade Policy Institute. The full report is available here. This essay was originally published in the February 2018 edition of the newsletter “Oregon Transformation: Ideas for Growth and Change,” a project of Third Century Solutions.

Click here for the full report, Following in TriMet’s Tracks: Defined-Contribution Plans a Necessary First Step to Oregon’s Fiscal Health:

Following_in_TriMet’s_Tracks_Feb2018

Read Blog Detail

Following in TriMet’s Tracks: Defined-Contribution Pensions a Necessary First Step to Oregon’s Fiscal Health

By Scott Shepard

Scott Shepard is a lawyer and was a visiting law professor at Willamette University in Salem, Oregon during 2016. He is the author of “A Lost Generation but Renewed Hope: Oregon’s Pension Crisis and the Road to Reform,” an academic study on Oregon state pensions published August 1, 2017 by the Mercatus Center at George Mason University. He is an Academic Advisor to Cascade Policy Institute, Oregon’s free-market public policy research center.

Introduction 

As recently as 2012, TriMet faced a pension funding disaster. Indefensibly overgenerous pension benefits granted in the early 1990s threatened to bankrupt the public transit system and to cripple the Portland metro area. While TriMet still has difficult reform ahead of it (regarding its other post-employment benefits promises), it has achieved pension fund stability by replacing its unsustainable defined-benefit pension promises with a well-designed, defined-contribution retirement plan.

“Defined-contribution” (DC) pensions are retirement benefit plans in which monthly payments are made by management into personal accounts owned by employees. Once those payments are made, the employer has no further financial obligations. The eventual pension payouts will be a function of the market performance of whatever investments are chosen by individual employees.

This stands in contrast to “defined-benefit” (DB) programs like Oregon’s Public Employees Retirement System (PERS). Under DB programs, employees are promised various levels of retirement payments calculated through arcane formulas that leave management mostly uninformed as to the level of funding obligation to which they have agreed. In many cases, those liabilities turn out to be much larger than expected. 

TriMet has brought its pension funding liabilities under control by moving its employees from defined-benefit plans to defined-contribution plans: first its management employees hired after 2002, then its unionized employees hired after 2012. The shift followed the lead of most private sector businesses, the federal government, and an increasing number of states. As a result of the change, TriMet’s pension obligations are moving steadily and reliably toward full funding within the near to medium term. This glide path to full funding is allowing the organization to focus on other vital personnel issues such as managing the cost of other post-employment benefits (“OPEBs,” which are primarily health care benefits for unionized workers) for current workers and retirees.

Oregon and its municipalities can only envy TriMet in this regard. The defined-benefit PERS funding costs continue to spiral out of control. These unbridled expenses are crushing local governments and school districts, forcing layoffs, hiring and wage freezes, bigger class sizes, reduced government services, and increased taxes. The failure to reform harms younger and more diverse workers at the expense of their older colleagues, and private-industry workers in favor of their government-employee neighbors. Taxpayers have said “enough,” voting 60-40 in 2016 against significant state tax hikes that inevitably would have been dedicated to helping to fund the PERS shortfall.

One necessary step toward addressing this problem is for the state of Oregon to follow in TriMet’s tracks, moving PERS workers from DB to DC plans. TriMet started down this road fully 15 years ago, while the state has dithered. Oregon must play catch-up by moving all PERS-covered workers to DC plans for work to be performed after the changeover.

This move by itself likely will not be enough to solve Oregon’s public pension crisis. The state has already promised more than it can reasonably pay. But moving to DC plans for all work not yet performed is a necessary first step. And the faster the legislature acts, the less severe—and the less upsetting to retirees and current and future employees—will be the other reforms required later.

CLICK HERE FOR THE FULL REPORT

Read Blog Detail

New Report Analyzes Fiscal Impact of Proposed Oregon Educational Opportunity Act

— Education Savings Account (ESA) program awaits Senate action

April 13, 2017

Media Release

FOR IMMEDIATE RELEASE

Media Contact:
Steve Buckstein
503-242-0900
steven@cascadepolicy.org 

PORTLAND, Ore. – Cascade Policy Institute today released a review and evaluation of a universal Education Savings Account (ESA) program for Oregon. Senate Bill 437 would cover all K-12 students and is awaiting a hearing in the Senate Education Committee. SB 437 is also known as the Educational Opportunity Act: The Power of Choice.

ESAs deposit a percentage of the funds that the state otherwise would spend to educate a student in a public school into accounts associated with the student’s family. The family may use the funds for private school tuition or other approved educational expenses such as online learning programs, private tutoring, community college costs, higher education expenses, and other customized learning services and materials. Funds remaining in the account after expenses may be “rolled over” for use in subsequent years, even into college.

Empirical research on private school choice finds evidence that private school choice delivers benefits to participating students—particularly in the area of educational attainment.

Currently, Arizona, Florida, Mississippi, and Tennessee have active ESA programs that are limited to particular groups of students such as those with special needs. Nevada passed a near-universal ESA bill in 2015, but it is yet to be funded. Last week, Arizona lawmakers passed a new ESA bill that will open their state’s ESA program to all Arizona children, phased in over the next few years.

A fiscal analysis of Oregon’s SB 437, as introduced, finds that it would have a net fiscal impact on the state and local school districts of approximately $200 million. This net impact can be reduced—and turned into a net cost saving to state and local governments—by adjusting the annual amount deposited into the ESAs. The program would “break even” at an amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students. These are the dollar amounts suggested in an Amendment to SB 437.

Cascade founder Steve Buckstein notes, “While vouchers may be considered the rotary telephones of the school choice world, Education Savings Accounts are the smartphones of that world. They offer many more opportunities for families and students, and introduce competitive forces into education finance, which may help keep costs down.”

The full report, Education Savings Accounts: Review and Evaluation of a Universal ESA in Oregon, can be found online here.

Founded in 1991, Cascade Policy Institute is Oregon’s premier 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 and schoolchoicefororegon.com.

###

Read Blog Detail
Budget-planning--cm

Facing Reality – Suggestions to balance Oregon’s budget without raising taxes

Contributors: Jeff Kropf; Steve Buckstein, Eric Fruits, Ph.D.

Summary

Despite an eight percent increase in general fund revenues, Governor Kate Brown and some lawmakers say the State of Oregon is facing a $1.7 billion budget shortfall in the 2017-19 biennium to maintain current services, to pay for the state’s increased share of the cost of Medicaid expansion, and to fund education ballot measures approved by voters. In addition, Governor Brown has released a budget that increases general fund spending by seven percent over the 2015-17 legislatively approved budget. Her budget expands entitlements and raises taxes, fees, and charges by nearly $275 million for the general fund alone—yet does nothing to address the state’s worsening 1 public pension crisis. While the Oregon economy is improving, the recovery has been uneven, and income for the average Oregonian is still about eight 2 percent lower than the national average. At the same time, the state’s high and rising housing costs mean that Oregon’s cost of 3 living is 15 percent higher than the national average. In other words, the average Oregonian earns less, but pays more for basic items—like housing, food, and transportation—than the average American. Oregon legislators and other policy makers must face the reality that the state simply cannot afford costly new programs or costly expansions to existing programs. In reality, Oregon cannot afford to continue some of the existing programs that drain the state’s budget year after year. This report identifies several straightforward solutions to the state’s current budget crisis for savings of nearly $1.3 billion in the 2017-19 biennium. Each of these solutions are “doable.” In addition, for agencies not listed in this report, reductions equal to across-the-board reductions of about three percent from Governor Brown’s budget would eliminate the shortfall she identified. If implemented, none of the tax and fee increases outlined in the Governor’s budget would be necessary.

READ THE FULL REPORT HERE

 

Read Blog Detail

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

FOR IMMEDIATE RELEASE

Media Contacts:

Steve Buckstein (503) 242-0900

Jeff Kropf (541) 729-6229

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

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

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

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

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

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

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

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

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

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

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

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

###

Read Blog Detail
Want-Ads-Series-cm

Minimum Wage – Its Role in the Youth Employment Crisis

By Randall Pozdena, Ph.D.

Introduction and Executive Summary

This paper examines the history of the imposition of a minimum wage, studies of its effects on youth, and the implications for current policy. A novel analytical technique produces important new findings regarding the adverse effects of the minimum wage on youth.

This topic is timely. Even as the International Labour Organization has declared that there is a worldwide “youth employment crisis,”[1] a record number of U.S. states recently authorized minimum wage rate increases, either through legislation or ballot initiative. According to the National Council of State Legislators (2016), in 2014 and 2015, 11 enacted increases through legislation[2] and four through ballot initiative.[3] Thus far in 2016, two states, California and Oregon, have enacted new minimum wage policies that sharply increase their minimum wage levels, even after adjustments for inflation. Approximately three-fifths of the states’ minimum wage levels exceed the federal minimum wage rate.

This has important bearing on the employment status of youth,[4] because many economists believe that sharp increases in the minimum wage affect youth employment particularly negatively.[5] Despite these regressive effects on this vulnerable class of workers, their plight is largely ignored in policy discussions. This paper reviews the theory of minimum wage impacts and more than four decades of others’ research on the impacts of raising the minimum wage.  I then use a statistical technique that has not been widely applied in the literature to develop my own estimates of impacts on the youth age cohort. I conclude from these efforts the following:

  • Basic economic theory argues that wage levels are a consequence of the interactions of demand and supply conditions in labor markets. Wages are not a parameter of the economy that can be manipulated without consequence. Artificially raising the wage in a market economy will result in the use of less of the affected labor. The resulting reduction in employment will occur among workers already at a productivity disadvantage relative to others.
  • Thus, youth wages are low because many are unskilled, lack work experience, and do not contribute sufficient value in the workplace to justify high wages. Since skill and productivity are acquired through accretion of experience and training, imposing a minimum wage that reduces youth employment has the potential to cause collateral damage. Specifically, doing so retards the future prospects of those who suffer the reduction in employment.
  • Most of the very large literature on the impact of minimum wages supports the notion that increases in minimum wages impairs the employment prospects of youth and discourages them from participating in the labor force.
  • Some of the key studies on which pro-minimum wage advocates rely have been criticized for poor design or implementation.

My approach confirms the view that the negative effects of minimum wage policy on youth are, in fact, material economically. I argue and demonstrate statistically that the adverse effects on youth employment and labor force participation are not only significant, but also causally related to minimum wage increases, and persistent. That is, the impacts of a one-time increase in the real (inflation-adjusted) minimum wage do not dissipate over time.

I then apply my findings to Oregon and find:

  • Oregon’s policy of indexing Oregon’s minimum wage to the Consumer Price Index (CPI)–introduced in 2002–resulted in a progressively more damaging minimum wage. This caused, by my calculation, a loss of 32,000 and 31,000 youth labor force participants and workers, respectively, over the 2002-2014 period.
  • Under Oregon’s new law passed in 2016, the youth age cohort in Oregon will lose another 52,000 jobs by 2022. This is over 22 percent of the 2015 youth labor force. Also, 63,000 more Oregon youth will withdraw from the labor force. This is over 26 percent of the 2015 youth labor force.
  • Even beyond 2023, when the graduated increases under the new law have ceased, Oregon youth will continue to lose access to employment. This is both because of the persistent (albeit weakening) echoes of the 2016 law changes and Oregon’s planned return to the 2002 indexing practice.

It is believed that labor organizations are advancing the current frenzy of large minimum wage hikes. It is argued that they see benefits to themselves––partly because their own contracts link their compensation to the minimum wage. Policy makers have joined the movement, having focused on the notion that minimum wages result in an improved distribution of income. The reality is that today’s policies will impose on many youth the cruelest minimum wage of all––a wage of zero. From this author’s perspective, regulatory intrusions into market wage-setting processes should not be undertaken lightly, both on first principles and my own and others’ analyses. If they do, as done by the International Labour Organization, then they also have to be open about their potential culpability for creating the “youth employment crisis” that they themselves now decry.

[1] ILO (2014).

[2] Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont, West Virginia, and D.C.

[3] Alaska, Arkansas, Nebraska, and South Dakota.

[4] Youth is conventionally defined as the cohort of individuals between the ages of 16 and 24.

[5] In a 1995 survey conducted the University of New Hampshire survey center, 83 percent of economists held the view that a proposed increase would have negative effects on youth employment. https://www.minimumwage.com/2015/11/survey-of-us-economists-on-a-15-federal-minimum-wage/, retrieved April 6, 2016. In a more recent survey by IGM, an expert panel was asked specifically if, under a $15 dollar minimum wage in 2020, whether “the employment rate for low-wage US workers will be substantially lower than it would be under the status quo.” Only 24 percent disagreed or strongly disagreed. Thirty-eight percent were uncertain. Note that the question was not selectively posed for the youth age group. See, www.igmchicago.org/igm-economic-experts-panel, retrieved May 5, 2016.

READ THE FULL REPORT HERE

Read Blog Detail

Cascade Report Finds Long-Term Negative Impacts on Youth from Oregon’s New Minimum Wage Policy

FOR IMMEDIATE RELEASE

Media Contact:

Steve Buckstein

Senior Policy Analyst

Cascade Policy Institute

(503) 242-0900

steven@cascadepolicy.org

PORTLAND, Ore. – Cascade Policy Institute released a report today that has foreboding implications for young people in our state. The report was commissioned after passage of SB 1532 earlier this year, which phases in large increases in Oregon’s minimum wage. The law mandates minimum wages by 2022 of $14.75 in the Portland metro area, and $13.50 and $12.50 respectively in other metro areas and rural areas. These rates must be adjusted after 2022 by any increases in the Consumer Price Index.

Authored by Oregon economist Randall Pozdena, Ph.D., Minimum Wage: Its Role in the Youth Employment Crisis analyzes the history, theory, and empirical impacts of minimum wage regulation. It focuses on youth aged 16 to 24 because they are most likely to be affected by minimum wage increases as new entrants into the labor force. The report uses data and statistical techniques that, for the first time, allow measurement of how the impact of an increase in the minimum wage evolves over time, not just in the period immediately after the increase. In addition, it allows prediction of the interaction of the minimum wage shock with employment, wages, and labor force participation over time.

“This report confirms ominous long-term negative consequences of minimum wage increases, not just for those currently 16 to 24 years old, but for future potential workers coming into this age group,” said Steve Buckstein, Cascade’s founder and Senior Policy Analyst. 

Key findings of the report: 

  • Increases in the minimum wage significantly depress youth employment and labor force participation. The share of youth employed falls by 3 percent in just the first six months after a 10 percent increase in the minimum wage, and it falls by 6 percent after a year. Similarly, the share of youth participating in the labor force declines by 4 percent at 6 months and 6 percent at 18 months.
  • Contrary to the claims of minimum wage advocates that higher minimum wages create a cascade of even greater increases, youth wages only rise by the amount of the mandated increase—and then only for those lucky enough to find a minimum wage job. Collectively for all youth, what wage increases occur are more than offset by condemnation of a large share of youth to a zero wage; namely, to unemployment.
  • Even a one-time increase in the minimum wage persistently continues to depress the share of youth who are employed. Specifically, statistically significant employment impacts can be expected to cumulate over time for at least five years into the future. Even seemingly innocuous increases in the minimum wage—such as Oregon’s prior 2002 policy of adjusting for the CPI—can significantly depress youth employment. Since the implementation of that adjustment policy fourteen years ago, the previous 56 percent share of youth employed has fallen to just 46 percent, an 18 percent decline. Thus, it appears that inflexible, automatic CPI indexing is inferior to letting markets set youth wage rates.
  • Portland metro area youth likely will suffer the most, with the share of employed youth falling by 30 percent by 2022. Youth in the state’s other metro areas will see a 20 percent decline, and youth in designated rural areas of Oregon will see a 15 percent decline.

Buckstein and Pozdena conclude that “even while bowing to the reality of economic differences between urban and rural areas of the state in its latest minimum wage law, Oregon has made a public policy mistake that predictably will be paid for by many of the state’s youngest current and soon-to-be potential members of the youth labor force.”

The report, Minimum Wage: Its Role in the Youth Employment Crisis, is available here.

Founded in 1991, Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. For more information, visit cascadepolicy.org.

###

Read Blog Detail
Residential-real-estate-loan,-financial-concept--House-model,-coins,-US-dollar-bag,-white-clock-on-a-table,-depicts-home-loan-or-borrowing-money-to-buy--cm

Using Disparate Impact to Restore Housing Affordability and Property Rights

By Randall O’Toole

Executive Summary

Portland, Bend, Medford, and to a lesser degree other Oregon cities are in the midst of a housing crisis. Median home prices have rapidly grown and are now four or more times greater than median family incomes. As recently as 1990, median prices were only twice median incomes; housing starts to become unaffordable when median prices are more than three times median incomes.

The Oregon legislature and various cities have applied band-aid solutions to this problem; but none of them will work and some, such as inclusionary zoning, will actually make housing less affordable. That is because none of these solutions address the real problem, which is that the urban growth boundaries and other land-use restrictions imposed by the Land Conservation and Development Commission, Metro, and city and county governments have made it impossible for builders to keep up with the demand for new housing.

Growth boundaries and similar restrictions have three negative effects on low-income minorities. First, they make housing more expensive. Second, they make housing prices more volatile, which makes buying a home riskier than in places that do not have such restrictions. Third, they are a major—if not the major—contributor to growing wealth inequality as barriers to homeownership have dramatically increased the share of families who cannot afford or must go deeply into debt to buy their own homes.

Fortunately, a June 2015 Supreme Court decision offers a legal remedy to this problem. This decision authorized the use of disparate-impact considerations in judging whether government agencies are following the Fair Housing Act. That act specifically forbids the disparate treatment of minorities—that is, intentional discrimination in housing sales and rentals. The disparate-impact doctrine asserts that policies such as zoning and land-use regulation that make it more difficult for minorities to obtain housing—even if the policies are not intended to do so—are equally in violation of the law unless the policies can be “justified by a legitimate rationale.”

According to disparate-impact regulations published by the Department of Housing and Urban Development in February 2013, prohibited conduct includes “enacting or implementing land-use rules, ordinances, policies, or procedures that restrict or deny housing opportunities or otherwise make unavailable or deny dwellings to persons because of race, color, religion, sex, handicap, familial status, or national origin.” Numerous land-use rules, ordinances, and policies increase housing costs. Since some protected minorities, such as blacks, are more likely to have lower-than-average incomes, any such rules or policies reduce their housing opportunities and therefore potentially violate the Fair Housing Act.

HUD’s implementation, known as Affirmatively Furthering Fair Housing, focuses on ending income segregation of communities as a means of ending racial segregation. However, this will be a costly policy that will do little to make housing more affordable to most low-income minority families.

As an alternative, fair-housing advocates should question policies that increase housing costs by intruding on private property rights. These include growth-management tools such as urban growth boundaries, the use of eminent domain for economic development, rent control, inclusionary zoning, and excessive impact fees, all of which benefit a few at everyone else’s expense. In approving the disparate-impact doctrine, the Supreme Court has offered a tool to both affordable-housing advocates and property-rights advocates for undoing these rules and policies that make housing less affordable.

READ FULL REPORT HERE

Read Blog Detail

New Report Highlights Civil Rights Implications of Oregon Land Use Laws, Urban Growth Boundaries

FOR IMMEDIATE RELEASE

Media Contact:
John A. Charles, Jr.

john@cascadepolicy.org

503-242-0900

PORTLAND, Ore. – A new report released today by Cascade Policy Institute demonstrates that Portland’s rapidly growing housing prices are a major hardship on newcomers, renters, and low-income families. The report claims the ultimate source of Portland’s crisis in housing affordability is the region’s urban growth boundary and that minorities suffer the most from the consequences of high housing prices.

The report, Using Disparate Impact to Restore Housing Affordability and Property Rights, is authored by Randal O’Toole, an adjunct scholar with Cascade Policy Institute, Oregon’s free market public policy research organization, and the author of The Vanishing Automobile and Other Urban Myths.

The report claims the ultimate source of Portland’s crisis in housing affordability is the region’s urban growth boundary:

“The Oregon legislature and various cities have applied band-aid solutions to this problem; but none of them will work and some, such as inclusionary zoning, will actually make housing less affordable. That is because none of these solutions address the real problem, which is that the urban growth boundaries and other land-use restrictions imposed by the Land Conservation and Development Commission, Metro, and city and county governments have made it impossible for builders to keep up with the demand for new housing.”

“Common sense says that restricting the supply of something for which demand is increasing will cause prices to go up,” says O’Toole, who cites the findings of economic studies from Harvard, the Federal Reserve Board, the University of California, and the University of Washington, among others, to conclude that strict land-use regulation is the main cause of unaffordable housing.

Other policies which make Portland-area housing less affordable, the report claims, include lengthy delays in the permitting process, onerous impact fees, and architectural design codes. But these policies would have little effect if developers could meet market demand by building homes in unregulated areas outside of existing cities. Urban growth boundaries not only limit supply, but they shield city governments from outside competition.

“These policies effectively discriminate against low-income blacks and other minorities,” says O’Toole. “Under the 2015 Supreme Court ruling, Texas Department of Housing v. Inclusive Communities Project, they also violate the Fair Housing Act just as much as if Portland put out a sign saying, ‘No blacks allowed.’”

O’Toole explains how this Court decision could have a profound impact on Portland’s housing market. He says the Supreme Court’s ruling said that land use policies that make housing more expensive can be legal under the Fair Housing Act only if they have a legitimate goal and there is no other way of accomplishing that goal without making housing less affordable.

According to Cascade Policy Institute CEO John A. Charles, Jr., “Policymakers think the solution to our housing shortage is to build more tax-subsidized apartments, but simply deregulating the land markets would result in far greater housing supply at lower cost.”

The report, Using Disparate Impact to Restore Housing Affordability and Property Rights, is available here.

Founded in 1991, Cascade Policy Institute is a nonprofit, nonpartisan public policy research and educational organization that focuses on state and local issues in Oregon. Cascade’s mission is to develop and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. For more information, visit cascadepolicy.org.

###

Read Blog Detail

Earning Their Keep: Do Elected Officials in the Portland Region Show up for Meetings?

By Nick Pangares and John A. Charles, Jr.

Most elected officials who serve on school boards or city councils do not get paid for service. However, for at least five governing jurisdictions in the Portland metro region, councilors do receive compensation. Those jurisdictions are: the Commissions for Multnomah, Clackamas, and Washington Counties; the Portland City Council; and the Metro Council.

This research examined the attendance records for all regularly scheduled meetings for the five jurisdictions during 2014 and 2015. In some cases, there were also “board briefings” or “work sessions” to attend.

In general, most elected officials attended a high percentage of meetings, either by being present or by participating via telephone. Group participation rates usually exceeded 85%, on average.

Washington County Commissioner Greg Malinowski had the best attendance record of all elected officials over the two-year period – 100% for both years. Multnomah County Commissioner Judy Shiprack had the worst two-year record – 70% for board briefings, and 80% for board meetings. She is termed-out and not running for re-election.

Summaries of the attendance records for all elected officials are below. The numbers indicate the percent of meetings where the officials participated.

 

Clackamas County Commission

Regular Commission Meetings

 

Ludlow Savas Schrader Smith Bernard
2014 98% 100% 82% 89% 89%
2015 98% 95% 93% 93% 89%

 

 

Multnomah County Commission

Regular Commission Meetings

 

Madrigal Kafoury McKeel Wendt Baily Smith Shiprack
2014 100% 98% 88% 98% 86% 90% 83%
2015 n/a 92% 97% n/a 89% 95% 77%

 

 

Multnomah County Commission

Regular Briefings

 

  Madrigal Kafoury McKeel Wendt Baily Smith Shiprack
               
2014 100% 93% 83% 97% 94% 90% 70%
2015 n/a 100% 100% n/a 65% 90% 70%

 

 

Washington County Commission

Regular Commission Meetings

 

  Duyck Malinowski Schouten Rogers Terry
           
2014 94% 100% 87% 87% 94%
2015 91% 100% 91% 88% 85%

 

 

Portland City Council

Regular Meetings

 

  Hales Fish Fritz Novick Saltzman
           
2014 92% 83% 92% 94% 85%
2015 97% 92% 97% 92% 85%

 

 

Metro Council

Regular Meetings

 

  Hughes Chase Craddick Harrington Stacey Collette Dirksen
               
2014 84% 97% 95% 97% 97% 97% 89%
2015 93% 98% 95% 98% 100% 98% 93%

 

 

Metro Council

Regular Work Sessions

 

  Hughes Chase Craddick Harrington Stacey Collette Dirksen
               
2014 85% 94% 96% 96% 96% 96% 94%
2015 89% 93% 93% 95% 98% 91% 91%

 

While taxpayers probably expect officials to show up, does attendance really matter? That depends. Strictly speaking, yes. Each body must have a quorum of members present to conduct business. If too many officials skip meetings, decisions can’t be made. So even if individual commissioners are ineffective, a minimum number of them are needed at any given meeting.

Moreover, at most public meetings where agenda items will be voted on, public testimony will be taken. Constituents have a right to expect that when they take the trouble to show up with prepared testimony, elected officials will be there to listen.

However, attendance has little to do with influence or effectiveness. Public meetings are a form of street theatre; all the key decisions have been made ahead of time behind closed doors. So an elected official with a spotty attendance record could easily be the most important member of the body – it’s just that the heavy lifting is being done out of sight.

For example, Portland City Commissioner Dan Saltzman had the lowest two-year record of attendance among all City Commissioners, but few observers would consider him ineffective. To the contrary, he may be the most influential member of the Council, especially with a Mayor who is not running for re-election.

Metro Presiding Officer Tom Hughes also had the worst attendance record among his peers. Yet any Council member hoping to advance new policy would hardly consider Councilor Hughes unimportant.

There are also extenuating circumstances. What we see may not reflect the whole story. According to Commissioner Malinowski:

“The issue of absences turns out to be apples and oranges most of the time. This is partially because 4 out of the 5 commissioners are part time, and most of the time the reason Commissioners miss meeting is because of prior obligations regarding outside County business. If you compare absences with the schedule of each commissioner, this is usually the case. However, meeting attendance and communication is critical, particularly when technical questions about County business need to be answered.”

When asked if there should be a required minimum participation rate for meetings, Commissioner Malinowski responded:

“Overall the honor system of attendance is working, and I don’t see a need for a minimum attendance rate requirement. Many times what happens is the Commission will cancel meetings if two or more Commissioners are going to be absent. This usually happens on Tuesday evening meetings.”

The value of attendance is ultimately determined by voters. Those who are satisfied with the performance of their representative may overlook a mediocre participation rate.

However, voters should remember two things. First, for the five jurisdictions featured in this report, elected officials get paid to show up. They are not volunteers.

Second, attendance does matter. If everyone takes a night off, no business gets transacted. And running a government entity is a business.

About the authors: Nick Pangares is a research associate at Cascade Policy Institute. John A. Charles, Jr. is President and CEO of Cascade Policy Institute and also serves on the board of a rural water district in Clackamas County. Volunteer Bob Ludlum assisted with data gathering for this report.

Read Blog Detail

Cascade Report Exposes $2.6 Billion in Unfunded Liabilities

Cascade Policy Institute has released a new report showing that Oregon public employers have more than $2.6 billion in unfunded actuarially accrued liabilities associated with non-pension benefits promised to current and future retirees. Referred to as “Other Post-Employment Benefits,” or OPEB, these liabilities include various forms of deferred compensation.

The Governmental Accounting Standards Board mandates that public employers clearly state financial obligations for OPEB in their comprehensive annual financial reports. However, employers are not required to set up trust funds to pay for these promises. As a result, the Cascade review of 125 financial reports of state, regional, and local governments shows that most employers have no money set aside and are paying for OPEB obligations out of annual operating revenues. This cannibalizes funds needed for actual services.

The Cascade paper is a call to action for the legislature to impose some form of fiscal discipline on public employers by requiring them to make annual contributions to OPEB trust funds. Legislation to accomplish this has been considered in past sessions but never approved.

READ FULL REPORT HERE.

Read Blog Detail

Unfunded OPEB Liabilities for Oregon Public Employers: A $2.6 Billion Time Bomb

By William Newell with John Glennon and Brandon Maxwell

Most Oregon taxpayers are likely to have heard of the multi-billion dollar problem of unfunded pension debt for public sector workers. Oregon’s Public Employee Retirement System (PERS) is one of the most generous in the country, and paying for it has forced cities, counties, and school districts to repeatedly cut services to current residents in order to transfer large amounts of revenue to retirees. Despite robust stock market returns on PERS investments, the PERS fund is still billions of dollars short of being fully funded.

While this problem has been well chronicled by the news media over the past 15 years, there is another aspect of retirement debt that has received much less scrutiny: Other Post-Employment Benefits (OPEB). These are benefits promised to employees that will be paid out during retirement years in addition to pensions. Such promises typically include health care coverage, but may also include life insurance, longterm disability insurance, or any other benefit negotiated by the employee.

More than a decade ago, the Government Accounting Standards Board (GASB) recognized that such promises imposed real obligations on public employers, but the amount was not being specifically identified in annual financial reports. Therefore, GASB adopted Statement 45, which requires that all units of government undertake regular valuations of their OPEB obligations and clearly state those obligations in annual financial reports.

OPEB audits must calculate liabilities for all current and future retirees, amortized over a period not to exceed 30 years. Based on these calculations, actuaries determine what the Annual Required Contribution (ARC) would be if each entity paid for current OPEB benefits as well as future obligations, on an amortized basis.

However, the ARC is not actually mandatory, despite use of the word “required;” governments must publish information about net OPEB liabilities, but are not required to create OPEB trust funds or pay anything for future obligations.

READ THE FULL REPORT HERE

 

 

 

Read Blog Detail

Report Shows Oregon Public Employment Contracts Are a Ticking Time Bomb

PORTLAND, Ore. – Cascade Policy Institute today announced the release of a new report showing that Oregon public employers have more than $2.6 billion in unfunded actuarially accrued liabilities associated with non-pension benefits promised to current and future retirees. These benefits, often referred to as “Other Post-Employment Benefits (OPEB),” typically include health care coverage for retirees, but may include other forms of deferred compensation such as life insurance.

A decade ago, the Governmental Accounting Standards Board (GASB) mandated that public employers begin clearly stating financial obligations for OPEB in their comprehensive annual financial reports. However, employers were not required to set up trust funds to pay for these promises. As a result, the Cascade review of 125 financial reports of state, regional, and local governments shows that most employers have no money set aside and are paying for OPEB obligations out of annual operating revenues. This cannibalizes funds needed for actual services.

The Portland transit agency TriMet has the biggest unfunded OPEB liability, estimated to be $950 million as of January 2014. Other employers with relatively large unfunded liabilities include Lebanon school district, Tillamook County, and the city of Corvallis.

Cascade President and CEO John A. Charles, Jr. said, “Over a period of decades, Oregon public employers have deliberately back-loaded employment contracts so that the cost of generous compensation packages would not become apparent until decades later, when the decision-makers themselves would be long gone. Those time bombs are now exploding, harming public school students, transit riders, and others who rely on public services.”

The Cascade paper is a call to action for the legislature to impose some form of fiscal discipline on public employers by requiring them to make annual contributions to OPEB trust funds. Legislation to accomplish this has been considered in past sessions but never approved.

In commenting on this failure, Charles noted, “Actuaries always state what it would take to amortize OPEB liabilities over a 25-year period; these are referred to as ‘annual required contributions (ARC).’ Unfortunately, most government managers treat the ARC as merely a suggestion. All the Oregon legislature has to do is pass a one-page bill reaffirming that ‘required’ means ‘required.’ How hard can that be?”

The Cascade report, Unfunded OPEB Liabilities for Oregon Public Employers: A $2.6 Billion Time Bomb, can be downloaded here.

Read Blog Detail

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.

Read Blog Detail

Time to Reset Oregon’s Budget and Recharge Our Economy: Facing Reality 2013

The Oregon legislature is struggling to balance the state budget while meeting the perceived need to adequately fund education, health care, public safety, and other services. In 2010, Cascade and Americans for Prosperity – Oregon published our first Facing Reality report, offering state legislators an opportunity to “reset” state government using the time-tested principles of limited government and pro-growth economic policies. While this opportunity was mostly ignored in the 2011 legislative session, we decided to update several key proposals from that report, add one more, and present them to the 2013 legislature.

We have just released our new report, Facing Reality 2013. Together, its proposals can save over one billion dollars in the state budget, and add 50,000 jobs over the next five years without any cost to taxpayers. These savings and economic benefits more than counter any claims that we need to raise taxes on hardworking Oregonians and businesses.

Here, in brief, are these proposals and their potential benefits:

FACING REALITY 2013 Components

Benefit Summary

Privatize liquor distribution and sales

$8 million biennial revenue

Reduce corrections costs

$68 million biennial savings

Eliminate the PERS pick-up

$772 million biennial savings

Align state employee compensation with private sector compensation

$160 million biennial savings

Enact Right-to-Work legislation

50,000 more people working in five years; 110,000 more working in ten years.

 

$2.7 billion more in wage and salary income in five years; $7.0 billion more in ten years.

 

14 percent more taxpaying families per year moving into Oregon from non-right-to-work states.

 

Our Right to Work proposal stems from Cascade’s 2012 report, Right to Work Is Right for Oregon, which broke new ground by covering 70 years of data and every state, and relying on what we believe to be the largest datasets ever used to study the impacts of right-to-work laws. Coincidentally, an initiative petition may be circulated soon to grant such freedom to all Oregon public employees. If that happens, Cascade will be in the forefront of making the economic and moral case for its approval.

Decades of well-meaning politicians, bureaucrats, and special interests have grown state government spending without regard for long-term consequences, producing an unsustainable budgetary premise that threatens Oregon’s financial stability. Long-term debt, unfunded liabilities, inefficient programs, unnecessary spending, and bloated bureaucracies all contribute to this bleak future. Along with higher tax rates, fee increases, and unfunded mandates that make it harder for businesses to produce a profit, we face the perfect storm that manifests itself in Oregon’s budget and economy today. Without a drastic change in direction, it will only get worse.

Unfortunately, the demonization of corporations and small businesses during the debate over tax-increase Measures 66 and 67 which passed in 2010, along with proposed regulations and higher state fees, has reinforced the impression that Oregon is not business-friendly. This must be addressed immediately if long-term investments in expanded business capacity are to occur.

The proposals in Facing Reality 2013 represent significant changes in the way Oregon government operates. More will need to be done, but these are a good start. We encourage all Oregonians to study them and ask their state legislators to do the same. It is not too late to refocus Oregon government on its core functions, reduce its costs, and remove it from areas in which it has no business, such as the distribution of liquor.

While we recognize the enormity of the politics that surround these concepts, we believe they are essential if we are to “recharge” our economy and ensure Oregon’s long-term future. Without them, Oregon’s future looks dim. With them, the future is as bright as we want it to be. 

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

Read Blog Detail

Coalition Releases New ‘Facing Reality’ Budget Report

For Immediate Release

April 8, 2013

 

PORTLAND, Ore. – Americans for Prosperity-Oregon and Cascade Policy Institute have released a new report, Facing Reality 2013, which calls attention to limited government and pro-growth solutions to current Oregon budget problems.

 

“The Legislature continues to give citizens the false choice of either failing our children or increasing taxes,” stated Karla Kay Edwards, Oregon State Director of Americans for Prosperity. “Facing Reality clearly demonstrates that Oregon can invest in our children’s education without negatively impacting our slow economic recovery.”

 

The report is based on a “Reality Based Budgeting” approach, encouraging political leaders to face reality, stop procrastinating, and adopt ideas to lower the cost of government and get the economy going again.

 

“It’s not too late to refocus Oregon government on its core functions, reduce costs and get out of areas it has no business in, such as the distribution of liquor,” said Steve Buckstein, Founder and Senior Policy Analyst at Cascade Policy Institute.

 

The report focuses on five public policy areas:

– Privatize Liquor Distribution and Sales

– Reduce Corrections Costs

– Eliminate the PERS Pick-Up

– Align State Employee Compensation with Private Sector Compensation

– Enact Right to Work Legislation

 

With solutions to controversial topics such as PERS reform, the report authors challenge legislative leaders to take effective steps to recharge the state economy.

 

“It is time for the Oregon Legislature to ‘Face Reality,’ as Oregonians have had to do, and adopt these non-partisan recommendations,” said Edwards.

###

Click here to read the report.

Read Blog Detail

New Report: The Right to Work Is Right for Oregon

The Right to Work Is Right for Oregon: A Comprehensive Analysis of the Economic Benefits from Enacting a Right-to-Work Law

By Randall Pozdena, Ph.D. and Eric Fruits, Ph.D.
Cascade Policy Institute • February 2012
Click here to read the full report.

Read Blog Detail

Facing Reality

By Americans for Prosperity and Cascade Policy Institute

Download the Full Report Here

The immediate effects of the most recent recession have hit Oregon especially hard. Declining incomes, diminished job opportunities and depressed property values have stalled spending and shrunk savings. In addition to these immediate effects are the longer-term effects that are just now being projected. State government in Oregon will emerge from the recession with reduced revenues and a reduced potential for economic growth to sustain the rates of state government spending growth enacted prior to the recession. The most recent revenue forecast projects general fund revenues to be $1.27 billion lower than forecast at the end of the 2009 legislative session. Last year, Oregon Governor Kulongoski declared, “Oregon cannot continue to fund public services at the levels funded today.” Rather than make minor revisions, Governor Kulongoski argued a “reset” is necessary, charging that “we must re-think the way we deliver the services provided by state government.”

(more…)

Read Blog Detail