Category: Tax and Budget

Why Cap-and-Trade Can’t Be “Tweaked”

By Eric Fruits, Ph.D.

Oregon is less than three months away from the next meeting of the Legislature and cap-and-trade is coming back.

While California is setting the cap-and-trade example with sky-high power rates and rolling blackouts, Oregon’s State Senator Michael Dembrow is reworking the bill that failed to get enough Democratic votes earlier this year.

Last summer’s attempt at imposing cap-and-trade gave rise to the Timber Unity movement, who descended on the capitol with hundreds of log trucks and whose Facebook group has more than 53,000 members.

The latest tweaks are aimed at bringing skeptical Democrats on board and stifling Republican dissent.

But, here’s the thing…. Cap-and-trade can’t be tweaked. The proposal is fundamentally flawed. It’s all pain and no gain. In fact, the only way cap-and-trade “works” is if the pain is bigger than the gain.

The state itself estimates gas prices will increase by more than 20 cents a gallon in the first year alone, which would give Oregon the third highest prices in the country—below California and Hawaii. No amount of tweaking will make that go away.

Put simply, cap-and-trade won’t work in Oregon. And no amount of reworking will make it work. Our legislators can avoid log trucks rolling through Salem and rolling blackouts throughout the state by shelving their plans for cap-and-trade.

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

Click here for PDF version:

11-6-19-Why_Cap_and_Trade_Can’t_Be_Tweaked”PDF

Read Blog Detail
Stills-in-a-whisky-distillery--cm

Oregon Distilleries Deserve Better

By Helen Cook

Oregon has a booming craft distilling industry. That’s why it’s so surprising that one popular distiller is calling it quits. Mike Selberg, owner of Cannon Beach Distillery, announced in June that he was forced to close up shop. This is largely because of Oregon’s tax structure on distilleries.

I decided to reach out to other Oregon distilleries for their situations. The resounding message was that something needs to change. Local distillers are taxed on the dollar value of their tasting room sales rather than on alcohol content. This ultimately punishes small-volume, high-price distillers and discourages small distillers from thriving as local businesses.

Oregon is a “Liquor Control State.” This means that the Oregon Liquor Control Commission (OLCC) is the sole distributor of spirits. Distillers can sell spirits in Oregon liquor stores through the OLCC’s distribution network as well as out of their own tasting rooms, but the distillers’ products are owned by the state of Oregon.

Similarly to licensed liquor stores, tasting room owners are commissioned by the state to sell their spirits. This means that a certain percentage of each liquor sale from a tasting room goes to the OLCC every week. This percentage can be detrimental to distilleries.

While several distilleries, such as Stone Barn Brandyworks, value the distribution network that the OLCC offers, the majority acknowledge that this overall structure does not benefit tasting rooms. Sebastian Deegan at Stone Barn Brandyworks stated that 38-40% of his distillery’s gross income goes to the state because of the “tax” on his tasting room. “I don’t think there is a business in the country that can operate with that overhead.” On average, Oregon distillers currently pay 33% of gross retail sales.

Tom Burkleaux runs New Deal Distillery and serves as Vice-President for Oregon’s Distillery Guild. “The state of Oregon takes more than we take,” he said. “Everyone is frustrated. The cards are definitely stacked against a small distillery.”

Larger distilleries have an advantage because they generally produce cheaper spirits in higher volume. Since money is collected based on the retail price, distilleries that produce high volumes of lower priced spirits are not adversely affected by the system. However, smaller distilleries hoping to produce high-end goods are discouraged from this craft since manufacturing and the retail price cost significantly more.

Some distillers might take a similar approach to Mike Selberg’s at Cannon Beach Distillery: move to a distiller-friendly state. But Tom doesn’t think many will follow in Mike’s footsteps. “Most people would close up shop rather than move. You want to start your business in your home.”

Michelle Ly from Vinn Distillers noted this, stating: “I would say that we do really pride ourselves on wanting to be here. Oregon is known for supporting local business and being a tight-knit community, so I think if we were given that flexibility, we would all be doing much better and contributing to the economy of Oregon.” Vinn Distillery will have to close its tasting room this summer largely because of this tax burden.

Distillers hoped that legislation could be passed to remove distillery tasting rooms from this structure. But such legislation has already been suggested without much success or interest from legislators. Tad Seestedt from Ransom Spirits noted that “there are few legislators that really would like to see parity and want to help the Oregon’s distilling community.” Other distillers shared the same sentiment.

Ultimately, tasting room sales would barely make a dent if removed from OLCC’s $1.22 billion yearly revenue. Distilleries remitted $2,775,462 to the state as net profit from their sales in 2018. While this is pocket change for the OLCC, this remittance is significant for small distilleries.

Oregonians shouldn’t have to choose between their home, their business, and the quality of their product, especially when their craft is a point of pride for Oregon residents. Our local distilleries deserve better from our legislature and the state of Oregon.

Helen Cook is a Research Associate at the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. She can be reached at info@cascadepolicy.org.

Click here for PDF version:

19-21-Oregon_Distilleries_Deserve_BetterPDF-1

Read Blog Detail
Man-opening-mail-in-ballot-cm

Dumbing Down Voters

By John A. Charles, Jr.

In 2016 Val Hoyle, then a legislator from Eugene, introduced a bill to guarantee postage-paid envelopes for Oregon’s vote-by-mail system. She argued that having to find and apply a stamp was a barrier to voter participation, especially to young people.

That idea was widely ridiculed, and the bill died.

Unfortunately, the political culture has changed. In March the Oregon legislature quietly passed SB 861, which requires the state to pay for ballot envelopes that can be returned by business reply mail. It will go into effect on or after January 1, 2020.

Implementation will cost an estimated $1.6 million to the state General Fund for the first 18 months. There will be an additional cost to Counties of $84,000 to destroy obsolete ballot return envelopes.

Is Oregon really so wealthy that we should spend $1.6 million just to ensure that voters don’t have to find a first class stamp? I don’t think so. Instead of treating postage as a voting barrier, perhaps we should treat it as an entrance exam.

The test would be simple: If you can’t figure out how to use stamps, or you are incapable of hand-delivering your ballot to the county elections office, you are not qualified to vote.

We might get better results.

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

Click here for PDF version:

10-2-19-Dumbing_Down_VotersPDF

Read Blog Detail
consept-of-rising-gas-prices-cm

Portland’s Temporary Gas Tax Should Stay Just That

By Rachel Dawson

Portland’s temporary gas tax should stay just that: temporary.

Portland voters approved the 10 cent per gallon gas tax three years ago to fund a road repair and traffic safety program. Since its implementation, the program has failed to live up to all expectations.

Gasoline-using vehicles pay for 100% of the tax but only receive a little over half the benefits. Only 56% of tax revenues go to street maintenance projects, while 44% is spent on pedestrian and bicycle safety.

The program is also poorly managed. A 2019 audit on the tax found that program oversight has been ineffective, many projects have not been completed on time, revenue goals have not been met, and completed projects have cost $900,000 more than what was told to voters.

City staff admitted that project schedules were not realistic and took longer to begin “because the scopes of individual projects were not yet well-defined.” This lackadaisical approach to project planning would never fly in the private sector, so why is the city getting a pass?

Portland commissioner Chloe Eudaly will send the expiring gas tax back to voters in May 2020. The region needs better roads, not another poorly managed tax. For these reasons, Portlanders should vote “no” on extending the gas tax in 2020.

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

Click here for PDF version:

9-4-19-Portland’s_Temporary_Gas_Tax_Should_Stay_Just_ThatPDF-1

Read Blog Detail
Portland-Vista-cm

Residents Say Portland is Not the City that Works

By Eric Fruits, Ph.D.

What if the self-proclaimed “City that Works” isn’t working? That’s what Portland residents are saying.

Last week the City of Portland published its most recent survey of city residents. Nearly 90 percent of those surveyed are dissatisfied with the city’s response to homelessness and almost two-thirds are dissatisfied with traffic congestion on their daily commutes.

This outrage comes after voters approved hundreds of millions of dollars for affordable housing projects and steep hikes in gas taxes to improve roads. Clearly, more money is not the answer: The more the city spends, the worse things get.

Council’s renter relocation payments, inclusionary zoning, and renter screening rules are shrinking the supply of affordable housing. While the city’s population is growing, it’s reducing its road infrastructure through road diets and replacing automobile lanes with dedicated bus and bike lanes.

Instead of punishing property owners for renting apartments, let’s loosen regulations on building and renting truly affordable housing. Instead of bringing traffic to a standstill, let’s add traffic lanes to foster a safe and speedy flow of auto and truck traffic. These aren’t radical ideas. In fact, these were Portland’s policies when it really was “The City that Worked.”

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

Click here for PDF version:

8-28-19-Residents_Say_Portland_is_Not_the_City_that_WorksPDF

Read Blog Detail
Worried-couple-reading-agreement-after-moving-to-new-home-cm

Stop Raising Rents in Portland

By Micah Perry

On Wednesday, August 7, 2019, the Portland City Council passed yet another ordinance that will harm the housing market in the city. Landlords will now be required to register all their rental units with the city and pay a $60 yearly registration fee for each unit.

Any economist, or even a student who has taken Econ 101, can tell you that countries with more regulations are less prosperous than nations that enjoy greater economic freedom. Entrepreneurship, from the opening of a small bakery to the development of an apartment complex, is seriously disincentivized by regulations.

Rules and fees placed on the housing industry cause any would-be entrepreneurs and developers—individuals who could provide a solution to Portland’s housing problem—to think twice and reconsider investment in housing rentals. This new ordinance joins a slew of deterrent regulations on rental housing within Portland.

Over the past few years, Portland’s City Council has approved policies that restrict or complicate a landlord’s ability to reject a rental applicant for reasons such as criminal background or ability to pay rent, and that require landlords to help pay for a renter’s relocation costs. Those who have already built rental housing may find it more lucrative and safer simply to sell the property they own rather than continue to rent it. Those considering building new rentals may now balk at the opportunity altogether.

Proponents of the new ordinance will argue that the fee is critical because it funds the city’s Rental Services Office, but the necessity of the office itself is questionable. Most of the office’s responsibilities seem to involve explaining the complex landlord-tenant laws passed by the city in recent years, a self-induced problem that could be solved by simply repealing them. In addition, while the office is portrayed as a resource for tenants to utilize when being treated unfairly, the office’s website notes that it often refers those in need of help to previously existing nonprofits and advocacy groups, who would help without the city’s intervention.

There are also at least two clear structural problems with the ordinance. First, mobile homes, which provided an affordable housing solution long before the city stepped in, will be subject to the tax and almost certainly see rents rise. Second, the fee’s structure makes it an especially steep price to pay for landlords managing large complexes throughout the city, even though city bureaucrats claim that it is a moderate price.

To use an example from the testimony of one landlord, Seattle, which has a similar program, charges landlords a base rate of $175, plus two dollars for every additional unit they own. So, the owner of a 200-unit apartment in Seattle would pay $575 a year, but an identical building in Portland would be charged $12,000 a year. Landlords most likely will pass along the costs to tenants in the form of higher rent.

This new ordinance will do more harm than good. It will raise rents on most people and, more importantly, further constrict the supply of rental housing in the city.

Micah Perry is a Research Associate at the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. He can be reached at info@cascadepolicy.org. A version of this article appeared in The Portland Tribune on August 20, 2019.

Click here for PDF version:

19-18-Stop_Raising_Rents_in_PortlandPDF

Read Blog Detail
Home-Tax-Deduction-Concept-cm

Metro: Where Temporary Means Forever

By Rachel Dawson

Milton Friedman once famously said that “nothing is more permanent than a temporary government program.” If Friedman were currently living in Portland, Oregon, it is likely he would instead be saying “nothing is more permanent than a temporary Metro tax.” The Metro Council unanimously voted in July to approve funding for planning and development grants supported by the regional government’s construction excise tax (CET) in the 2019-20 fiscal year. This CET is riddled with problems, including the removal of its sunset date and mission creep.

The CET was originally adopted by the region in 2006 as a temporary tax to support development planning for areas newly brought into the urban growth boundary (UGB). The tax is paid by anyone applying for a building permit for construction within the UGB, with some exceptions.

Its original sunset date was slated for 2009 or until Metro collected a certain amount of money. When asked if this was a permanent tax in 2006, Metro responded by saying, “No. This tax takes effect July 1, 2006, and will remain in effect until $6.3 million is collected.” This fund threshold was met and the original sunset date was passed, however, the CET was not allowed to die.

The CET was extended another five years until 2014, and again extended in 2014 until 2020. Instead of extending the CET once more, Metro voted to eliminate the tax’s sunset date in 2019, using its powers to create a continuous revenue stream. The resolution approved by the Metro Council states, “Collection of the excise tax will continue into the future until such a time as the Metro Council determines it is no longer necessary or effective.” Based on this language, the tax will never end, because Metro will never find such a flow of cash unnecessary.

It now appears that Metro has taken the liberty of shifting the scope and purpose of the tax, leading to mission creep. By the end of the CET’s original sunset date, the vast majority of the planning work the tax was established to carry out was completed. Metro no longer had enough projects to justify the tax’s existence.

Therefore, Metro expanded the scope of projects eligible for funding in 2009 so that tax revenue could be used for planning in existing urban areas in addition to the newly added territory. The purpose of the CET has again changed in recent years to prioritize “equitable development” projects within the UGB.

For example, Albina Vision Trust was awarded $375,000 for its community investment prospectus as part of Metro’s new equitable development category. Albina Vision Trust does not own any of the land referenced in its proposal. Rather, the project focuses on “community-based programming” and the “investment potential” of the lower Albina area. The desired project outcome is to pre-develop scenarios of what the community could look like and how the organization could maintain “social values” in Albina. The CET was originally created to plan development of land incorporated into the UGB, not to think about how a nonprofit can maintain social values in a neighborhood it does not own.

Metro’s approval of the Albina Vision Trust prospectus highlights another problematic change that has been made to the CET: Metro now has the authority to approve grants to private organizations instead of only to public entities. Metro should not be picking winners and losers by investing tax funds in ideas which may not be successful at the expense of other potential players.

Concerns regarding the CET do not stop there. Metro’s auditor concluded in a 2016 report that Metro has poorly managed use of CET funds. Administrative costs have increased since 2009, the program is becoming less aligned with regional planning priorities, and its regional impact is unknown. Furthermore, no performance measures were in place when the program was reviewed, and project monitoring was weak. For example, Metro amended funding of a project that was already largely completed and approved two different contracts that likely funded the same project.

Most area residents are unaware of Metro’s CET and its troubling history. This lack of regional oversight has allowed Metro to manipulate the CET to accommodate its wishes without regional approval or knowledge. The CET should have expired in 2009 when it raised the original amount of funding and completed the work it was created to support. If Metro wants to pay for other projects with CET revenue, it should go through the process of winning voter approval to create a new revenue stream.

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

Click here for PDF version:

19-16-Metro_Where_Temporary_Means_ForeverPDF-1

Read Blog Detail
rent-a-room,-flat,-apartment,-house-online-cm

Portland’s City Council Wants Rent to Go Up

By Micah Perry

The Portland City Council recently passed a new ordinance that will require landlords to register all of their rental units with the city and pay a $60 yearly registration fee per unit.

While regulated affordable housing will be exempt, other types of rentals, like mobile homes, will still be subject to the fee. It is almost certain that landlords will pass on the increased costs to their tenants.

During one council meeting, current landlords noted that the registration fees will siphon money away that could be used for maintenance. They also said that increased housing regulations will discourage potential developers and landlords from wanting to build new rental units in the city. Many landlords are incentivized to sell their units, rather than rent them, because of the increased regulation.

The money raised by the fee will fund the Rental Services Office, a new, needless expansion of Portland’s bureaucracy that will only serve to grow the number of rules placed on housing in the city.

This ordinance adds to the long list of policies that disincentivize the operation and construction of rental units in Portland. If the Portland City Council keeps pursuing policies like these, rents will continue to go up and rental housing will continue to disappear.

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

Click here for PDF version:

8-14-19-Portland’s_City_Council_Wants_Rent_to_Go_UpPDF-1

Read Blog Detail

Oregon Distilleries Deserve Better

By Helen Cook

How much would you be willing to pay in taxes for your local business?

Thirty-three percent of total sales from Oregon distilleries currently goes to the Oregon Liquor Control Commission. This means, on average, that the state makes a greater profit from tasting room sales than the distillers making the product. In comparison, beer and wine crafters remit 0% of tasting room sales to the state.

Oregon is a “Liquor Control State.” This means that all liquor is owned by the state, entitling it to a certain percentage of each liquor sale. The revenue that distillers do receive from tasting room sales is actually a commission for selling the state’s liquor.

Distilleries are struggling to stay afloat because of this control system. In fact, Cannon Beach Distillery recently decided to close rather than pay remittance to the state. Others are worried they might have to do likewise.

Granting distillery tasting rooms the same privileges as the beer and wine industries could be what keeps craft distilleries in Oregon from disappearing. Oregon distilleries deserve better.

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

Click here for PDF version:

8-7-19-Oregon_Distilleries_Deserve_BetterPDF

Read Blog Detail
Woman-going-through-bills,-looking-worried-cm

Portland’s Clean Energy Tax: A High Cost with Low Benefit

By Rachel Dawson

In January 2019 the City of Portland implemented a voter-approved a 1% tax on certain “retail sales” within Portland to fund clean energy projects and jobs training. This tax will be applied to retailers with $1 billion or more in total sales, $500,000 of which must be from within Portland city limits. Retailers can pass the cost of the tax along to the purchaser of the good or service. Thus, it is likely consumers—not retailers—will ultimately be paying for it. Once collected, these funds will be administered by the Portland Clean Energy Fund.

Despite claims that the Portland Clean Energy Fund is unique, the energy efficiency projects funded by this tax are already being completed by the Energy Trust of Oregon (ETO) and Oregon Housing and Community Services through a surcharge on ratepayers’ utility bills. In some cases, the Portland Clean Energy Fund will be triple-taxing Portland utility ratepayers.

Approximately 40-60% of funds will be allocated to clean energy projects including renewable energy, conservation, and green infrastructure for residential, commercial, and public school projects. At least one half of clean energy project funds must benefit low-income residents and minorities. The Portland Clean Energy Fund will also be used to help Portland meet its goal of using 100% community-wide electricity from renewable sources by 2035.

Many voters believed this tax would only affect large retailers. However, senior deputy city attorney Kenneth McGair admits the tax will affect public works projects and construction equipment wholesalers, as well as disability insurance plans and insurance policies. The only exempt transactions will be groceries, medicine, and health care services. Due to its impact on construction, this tax will increase the cost of taxpayer funded projects such as affordable housing.

While 1% may seem like a small amount, it will add up to millions of dollars when applied to high-cost construction projects. For example, the tax will add an estimated $2 million to Lincoln High School’s $200 million renovation costs.

Voters may be unaware that they are already paying for similar clean energy projects through a surcharge on their utility bills known as the Public Purpose Charge (PPC). The tax rate from the PPC has grown to over 6% for many electric utility customers and up to 5.8% for ratepayers who consume natural gas.

ETO uses funds from the surcharge to support energy efficiency projects for low-income families (low-income weatherization), rehabilitation and construction of low-income housing, above-market renewable energy, and energy conservation and market transformation. Not only will the Portland Clean Energy Fund be completing similar projects to ETO’s, but ETO projects that involve construction, such as their affordable housing and school green infrastructure projects, will now be further taxed to support energy efficiency. Some ETO ratepayer-funded clean energy projects will be taxed to further fund clean energy projects. And many Portland area residents will be caught paying for both.

In addition to the ETO, the Oregon Housing and Community Services (OHCS) agency also benefits from the PPC surcharge to fund additional low-income weatherization projects, arguably the same demographic the Portland Clean Energy Fund aims to help.

One of these tax programs should be repealed: either the Portland Clean Energy Fund or the Public Purpose Charge. Doing so will ensure that Portland residents are not double- or triple-taxed for multiple programs that provide the same services.

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

Click here for PDF version:

19-12-Portland’s_Clean_Energy_Tax_A_High_Cost_with_Low_BenefitPDF

Read Blog Detail
House-under-construction.--cm

Public Debt for Public Housing

By Vlad Yurlov

In the 2018 general election, voters approved a bond measure that enabled Metro to borrow about $652 million for low-income public housing in the tri-county area. This money will be given out to localities within Metro. With the minimum of 3,900 housing units to be built, the price-tag would be more than $165,000 per unit.

When pressed for completion times for this project, a high-level Metro staffer stated new units can be expected to be used in eight to ten years. This schedule should not surprise anyone who has dealt with government bureaucracies, but a decade is a long time to wait for a crisis we’re having today.

For comparison, more than 6,700 housing units were constructed per year between 2010 and 2018 in the tri-county area, based on the U.S. Census Annual Housing Estimates. This means that even a target of 3,900 units would be roughly 60% of just one year’s worth of private construction. In addition, if Metro does build homes, private companies have less incentive to build, thereby compounding the current crisis.

A good government delivers public services on time and on budget. Right now, Metro is taking the bucks, without making much of a bang.

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

Click here for PDF version:

7-3-19-Public_Debt_for_Public_HousingPDF

Read Blog Detail

Portland’s Ill-Considered Climate Action Tax

By Micah Perry

Last fall, Portland voters approved a new 1% tax on large retailers to help the city achieve the goals of its Climate Action Plan. This measure has had serious consequences for Portland businesses.

Before the vote, proponents of the new tax described large retailers as places like Walmart or Fred Meyer. But, according to Dan Drinkward of Hoffman Construction, the city’s implementation of the measure “has gone beyond the clear intent of the measure as it was communicated to voters.”

Because of the measure’s broad language, many construction companies are defined as retailers and will have to pay the tax. Their clients will ultimately bear the cost increases—clients like Portland Public Schools, low-income housing developers, and the City of Portland itself.

Portland’s schools will especially suffer. The district’s projects have already increased in price because of the tax, with the Lincoln High School rebuild now costing an extra $2 million.

While certain foods, medicines, and health care services are exempt, other necessities like clothing and toiletries are subject to the tax, making Portland’s cost of living even higher, especially for low-income residents.

It would only take three commissioners from the Portland City Council to revise or repeal this poorly-thought-out tax. For the sake of the city, Portland’s voters must call on them to do so.

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

Click here for PDF version

6-26-19-Portland’s_Ill-Considered_Climate_Action_TaxPDF

 

Read Blog Detail
sunrise-over-Mt-Hood-at-Trillium-Lake-cm

Metro Wants More Money—For Parks You May Never See

By Helen Cook

How much would you be willing to spend to buy parkland that would ban your dog?

Metro hopes Portland area taxpayers will spend $475 million to buy land kept from public use for many years. That’s the purpose of a Metro bond measure on the ballot in November.

Much of the new tax money would go to acquiring natural areas that will be unusable by the public for an unspecified amount of time. If this feels like déjà vu, that’s because Metro passed a similar bond measure in 2006.

Rather than let the previous tax increases sunset, Metro wants more money, ostensibly to create parks for historically underserved communities. But much of the land Metro plans to buy is located far from the communities it’s intended to serve.

Metro also claims the new bond measure won’t increase taxes. This is not true. If the bond measure fails, property owners’ tax bills will go down. A “yes” vote is a vote for higher taxes. A “no” vote will save the average homeowner about $48 a year.

Metro’s new bond is neither the beginning nor the end of a cycle of buying remote natural areas that won’t allow recreational uses. Make sure to look for this measure on your ballot in November and vote no.

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

Click here for PDF version:

6-19-19-Metro_Wants_More_Money_For_Parks_You_May_Never_SeePDF

Read Blog Detail
Calculator-And-Pen-On-Receipt-cm

Oregon Legislator to Oregon Business: “Let ‘em Leave!”

By Eric Fruits, Ph.D.

“Let ’em leave. Someone else’ll come in.” That was Oregon state senator James Manning’s response when told that new business taxes will cause some firms to leave the state.

Unfortunately, the senator is not alone with the let-them-leave attitude. That seems to be the attitude of the supermajority in the legislature as well as the city of Portland, who have both recently passed massive business taxes.

The legislature just passed a billion dollar a year “corporate activities tax.” The new tax is triggered once a business hits one million dollars in sales. This may seem like a lot to a legislator; but many small businesses such as restaurants, retailers, and consulting firms can easily generate a million dollars in sales. In fact, the Census Bureau reports about a quarter of Oregon employers have sales of a million or more a year. Thousands small firms will be subject to thousands of dollars in new sales taxes on top the income taxes they already pay.

Last year, Portland voters approved their own tax on business revenues, with money earmarked for so-called clean energy projects. Firms who thought they were exempt are now learning that they, too, will face a steep tax bill.

These new taxes will be a good test of Senator Manning’s let-them-leave theory, as owners look to other states for a better business environment. However, I’m not confident someone else will come in to replace the ones that leave.

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

Click here for PDF version:

6-12-19-Oregon_Legislator_to_Oregon_Business_“Let_‘em_Leave!”PDF

Read Blog Detail

SW Corridor Project: A Net Negative for the Environment

By John A. Charles, Jr.

Portland politicians claim to be concerned about carbon dioxide emissions and climate change. That’s why so many of them support TriMet’s proposed 12-mile light rail line from Portland to Bridgeport Village near Tigard. They think it will reduce fossil fuel use.

Their assumptions are wrong.

According to the Environmental Impact Statement (EIS) for the project, energy used during construction of the rail project will equal 5.9 trillion Btu. Much of this will be in the form of fossil fuels needed to power the heavy equipment. Additional energy will be used to manufacture the rail cars, tracks, and overhead wires.

The EIS claims that the negative environmental consequences of construction will be made up by energy saved from operations of the train. However, the operational savings are so small it would take 61 years to mitigate the carbon dioxide emissions of construction.

2035 Daily Vehicle Miles Traveled and Energy Consumption 

Vehicle Type Daily VMT – No build option Million Btu/Day – No build option Daily VMT

With Light Rail

Million Btu/Day

With Light Rail

Passenger vehicle 51,474,286 249,084 51,415,071 248,798
Heavy-duty trucks 3,389,982 73,132 3,389,288 73,117
Transit bus 100,122 3,546 97,501 3,453
Light rail 19,189 1,247 21,200 1,377
TOTAL 54,983,579 327,009 54,923,060 326,745

                                          Source: Draft EIS, SW Corridor Project

Unfortunately, all of the light rail cars will need to be replaced before then. Building new cars will require more energy, resulting in additional CO2 emissions and a longer payback period.

Light rail is not a solution to a perceived climate change problem; it IS a climate change problem. Any further planning for the SW Corridor project should be terminated.

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

Click here for PDF version:

6-7-19-SW_Corridor_Project_A Net_Negative_for_the_EnvironmentPDF

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

Taxpayers Should Demand Accountability Before Passing (Another) Metro Bond Measure

By Miranda Bonifield

Last November, Metro gained approval from Portland voters to borrow $652 million for low-income public housing projects. In 2020, they’ll ask for $850 million for a light rail project.

This year, the regional government is proposing a $475 million bond measure to fund parks and nature projects. While Metro argues this is not a tax increase, the reality is that borrowing $475 million will cost taxpayers over $800 million between principal and interest payments. And judging by precedent, Metro will ask for additional funds before they’ve completed the projects currently on their roster. Metro has owned its largest nature park, Chehalem Ridge, for nearly a decade without making it accessible to the public—making it a nature project, but not a park. Metro continually asks voters to pay full costs without delivering full benefits.

In 2016, Metro persuaded voters to approve additional funding for similar projects despite concerns that the regional government ought to make smaller demands and demonstrate its reliability. While audits have found some improvements since 2016, Metro still struggles to demonstrate measurable benefits from the thousands of acres they already possess.

The Metro Council will be finalizing the bond language and hearing public testimony in their Portland headquarters at 2 p.m. on June 6. Voters should require accountability and consistency from Metro before indebting ourselves for another twenty years.

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

Click here for PDF version:

5-29-19-Taxpayers_Should_Demand_Accountability_Before_Passing _(Another)_Metro_Bond_Measure(DO)PDF

Read Blog Detail

Carbon Regulation: Another Legislative Circus

By John A. Charles, Jr.

According to the state’s Global Warming Commission, Oregon has already met its goal of reducing per-capita carbon dioxide emissions to levels that are 20% below 1990 emissions by the year 2020. In fact, we met the goal four years ago.

Are state legislators celebrating this achievement? Not at all. They are too busy rolling out a 98-page bill that will establish a statewide limit on carbon dioxide emissions, designed to make energy more expensive. The bill also repeals the CO2 goal that we’ve already met and imposes a more stringent one: to reduce emissions to 80% below 1990 levels by the year 2050.

Why change the goal? Because proponents of the bill don’t care about results. They always want aggressive sounding goals with distant timelines, in order to give themselves bragging rights about how visionary Oregon is in restricting the use of fossil fuels.

Most of the costs are backloaded to occur after 2030, when electric utilities will be forced to buy a shrinking number of carbon dioxide allowances. At that point, electricity bills will start going up. But you won’t be able to blame politicians, because most of the legislators voting for the bill this year will be out of office by then. That’s how it always works.

We’ve already met the state goal for CO2 reduction. Legislators should leave us alone.

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

Click here for PDF version:

5-22-19-Carbon_Regulation- Another_Legislative_CircusPDF

Read Blog Detail
Staff-calculating-restaurant-bill-cm

Why Record-Breaking Revenues Aren’t Enough

By Eric Fruits, Ph.D.

This week, Oregon is facing a one-day teacher strike, with educators demanding more money for schools. Also this week, the legislature will consider a billion-dollar-a-year sales tax on business. All this is happening in the face of record-breaking tax revenues.

Research published by the Pew Charitable Trusts shows that Oregon tax revenues are nearly 30 percent higher than the pre-recession peak. Only one other state has seen bigger growth in tax revenues.

But even a gusher in tax revenues can’t keep pace with government spending. Despite a booming economy with record low unemployment, the number of people on the Oregon Health Plan has nearly doubled from pre-recession levels. Over the same period, the annual cost of the public employee retirement system has grown by 60 percent, or double the rate of tax revenues.

Nearly every problem with state and local budgets can be traced to PERS costs and Medicaid expansion. Our budget problems are spending problems, not revenue problems.

While we recovered from the last recession, our elected leaders are making dangerous decisions today that will lead to devastation when the next recession hits. If our government can’t balance the books during a boom, we won’t survive a bust.

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

Click here for PDF version:

5-8-19-Why_Record-Breaking_Revenues_Aren’t_EnoughPDF-1

Read Blog Detail

May 8 Should Be Declared “Fix PERS Now Day”

By Eric Fruits, Ph.D.

The Oregon Education Association is organizing a statewide walk-out May 8 related to what it says is inadequate school funding. What they’re really demanding is a $2 billion tax increase.

Districts across the state, including Portland, Beaverton, North Clackamas, Gladstone, and Eugene have canceled classes for the day, forcing working parents to stay home or line up day care for the strike. The teachers surely have their chants and songs already scripted for their rallies. But, there’s one slogan the teachers won’t be shouting. That’s: “Fix PERS Now!”

District administrators appear to be in support of the Oregon Education Association’s unauthorized strike. West Linn-Wilsonville superintendent Kathy Ludwig said, “OEA’s purpose with this rally is to send the message to all Oregonians that public school funding has been insufficient for decades and needs to be addressed.” A written statement made to the Portland teachers’ union by superintendent Guadalupe Guerrero reads: “Our educators and students deserve better. It is long overdue that we prioritize schools in Oregon.”

The claim that Oregon hasn’t prioritized public education is simply wrong. Portland Public Schools voters have approved nearly $1.3 billion in construction bonds since 2012. In 2011 and 2014, voters approved and renewed a local option property tax increase for Portland schools. Another renewal of the $95 million tax is expected to be on the ballot this year.

In Oregon, total expenditures per student were $13,037 in 2016, the most recent year for which information is available from the U.S. Census Bureau. Oregon is exactly in the middle of the state rankings of per student total expenditures. Six states, including Oregon, Washington, and California, have per student spending that is within five percent of the national average. Total expenditures include salaries, employee benefits such as health insurance and PERS, supplies, and debt service, among other things.

According to the state’s Legislative Revenue Office, annual state and local education spending in Oregon has increased by about $1.7 billion over the past ten years. This amounts to $2,350 in increased spending per student and has greatly outpaced the rate of inflation.

Despite a booming economy with increased tax revenues and funding for schools, many districts claim they are facing a funding gap. Beaverton expects to cut more than 200 teachers. Portland plans to eliminate 45 classroom teaching positions and combine many fourth and fifth grade classrooms. These announcements raise the question: Why are districts cutting staff in the face of rising revenues?

PERS and other benefits are the biggest drivers of Oregon’s education finance problems. The cost of paying for public employee retirements has doubled over the past ten years. In 2009, school districts paid approximately 15 percent of payroll to fund PERS. The latest estimates indicate next year, districts will have to pay 30 percent of payroll. The increased cost of PERS alone in the next biennium would cause the average class size to increase by two to four students per classroom.

It gets worse. In reaction to earlier PERS crises, many school districts took on additional debt to reduce their PERS obligations. The interest payments on the bonds are taking money out of classrooms. Census data indicate Oregon schools pay almost $600 per student per year in interest payments alone, making it the fourth highest state in per student interest payments.

The OEA claims it’s seeking more spending to reduce class sizes and improve graduation rates. However, the Oregon Business Council calculates PERS will consume much of the $2 billion in tax increases under consideration by the legislature. Without meaningful PERS reforms, Oregonians will face decades of multi-billion-dollar tax increases every time the legislature meets.

The frustration of teachers is understandable. They are on the front lines of education. However, walking off the job is the wrong approach and sets a poor example for students. It punishes pupils, parents, and employers for our politicians’ failure to fix PERS. It also misses the mark strategically because the legislature doesn’t have any more money, and neither do put-upon taxpayers. Parents who are forced to stay home to watch their kids on May 8 should take them on a field trip to the OEA’s rallies with signs of their own, reading, “No New Taxes—Fix PERS Now!”

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

Click here for PDF version:

19-09-May_8_Should_Be_Declared_“Fix_PERS_Now_Day”PDF

Read Blog Detail
Paid-family-leave-form-in-clipboard-and-note-pad.-cm

A Trio of Terrible Bills for Oregon Employers

By Eric Fruits, Ph.D.

Apparently, there is no limit to the Oregon legislature’s disdain for businesses and other employers. This disdain is demonstrated in three bills that seek to saddle employers with expensive mandates and expansive regulations that will smother job opportunities, stifle employment growth, and do little improve the everyday lives of most working Oregonians.

Paid family leave

Oregon’s legislature is currently considering HB 2005, which would turn family and medical leave in Oregon into a universal benefit that would pay out a portion of an employee’s wages while they are out of work because of a difficult pregnancy, a serious injury or illness, a family emergency, or the birth or adoption of a child.

Under the bill, also known as the FAMLI Equity Act, family and medical leave would be paid for by a state insurance program. Workers and employers would each put up to one percent of an employee’s wages in a state-run insurance fund. Employees on leave would be eligible for benefits equal to some or all of their salary. Beginning in 2022, employees would be able to take up to 22 weeks of paid leave:

  • Four weeks for pregnancy, if the employee is completely unable to work due to pregnancy or childbirth;
  • Eight weeks for medical leave, which could also be used to care for a family member who is seriously ill; and
  • Ten weeks for parental leave, for use only in the year after a child’s birth, adoption, or foster placement.

The program applies to just about any firm with one or more employees, even the self-employed. Although the proposal has been amended to provide state grants up to $3,000 to help small employers while a worker is out on leave, the program would be especially costly and burdensome for small employers who do not have the ability to shift staffing or hours to cover workers who are out on extended paid leave. It will also be costly and burdensome for employers with highly specialized workers who are difficult to replace on a temporary basis.

So far, no one knows how much employers or employees would have to contribute to the fund (the bills says “not to exceed one percent of employee’s wages”), how much it would cost to run the program, or how much it would cost to set up the program. A simple back-of-the-envelope calculation suggests this will be a very expensive program. At two percent of payroll—one percent for the employer and one percent for the worker—the cost for the average Oregon employee will be more than $1,000 a year.

In addition to payroll taxes reducing their incomes, employers will be less inclined to take on new employees, especially if those potential employees are deemed likely to take paid leave. Employees will see smaller paychecks, either directly through payroll deductions to pay for the program or in lower pay to account for costs imposed on their employer.

Medicaid payroll tax

HB 2269, also known as the Employer Health Care Responsibility Act, requires employers with more than 50 workers to spend at least 50 cents per work hour per employee for employee health care. If employers do not provide health insurance coverage, they must provide the 50 cents per hour per worker on either direct spending for worker health care services or by paying into a state government fund. The bill is a major component of Governor Brown’s tax package to support expanding Medicaid.

This tax would be in addition to the two percent sales tax surcharge on health care premiums paid by many Oregon employers under HB 2010, which was signed by the governor earlier this year.

As written, the legislation does not consider the common cases in which a worker may not have insurance through his or her employer but may have coverage through a spouse or parent. It also does not consider the cases in which a worker rejects insurance from the employer, often in exchange for higher take-home pay.

The end of independent contractors

 One way employers can avoid some of the costs of the paid family leave program and the Medicaid payroll tax would be to rely more heavily on independent contractors. However, HB 2498 could eliminate this option. This bill would reclassify many, if not most, independent contractors as employees. It says that if the contractor performs services that are “within usual course of business” of the firm hiring the contractor, then that contractor is deemed an employee of the firm.

A hairdresser renting a chair in a salon would be deemed to be an employee of the salon. Uber and Lyft drivers would be deemed employees of the ride-hailing companies. Even lawyers working part-time as outside counsel would be deemed employees of their client firms. While these newly deemed “employees” may receive benefits as employees rather than contractors, they would also lose the ability to determine when they work, where they work, and even how they work.

Well-meaning policies have a tendency to backfire, even if polling says the policies are popular. Too often, the polls fail to put a price tag on the policies. When the price tag includes substantially higher taxes and diminished opportunities for work, programs such as Oregon’s proposed paid family leave and Medicaid payroll tax bills end up harming far more people than they help.

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

Click here for PDF version:

19-08-A_Trio_of_Terrible_Bills_for_Oregon_EmployersPDF

Read Blog Detail
Tax-day---Monday,-April-15,-2019.-cm

There’s No Such Thing As a Free Government

By Miranda Bonifield

April 16 was the first day of 2019 where the money Americans have earned finally exceeded the portion of our income dedicated to the support of the government. Tax Freedom Day is an annual reminder of the real cost of expanding government’s power and responsibilities. The $5.2 trillion we spend on taxes in 2019—29% of our income—will outpace our spending on food, clothing, and shelter combined.

Unfortunately, this is only what we’ll pay this year—not what the government will spend. If annual federal borrowing were taken into account, Tax Freedom Day would fall on May 8, meaning we would work nearly half of this year to support government programs.

Americans have handed the government an ever-growing share of our money in exchange for the promise of a chicken in every pot and a roof over every head. But prosperity is not preserved and poverty is not prevented by government spending. Rather, it is the everyday Americans who work and innovate every day to create value for ourselves and our communities who are responsible for the opportunities we can all take hold of.

Next time you’re asked to approve a tax increase, ask yourself how many days you’re willing to work to fuel government programs, and how many you’d like to work to support your family.

Click here for PDF version:

4-17-19-There’s_No_Such_Thing_As_a_Free_GovernmentPDF

Read Blog Detail
House model in home insurance broker agent "u2018s hand or in salesman person. Real estate agent offer house, property insurance and security, affordable housing concepts

Portland’s Affordable Housing Bond: Nothing for Money

By Eric Fruits, Ph.D.

Remember that song about getting money for nothing? In Portland, it’s the opposite. We’re getting nothing for money.

This week, Portland’s City Council will get the first annual report on how the city is spending its affordable housing bond money. The four-page report—yes, it’s really only four pages—is colorful and has lots of pictures but nothing about actual results. So, I did some research.

Turns out, by the end of 2018, the city spent almost $38 million and built exactly zero new units of affordable housing. Sure, Portland bought two buildings. But, the buildings were already built or almost completely built, which means the money did nothing to actually add any new units.

Once the city spends millions more on the four other buildings in their pipeline, Portland might have only 250 additional units of affordable housing.

Last year, French President Emmanuel Macron announced plans to reform the country’s social welfare programs. He said, “We put a crazy amount of dough into our social benefits and poor people are still poor.”

The same can be said for Portland: We’re spending a crazy amount of money on affordable housing, but we’re not actually building much new affordable housing.

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

Click here for PDF version:

4-3-19-Read_My_Lips_Metro’s_Promises_Are_Doubtful_at_BestPDF

Read Blog Detail

Read My Lips: Metro’s Promises Are Doubtful at Best

By Miranda Bonifield

There’s nothing so permanent as a temporary government program, and nothing is quite as immortal as a temporary tax. Metro promised in 2006 that its parks bond would leave no need for new taxes until 2016. Instead, the money was sent to a general fund and additional taxpayer support was requested in both 2013 and 2016.

Now Metro is planning a new 400-million-dollar bond measure to support expansion of its parks and nature programs. The organization argues that tax rates wouldn’t be raised and that the funds would combat the challenges posed by population growth, climate change, and racial inequity.

What isn’t said is that your property taxes would go down without approval of the new 20-year bond measure. Metro can and probably will want to issue additional bonds and levies in future years, including a potential transportation bond in 2020—meaning that taxes would rise in the long term.

Metro’s auditor found in 2015 that Metro’s land acquisition often lacks clear connection to its long-term goals. This means that not only is Metro stretching for more money, it’s not even entirely sure what it accomplishes by spending it.

Read my lips: Metro’s version of no new taxes is doubtful at best.

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

Click here for PDF version:

4-3-19-Read_My_Lips_Metro’s_Promises_Are_Doubtful_at_BestPDF

Read Blog Detail
sun-shining-in-a-forest

Oregon Taxpayers Can’t Celebrate $146 Million Debt Service on the Elliott State Forest

By John A. Charles, Jr.

This week our State Treasurer, Tobias Read, issued a press release bragging that investors around the country “stood in line” to loan Oregon $100 million so that Governor Kate Brown could buy part of the Elliott State Forest, which we already own.

According to Treasurer Read, “There was three times more demand than supply” of the bonds, which will be repaid to investors over 20 years at an interest rate of 3.83 percent.

While this may have been a great day for investors, Oregon taxpayers have no reason to celebrate. They will be paying roughly $146 million in debt service on the loan, while getting little in return.

The Elliott is an 82,500-acre forest in Coos and Douglas Counties. It is an asset of the Common School Fund, which means it must be managed for the financial benefit of K-12 public schools. It was once a thriving commercial forest, generating millions of dollars each year for schools. In 1994, it had an estimated market value of $850 million.

Timber harvesting started to decline in the late 1980s due to environmental litigation. By 2014, timber production was so minimal that the Elliott actually started losing money. This immediately caught the attention of the State Land Board, which owns it. Land Board members in 2015—Governor John Kitzhaber, Secretary of State Kate Brown, and Treasurer Ted Wheeler—feared they would be sued for breach of fiduciary trust if they continued to hold onto a money-losing asset.

Seeing no other options, the Board unanimously voted in August of that year to sell the forest and place the proceeds in the Common School Fund, where they could be profitably invested in stocks, bonds, and other financial instruments.

The Board set the market value of the forest at $220.8 million. After a lengthy outreach process, the Board received a bid for that amount in 2016 from a consortium of buyers led by Lone Rock Timber Co.

However, by the time the bid was evaluated in December, the composition of the Land Board had changed. Kate Brown had become Governor, Tobias Read was Treasurer, and Dennis Richardson was the new Secretary of State. At the first meeting of the board in February 2017, both Read and Richardson stated that they had a fiduciary duty to sell the forest so that $220.8 million could be invested in better-performing assets. Gov. Brown reversed her 2015 vote and urged the Board to reject the offer. The final vote was 2-1 in favor of selling the forest.

This infuriated Oregon’s environmental lobby, even though it was their own lawsuits that had turned the Elliott into a liability. After the vote, pressure mounted on Treasurer Read to change his mind.

Two months later, Read reversed himself. He and Gov. Brown decided that instead of selling the forest for $220.8 million, they would retain it and ask the legislature for permission to borrow $100 million to buy part of the Elliott so that it would no longer be required to make money. The $100 million would be placed in the Common School Fund to make up for the lost timber harvest receipts.

Unfortunately, the $100 million loan will require debt service payments of roughly $200 million, and all of it will have to be paid by Oregon taxpayers. Therefore, the benefits to schools of adding $100 million to the Common School Fund will be diluted or possibly exceeded by debt service.

Moreover, the Land Board had no clear idea of which part of the Elliott will be free of the obligation to produce revenue for schools. The $100 million certainly will not “buy” the entire forest; an unknown portion will still have to be managed for profit, if that’s even possible.

Ordinarily, one could expect the State Treasurer to be the adult in the room regarding a cash offer of $220.8 million and the Board’s fiduciary duty to schools, but this is Oregon. It’s so much easier to just borrow money and talk about something else. Tobias Read is giddy that several of the bond buyers were from “socially responsible investment funds.”

Perhaps if he talks long enough about green investing, taxpayers will forget about the $200 million they owe on the loan.

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

Click here for PDF version:

19-06-Oregon_Taxpayers_Can’t_Celebrate_146_Million_Debt_ServicePDF

Read Blog Detail

What’s Causing Oregon’s “Housing Affordability Crisis”?

By Miranda Bonifield

Here’s a question for you: Why is housing so expensive in Oregon?

Government at all levels has attempted to address the issue of housing affordability for years with tax credits, occasional expansion of the urban growth boundary, multimillion dollar bond measures, and now statewide rent control in Oregon. But rather than making life easier for Americans, state and local policies play major roles in the affordability crisis.

Economist Dr. Randall Pozdena recently authored a report published by Cascade Policy Institute that analyzes the decline of housing affordability, with a particular focus on Oregon. His research confirms what any developer can already tell you: Housing is less affordable because land is less available.

Easy access to land up until the 1970s meant housing price increases roughly tracked increases in household income. But in the ’60s and ’70s, planners and environmentalists dreaming of European-style density began lobbying against automobile-driven suburban sprawl. These measures gained enough traction that by 2000, the Brookings Institution found, state ballots around the country contained 553 “anti-sprawl” measures. Supporters expected higher density to decrease the need for public spending, improve traffic conditions by facilitating the use of transit, and lower development costs.

Instead, housing is escalating further out of reach every year. Oregon, California, Hawaii, and Washington, D.C. have the worst affordability scores in the country. An expensive market might make sense in D.C. and Hawaii, as both have extremely limited land available for development. California’s problem is the bureaucratic state whose regulations keep developers from meeting demand. But it’s Oregon that has the worst score for affordability out of the fifty states: Our housing prices rose 32% faster than our incomes between 1992 and 2007. This puts housing affordability in Oregon behind every one of the other 49 states.

With some exceptions, Oregon’s income growth has generally kept pace with the rest of the nation. We have plenty of developable land and a capable, productive community. Our housing is unaffordable because we’ve embraced some of the most aggressive “anti-sprawl” policies in the country. Dr. Pozdena finds:

“The higher the rank of anti-sprawl policy in a state, the poorer is the affordability rank of the state and the lower has been the availability of additional development sites relative to population growth. The confidence that these associations are not random is 99.99 percent. This is strongly indicative of a causal relationship between implementation of anti-sprawl policy, land conservation, and the affordability problem.”

There is no market and no economic philosophy in which reducing supply while demand increases leads to lower prices. In reality, Oregon’s policies have increased public spending, damaged public service quality, made no sizable impact on the number of automobile commuters, and worsened congestion.

It’s encouraging to hear policymakers acknowledge that we need to expand urban growth boundaries and encourage more development; but until a fundamental shift occurs in the philosophy behind growth policy, these statements are all flash and no substance. Oregon’s land use regulations don’t align with the way Oregonians actually live. They worsen traffic, crowd cities, and decrease quality of life.

Oregon must address the true causes of housing affordability problems, not just the symptoms—or the crisis will never end.

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

Click here for PDF version:

19-05-What’s_Causing_Oregon’s_“Housing_Affordability_Crisis__PDF

Read Blog Detail

A Done Deal and a Bad Deal: Why Rent Control Won’t Solve the Housing Crisis

By Eric Fruits, Ph.D.

Oregon will soon be the first state to have a statewide rent control program. Last week, in my first week at Cascade Policy Institute, I testified in opposition to the rent control bill, SB 608. The bill has the support of the Governor Kate Brown, House Speaker Tina Kotek, and Senate President Peter Courtney. About 100 people signed up to testify, and supporters outnumbered opponents by 2-to-1. It’s a done deal and it’s a bad deal.

During World War II, the federal government instituted a national system of rent controls, establishing maximum rents for rental properties. New York City was the only city to retain this first generation of rent controls after the war. During the 1970s, rent regulations were introduced in many cities, including Boston; Washington, D.C.; San Francisco; and Los Angeles.

In contrast with pure rent control (a fixed maximum price), SB 608 is a form of “second generation” rent controls that allows annual rent increases, limited to 7 percent plus inflation. Rent controls under SB 608 apply to buildings that are more than 15 years old. The bill also places strict limits on “no cause evictions.”

Nobel laureate Paul Krugman wrote in the New York Times that rent control is “among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial.”[1] Krugman’s well known and widely used economics textbook describes the economic inefficiencies associated with rent control:[2]

Rent control, like all price ceilings, creates inefficiency in at least four distinct ways. It reduces the quantity of apartments rented below the efficient level; it typically leads to misallocation of apartments among would-be renters; it leads to wasted time and effort as people search for apartments; and it leads landlords to maintain apartments in inefficiently low quality or condition.

Proponents of rent controls argue that “second generation” rent controls reduce or eliminate the inefficiencies associated with “first generation” rent controls. For example, Kotek was quoted in the Oregonian:[3]

What you’re hearing from landlords about rent control is they have an idea of it that’s very much the model that began right after World War II where properties had hard, fast caps on rents. That’s not the kind of rent control we’re talking about. We’re talking about second generation rent stabilization where there’s a process for managing rent increases that protects investors and tenants.

Kotek is correct that second generation rent controls are not as bad as first generation rent controls, but it’s matter of degree. Second-degree burns aren’t as bad as third-degree burns, but a second-degree burn still hurts.

While many proponents see rent control as one way to address housing affordability, none of them indicated it would do anything to resolve what is widely perceived to be a housing shortage. In fact, an expert flown in from Berkeley by the housing committee admitted that rent controls in other cities have led to the conversion of apartments to condominium. He went so far as to suggest legislation that would ban the conversion of apartments to condos.

This suggestion lays bare the pernicious chain of regulation that rent control brings. Second generation rent control doesn’t “work” unless there are strict limits on the termination of month-to-month rents. Then, it won’t work unless there are strict limits on the conversion of units. One witness even suggested that apartment building owners should be forbidden from selling their properties.

The limits on providers’ ability to terminate leases will lead to providers becoming more selective in to whom they rent units. In this way, the ordinance misallocates rental units among would-be renters and may do the most harm to those whom the bill is intended to help, such as those with a history of homelessness, impaired credit, criminal convictions, or employment instability. An older woman testified about her horror story of trying to find an apartment with her retired husband in Medford, applying to dozens of apartments only to be told she’d be on a list. Her story will become more common as rent controls reduce the supply of rental units.

In addition to the inefficiencies identified by Krugman, SB 608 will ultimately lead to higher rents than would occur in the absence of the law. As rental units turn over, providers will factor in the expected cost of the law into the rents and other fees that they charge incoming residents. Some or all of the expected cost associated with SB 608 will be passed on to tenants. Ultimately, the law will have the perverse impact of increasing—rather than reducing or stabilizing—rents over time and reducing the amount of market rate housing available to low- and middle-income households.

[1] Krugman, Paul. “A rent affair.” New York Times. June 7, 2000.

[2] Krugman, Paul and Robin Wells. Microeconomics, 3rd ed. New York: Worth Publishers. 2013. p. 130.

[3] Friedman, Gordon R. “Portland’s Tina Kotek explains her rent control plans—and landlord pains.” Oregonian. February 4, 2017.

 

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

Click here for PDF version:

19-04-A_Done_Deal _and_a_Bad_DealPDF

Read Blog Detail

Cap and Trade in Oregon: All Pain, No Gain

By Eric Fruits, Ph.D.

The Oregon legislature is expected to pass a carbon cap-and-trade bill this session.

While there is some agreement that climate change can have a negative impact on livability in the Pacific Northwest and throughout much of the world, there has been little attention paid to how little Oregon contributes to worldwide carbon emissions.

Oregon emitted about 65 million metric tons of carbon dioxide equivalents in 2017. By way of comparison, total global emissions were about 37 billion metric tons. That means that Oregon accounts for less than two-tenths of one percent of global emissions. About one six-hundredth. That’s tiny.

In other words, even if Oregon were to reduce carbon emissions to zero, the state would do virtually nothing to change worldwide carbon emissions, which means it would do virtually nothing to slow or stop global climate change.

At the same time, the cap-and-trade program would hit the pocketbooks of every Oregonian. An earlier version of the bill estimated the state would sell about $700 million a year of carbon permits, with the costs passed on the consumers and businesses.

Oregon’s cap-and-trade bill fails the basic cost-benefit test: The costs of cap-and-trade to everyday Oregonians would be exceptionally high while doing nothing to stop or slow climate change.

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

Click here for PDF version:

2-13-19-Cap_and_Trade_in_Oregon_All_Pain_No_GainPDF

Read Blog Detail

Rent Control Is a Steal

By Miranda Bonifield

Remember that emotional final episode of the now-classic sitcom Friends? As the group reminisces about the New York apartment that served as the stage for most of the show, Chandler tells his newborn child, “This was your first home…and thanks to rent control, it was a steal.”

His comment was more apt than the screenwriters probably realized. Rent control is a steal. It steals incentive from landlords who are interested in providing housing but can’t make ends meet when they’re no longer in charge of their rates. And especially in combination with aggressive anti-sprawl policies cities like Portland are so fond of, it steals housing opportunities from individuals who need them most.

Rather than solving housing problems, studies have found that in the long run, rent control policies increase housing costs and fuel gentrification. In San Francisco, researchers found that landlords frequently turned their apartment buildings into condominiums and invested in higher-value properties—making it even more expensive to live in the city. And unfortunately, landlords are less interested in maintaining rent-controlled apartments, which does nothing for the tenants’ quality of living.

If people are struggling to find housing, the solution isn’t to limit supply and destroy affordability. That just makes things harder. Instead, state leaders should reduce regulations that constrict housing supply, allowing developers to provide the homes Oregonians need so desperately

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

Click here for PDF version:

2-6-19-Rent_Control_Is_a_StealPDF

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

More Money for Schools Is Meaningless Without Controlling PERS Costs

By John A. Charles, Jr.

Several members of the Portland Public Schools Community Budget Review Committee recently co-authored an essay entitled, “The under-funding of schools must end.”

The authors assume that all money problems at public schools are the result of insufficient tax support; but the reality is that schools have been unable to control costs, especially related to pensions.

For example, in 1998 Oregon schools were required to send premiums equal to 9.9% of their salaries to pay for their share of the Public Employee Retirement System (PERS).

Since then, those rates have gone up steadily and will reach 18.3% later this year—an increase of 84% over two decades. Some school districts will pay much more. Sherwood school district will pay 27% of salaries for their PERS Tier 1 and Tier 2 obligations. Tigard-Tualatin school district will pay 28%. Tillamook Community College will pay 21%.

School support from the Oregon general fund has doubled since 2001, but it doesn’t do much good when tax money entering the front door of schools leaves out the back door for retirees. In many cases, those former workers are earning more in retirement than they did when they were actually teaching.

Unless the legislature is willing to take strong measures to control the cost of PERS, there will never be enough money to satisfy public school advocates.

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

Click here for PDF version:

1-23-19-More_Money_for_Schools_Is_Meaningless_Without_Controlling-PERS-CostsPDF

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

ODOT’s Passenger Rail Project Equals Increasing Costs, High Taxpayer Subsidies

By Justus Armstrong

The Oregon Department of Transportation recently published its Tier 1 Draft Environmental Impact Statement (EIS) for the Oregon Passenger Rail Project, which plans to expand and improve passenger rail service between Eugene and Portland and increase Amtrak Cascades rail service from two to six round trips per day. Out of two potential build alternatives—Alternative 1, which would improve the existing Amtrak route, and Alternative 2, which would create a new route along Interstate 5 between Springfield and Oregon City—ODOT has identified Alternative 1 as the preferred alternative. Many are optimistic about improved passenger rail options, but Alternative 1 would include anywhere from $870 to $1,025 million in capital costs. Is the project worth such a high price?

One of the stated goals of the Passenger Rail plan is to implement a cost-effective project, but based on ODOT’s own testimony, it appears that Amtrak is actually becoming less cost-effective. In a 2017 Legislative report on passenger rail performance, ODOT reported that “[t]he gap between revenue and costs continues to increase.…It is likely the costs to operate the service will increase in the coming years.”

The EIS estimates that Alternative 1 would cost around $48 million a year in operations and maintenance costs—a sharp increase from the $17.75 million ODOT currently pays Amtrak annually to support the existing rail service. The EIS also admits that this is a conservative estimation based on the assumption that Amtrak payments will triple as the number of round trips triples. Currently, ODOT subsidizes each one-way Amtrak ride to the tune of about $118, and with the costs to operate Amtrak already rising, expanding an increasingly cost-ineffective service risks adding to an even greater burden on Oregon taxpayers.

On the other hand, if the improved passenger rail service were to achieve the 89 percent increase in ridership hoped for by 2035, ODOT’s subsidy would be distributed more broadly among an expected 646,000 annual rail passengers. Theoretically, this could help make ODOT’s investment more worthwhile.

More Amtrak passengers would mean more ticket revenue, lessening the gap between revenue and operating costs. However, ODOT’s ridership projections are largely based on the hope that population increases in the Willamette Valley “could result in unprecedented ridership increases.” In perspective, only 105,000 (less than 4%) of the Willamette Valley’s 2.8 million residents were riding Amtrak in 2015. Living up to the ridership goals in the EIS would require a significant shift in transportation choice towards intercity passenger rail not yet seen in Oregon.

The draft EIS does not include projections for expected revenues and fare recovery, so exact measures of cost effectiveness for the project are not yet nailed down. Unless fare recovery is significantly improved, Oregon will continue to lead the nation in passenger rail subsidies and triple already wasteful operating expenditures.

There is also the matter of the $1 billion in construction and design costs that would have to come from state and federal funds. ODOT’s passenger rail plans are likely motivated by prospects of broader eligibility for federal funding, but any advancements in rail service are bound to be a costly investment for Oregonians.

Public transportation expansions are often put forward as solutions to highway congestion. However, the EIS for the passenger rail project admits that neither build alternative would alleviate Oregon’s congestion issues, stating that the potential reduction in the number of vehicles on I-5 between Eugene and Portland “would not be significant enough to affect or improve congestion on I-5.” In fact, the EIS states that the project could even exacerbate congestion by increasing vehicle activity on surface streets near Amtrak stations. Expanding passenger rail service may benefit the small portion of the Willamette Valley population that uses Amtrak, but would do little to address Oregon’s broader transportation challenges.

Instead of expanding Amtrak rail service, ODOT could plan on gradually increasing the frequency of Thruway bus service over the next 20 years. The No Action alternative already includes plans to increase intercity bus service between Eugene and Portland to seven round trips per day, so why not focus on further increasing bus frequency rather than replacing it with a more costly rail alternative? That way, transportation service can be more flexibly adjusted to transportation demands without the same level of capital investment and heavy subsidies that expanding passenger rail would require.

Justus Armstrong is a Research Associate at Cascade Policy Institute, Oregon’s free-market public policy research organization.

Click here for PDF version:

19-1-ODOT’s_Passenger-Rail-Project_Equals_Increasing_Costs_High_Taxpayer_SubsidiesPDF

 

Read Blog Detail

Prosper Portland’s Latest Business Grants Program Oversteps Again

By Justus Armstrong

Should the City of Portland invest taxpayer money in local marijuana businesses just because they’re owned by people of color? Prosper Portland seems to think so. Its new grants program seeks to expand minority-owned cannabis businesses in the Portland area.

 The Cannabis Business Development Equity Program, funded by a 3% local tax on legal cannabis sales, is intended to address the disproportionate effects of the War on Drugs on people of color. Grants ranging from $5,000 to $30,000 will be administered by the NuLeaf Project and are expected to be awarded to 10-20 businesses. Prospective grant recipients must have at least 51% ownership by people of color to qualify.

 Redressing—in some fashion—the economic impacts of marijuana prohibition on minorities might seem like a laudable goal. Grants funded by Portland cannabis tax revenue have also gone towards clearing records and assisting with workforce reentry for those disproportionately affected by marijuana prohibition.

 Measures addressing the direct criminal justice implications of drug convictions may, in fact, help to right past inequities; but the business development aspect of Portland’s program oversteps these intentions. Prosper Portland’s latest “investment” project follows the same trend as many other government programs, continuing a troubling pattern of crony capitalism disguised as affirmative action.

 Giving cannabis startups funding from the city doesn’t correlate to healing the wounds of incarceration. The NuLeaf Project doesn’t require applicants to come from a background specifically affected by cannabis prohibition. Rather, preference is given to any business with at least 51% minority ownership. The assumption seems to be that because drug possession charges have disproportionately affected people of color, all minority entrepreneurs in the cannabis industry face significant “capital, education, and connection hurdles” when starting a business.

 Prosper Portland packages the program as a way to help negatively impacted communities, but the request for proposals explicitly states that the program is “designed with an emphasis on supporting a business through growth and ensuring technical assistance leads to wealth creation outcomes.” Whether or not NuLeaf’s mission is worthwhile, it’s hard to see why public money should be given away for private wealth creation. Should Portland assume that minority-owned businesses in an industry approaching $25 billion can’t succeed without help from the city government?

 Corporate welfare is corporate welfare, regardless of the industry or the race of a business’s leadership. If you don’t believe Carrier Corporation should receive targeted tax breaks from President Trump, or that Amazon should receive special treatment from Seattle, the principle is the same. Prosper Portland’s subsidizing of cannabis companies is a similar market distortion and an illegitimate use of public funds. Tax funding should not be directed to fund businesses in Portland or anywhere in Oregon. Minority-owned cannabis businesses, like any other businesses, should succeed or fail by their own merit.

Justus Armstrong is a Research Associate at Cascade Policy Institute, Oregon’s free-market public policy research organization.

Click here for PDF version:

18-23-Propser_Portland’s_Latest_Business_Grants_Program_Oversteps_AgainPDF

Read Blog Detail

QuickPoint! – “They Left Out Radio!” – The Human Genius Behind Economic Growth

By Kathryn Hickok

Bull market? Bear market? Growth? Uncertainty? What does 2019 have in store?

Economies are described in numbers, percentages, and quarterly comparisons. But the picture is richer than dollar values of production and consumption. No economy exists without millions of unique people bringing to the marketplace their creativity, intelligence, initiative, and effort. The knowledge, skills, and experiences of people are the true wealth of a society.

President Reagan once remarked on the limitations of economic predictions that can’t measure human genius. He said:

“You know, back in the twenties I think they did a report for Herbert Hoover about what the future economy would be like. And they included all their projections on industries and restaurants and steel, everything. But you know what they left out? They left out radio! They left out the fantastic rise of the media, which transformed the commercial marketplace….

“And now they make their projections, and they leave out high tech….”*

Fostering economic growth requires a tax and regulatory climate that’s friendly to businesses and the people who start them. The Oregon legislature should remember this when it convenes in February.

 

* Peggy Noonan, What I Saw at the Revolution: A Political Life in the Reagan Era (New York: Random House, 1990), 146.

 

Kathryn Hickok is Executive Vice President at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for PDF version:

12-12-18-They_Left_Out_RadioPDF

Read Blog Detail

Fake Leadership

By John A. Charles, Jr.

Governor Kate Brown’s proposed two-year general fund budget for 2019-21 requests $23.6 billion. That is an increase of 12.4% over the current level, which was the largest budget in Oregon history when it was adopted 18 months ago.

So far, few legislative leaders have questioned why the Governor needs so much money. At the Oregon Business Plan summit, held on December 3, most of the talk was about adopting new taxes and repealing the popular “kicker” law that rebates surplus funds to Oregon taxpayers. That’s not a good omen.

Most parents teach their children at a young age that they can’t always ask for more; sometimes you have to make do with what you have. That lesson has been lost on Oregon’s political leaders. No matter how much money we send to Salem, it’s never enough.

Before legislators vote to approve even one more tax, they should ask where the money will go, and why is it needed? And more importantly, if the current record-setting budget is not enough, what will change in the next two years to avoid another huge increase in 2020?

Any governor can demand more money; addressing the root causes of our problems takes real leadership. Gov. Brown has yet to figure that out.

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

Click here for PDF version:

12-5-18-Fake_LeadershipPDF

Read Blog Detail

Metro Should Let Transit Customers Drive Transportation Innovation

By Justus Armstrong

ABC’s Shark Tank may be coming to the Portland region—not in the form of a reality TV special, but as a taxpayer-funded project that positions the Metro regional government to act as a venture capital firm. Rather than investing in the success of growing businesses, however, the Sharks at Metro plan to fund temporary pilot projects that test new transportation technology.

Metro proposes that its Partnerships and Innovative Learning Opportunities in Transportation (PILOT) program—a component of the Emerging Technology Strategy—would help meet its “guided innovation” goals, but the shortsighted approach of this program ignores a vital question: Are risky technological investments the best use of taxpayer funding?

In a presentation at a Metro work session in July, Senior Technology Strategist Eliot Rose suggested the PILOT program would “guide innovation in transportation technology toward creating a more equitable and livable region.” Embedded in the presentation were numerous contradictions, beginning with the oxymoron of “guided innovation.” In Metro’s case, guided innovation more than likely means “hindered innovation,” with PILOT funding being a carrot-and-stick method of ensuring that emerging technologies take the direction technocrats deem appropriate, not the direction consumers are demanding.

By allocating government funding to the transportation projects of its choice, Metro risks preventing better ideas from emerging and hampering the innovation necessary for real progress to take place. As Metro strategist Rose noted, ridesharing, bikesharing, and other technologies PILOT wishes to foster have already been expanding in Portland. This technological progress has taken place with private investment, yet Rose still concludes that public money is needed for it to continue.

During the July work session, Metro staff claimed that the government “needs to intervene to bring technology to people and communities that the market doesn’t serve.” This assumption presents another contradiction: If an investment isn’t cost-effective for a private actor, what makes it a cost-effective investment to Metro? And how can successful projects be expected to continue without public funding, if the projects’ functions wouldn’t otherwise be demanded by the market?

Furthermore, Metro’s plan risks sinking taxpayer money into potentially unsuccessful projects. The $165,000 Forth-Hacienda project was presented by Metro as an example of a successful pilot project—not because the project itself was successful, but because its failure offered a great learning experience. The desire to better understand new technologies is not without merit, but the experimental nature of such pilot projects hardly makes them a good fit for taxpayer funding.

For all the project’s flaws, discussion about Metro’s Emerging Technology Strategy has included some promising aspects. For instance, during the work session, Metro Councilor Shirley Craddick brought up the idea of transitioning some of TriMet’s responsibilities to ridesharing networks. Considering more innovative modes for public transportation would be a step in the right direction and likely would improve cost-effectiveness, quality, and ridership of transit while meeting the needs of the populations Metro seeks to assist.

Perhaps a more effective Emerging Technology Strategy could focus solely on ways to improve existing public transportation through new technology, rather than interfering with private transportation markets through subsidies and attempts to shape private development. Instead of subsidizing companies with PILOT funding, Metro could offer open-ended transportation vouchers directly to transit users, especially transit-dependent and underserved populations.

Transit vouchers could be spent on a variety of transportation options, including TriMet and the newer technologies the PILOT program intends to target, such as rideshare, bikeshare, and electric vehicle and autonomous vehicle rentals. Putting the money directly into the hands of transit users could drive innovation through consumer sovereignty on the demand side, encouraging competition and making companies work to meet transit users’ needs instead of Metro’s project specifications.

With its PILOT program, Metro seeks to encourage innovation while managing risk; but any risk associated with developing new technologies should be borne by the companies driving the innovation, not by the public. If Metro moves forward with the PILOT program, it will only hinder its own goals. Instead of shaping existing markets in the private sector, Metro should focus on applying technological improvements to public transportation options.

Moreover, Metro should reform the regulatory framework and barriers to entry that may be preventing the emerging transportation technology market from functioning at its best. After all, the expansion of Uber and Lyft in Portland didn’t take place because Portland subsidized these companies. It happened because Portland stopped banning them. Metro councilors and staff can’t foresee the direction that new technologies will take, so they can’t know enough in advance to guide the direction of innovation or adequately manage its risks. The best they can do is get out of the way.

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

Click here for PDF version:

18-20-Metro_Should_Let_Transit_Customers_Drive_Transportation_InnovationPDF

Read Blog Detail

Another Tax Increase from Kate Brown

By John A. Charles, Jr.

Governor Kate Brown’s top health care administrator is requesting that the legislature increase taxes on beer, wine, cider, cigarettes, cigars, and vaping pens. If approved, the taxes would result in $784 million in new revenue for the state over the next two years.

Health officials claim that this is a “public health” measure designed to reduce consumption of harmful products, but it’s really just a money grab. The state has an estimated shortfall of $800 million in Medicaid funding, and this proposal conveniently would raise almost that amount.

However, the proposed tax probably will not actually raise that much money because of a built-in contradiction: If consumption goes down, then tax revenue has to go down as well. Legislators cannot support it as both a public health measure and a revenue-raiser at the same time. For one goal to succeed, the other must fail.

It’s an open secret in Salem that the biggest “addiction” problem in the state is not tobacco or alcohol consumption; it’s the addiction that politicians have to taxation on smoking, drinking and gambling. They don’t want less of these activities; they actually want more.

Legislators are not our parents. Oregonians should be left alone so they can decide for themselves what products to use.

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

Click here for PDF version:

10-31-18-Another_Tax_Increase_from_Kate_BrownPDF

Read Blog Detail

Metro’s Bond Measure 26-199 Raises Taxes on Homeowners, Requires No Accountability for Money Spent

By Miranda Bonifield

Metro claims Measure 26-199 is designed to address affordable housing, but the 652.8 million dollar bond measure raises taxes for homeowners without ensuring that it will accomplish its goals.

Metro claims these bonds would fund up to 3,900 low-income housing units. However, the measure doesn’t require a minimum number of units: Metro could build a few units, spend the rest of the money on “services,” and fulfill the requirements of Measure 26-199. The text of the measure even says these bonds may be used for things like grocery or retail space without limitation. In other words, there’s no guarantee the measure will make even a small improvement to housing affordability.

There is no deadline ensuring Metro provides these units in a timely fashion. There is no requirement for Metro to change its practices if auditors find Metro is failing to accomplish its goals. 26-199 asks you to trust Metro’s intentions without any accountability to encourage success. Meanwhile, urban growth boundaries and endless red tape keep Oregon’s housing supply from meeting the needs of our growing population.

Any major project needs firm deadlines and specific goals to have any hope of success, but Metro’s measure provides neither.

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

Click here for PDF version:

10-24-18-Metro’s_Bond_Measure 26-199_Raises_Taxes_on_Homeowners_Requires_No_Accountability_for_Money_SpentPDF

Read Blog Detail

Electric Buses: Another Costly Fad

By John A. Charles, Jr.

The TriMet Board recently approved a plan to replace its entire fleet with battery-electric buses (BEBs) by 2040. If implemented, this will cost taxpayers $553 million more than buying diesel buses.

It might be worth the premium if battery powered buses were cleaner or more reliable, but they aren’t. King County, Washington has been testing BEBs since April 2016. On average, they only travel 2,771 miles between service failures. Diesel buses are good for 17,332 miles—more than six times as long.

In addition, battery buses are not the best environmental option, because they draw electricity from power plants using fossil fuels. The Los Angeles County Metropolitan Transit Authority went through an extensive analysis in 2016, and found that “renewable” natural gas derived from landfill methane had a much better environmental profile than electric vehicles.

For that reason, the MTA decided to convert its bus fleet to renewable natural gas, not electric. The agency concluded that renewable natural gas “achieves 39% greater reductions in greenhouse gas emissions, at half the cost” of electric buses.

What does TriMet know that the Los Angeles MTA doesn’t? That question should be answered before we spend $553 million.

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

Click here for PDF version:

10-10-18-Electric_Buses_Another_Costly_FadPDF

Read Blog Detail

The Kicker Debate Continues

By Steve Buckstein

Because of Oregon’s recent and projected strong economy, a personal “kicker” tax refund of $686 million is projected to go out in the first half of 2020. This would be the second-largest kicker amount in the state’s history. If you pay personal income taxes to the state of Oregon, you will get some of this money as a credit on your future tax liabilities. This will again raise the question: Is the kicker law good or bad public policy?

Some people will be envious that the “rich” will get much bigger refunds than the rest of us and they don’t really “need” the money. While the average kicker is projected to be $336, they point to those in the highest adjusted gross income bracket of $401,200 and above who can expect to receive $6,787. What is often unstated in this argument is that those “lucky” top taxpayers paid way more income tax than the rest of us, and they will get back exactly the same percentage of their tax payments as everyone else does.

So, whether the kicker law is good or bad public policy, let’s think a little about who this money really belongs to. Is it a rebate for overpaying your taxes, or is it somehow “our” money that is better left in government coffers?

How the kicker works 

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

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

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

Whose money is it? 

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

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

How much is that latte? 

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

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

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

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

Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization. You can find more Cascade Commentaries on Oregon’s kicker law here.

Click here for PDF version:

18-17-The_Kicker_Debate_ContinuesPDF

Read Blog Detail

Metro’s Poorly Thought-Out Grants Program

By Justus Armstrong

Portland’s Metro Council plans to award grants for its Investment and Innovation program this fall. The program seeks to strengthen the local infrastructure for waste reduction; but with a combination of corporate welfare and vague performance measures, its methods are murky at best and unethical at worst.

With $9 million in funding over three years, Metro’s program offers grants of up to $500,000 to both non-profit and for-profit organizations for projects in line with Metro’s waste reduction goals. The grants are limited to costs tied to waste reduction projects; but padding companies’ expenses to benefit these projects goes outside the scope of Metro’s stated goals and undermines the competitive marketplace. Most citizens, and Oregon’s Constitution, would oppose tax funding for privately owned corporations. Apart from its good intentions and “green” packaging, what makes this project any different?

Metro’s Investment and Innovation program lacks clear direction and accountability to taxpayers for results. Since the grants outsource waste reduction to third parties, Metro can offer no estimates of the program’s ability to actually reduce waste. Metro is handing out taxpayer money for hypothetical benefits that are unlikely to match the price tag.

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

Click here for the PDF version:

8-8-18-Metro’s_Poorly_Thought-Out_Grants_ProgramPDF

Read Blog Detail

23 Million Reasons for Metro to Repeal Its Construction Excise Tax

By Jakob Puckett

How much do we have to tax something to make it affordable? You might think that’s counterintuitive, and you’d be right. But that’s exactly what the Portland-area Metro Council is doing with affordable housing through their Construction Excise Tax. So what is this tax? For every construction project valued at over $100,000, Metro taxes 0.12% of its value, with most of the revenue directed to fund grants to plan for affordable housing.

That number may not sound like much, but the Portland City Council also has a Construction Excise Tax, only it’s eight times higher than Metro’s, also for housing land-use planning. So two councils levy the same tax on the same people for the same purpose.

And the money raised rarely goes to constructing housing units. Metro recently approved 10 new grants; and while all of them fund more land-use planning exercises, none of them actually build new housing. This extra paperwork often leads to construction delays, creating an expensive, redundant mess for land developers.

And just how expensive has it been? Metro has renewed this tax twice, raising over $23 million for these projects, which has just made housing construction $23 million more expensive. And, in a city where every dollar put towards new housing counts, that’s 23 million reasons why Metro should repeal its Construction Excise Tax.

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

Click here for the PDF version:

8-1-18-23_Million_Reasons_for_Metro_to_Repeal_Its_Construction_Excise_TaxPDF

Read Blog Detail

Private Developers Leading the Way for Affordable Housing

By Rachel Dawson

The Metro Council voted June 7 to place a housing bond measure of $652.8 million for only 3,900 units on the ballot this fall. The regional government estimates the cost of new projects will be around $253,000 per home. But as there is no cap on cost per dwelling, project costs could be much greater. This bond will spend too much money on too few homes. However, private developers in the Portland region have shown it’s possible to build more residences at a lower cost compared with Metro’s proposal.

There is no better example of this than local private developer Rob Justus. With Home First Development, Justus has helped build a total of 431 public units for an average cost of $90,230 since 2011. Home First likes to call this “affordable-affordable” housing. Before a project begins, the company keeps itself accountable by working backwards: They contain the costs of the project so apartments can be rented to tenants at a price that works for them. This philosophy has allowed Home First to increase the number of homes they are able to build.

In concert with the Portland Habilitation Center, Justus built 78 affordable residences in 2015 in Portland at $65,000 per unit. In 2017 he offered to build 1,000 homes in Portland at $85,000 per unit if the city could gather $20 million, but Portland officials rejected this proposal. These homes would have cost 66% less than Metro’s housing bond estimates.

Justus has made low costs possible by building in less expensive neighborhoods and using non-union labor. These homes may not be the largest dwellings in the best part of town, but they are affordable to those in the lower 30% of area median income who are in need of a home.

Along with wages and location, the materials used can greatly affect the price of a project. A Catholic charity attempted to build the complex known as St. Francis Park in 2015 using an inexpensive siding called HardiPlank. When the project went through Portland’s required design review, city regulators decided to choose a more expensive siding, which drastically increased the cost of the project. This additional cost caused the city to increase taxpayer subsidy to the building. Ironically, in 2006 a housing complex in Vancouver using the same inexpensive siding that was rejected by the city of Portland received a national development award.

The fatal flaw in this bond measure is that there is no cap on cost per home, which the city of Vancouver has demonstrated is possible to have. Vancouver passed their own Affordable Housing Fund in 2016 which caps the amount spent per housing unit at $50,000. Money from the fund would add to a project’s “capital stack,” rather than fully funding the complex. This forces project applicants (one of whom was Home First Development) to search for multiple sources of funding instead of relying on the Vancouver City Council to foot the bill.

The Metro Council could build cheaper apartments by using less expensive materials and contracting with private developers to decrease labor costs. Without a cap on cost per unit to keep themselves accountable, Metro is able to write a blank check with taxpayer dollars for every project.

Housing can be made affordable to both taxpayers and renters. Metro can do this by withdrawing the bond measure and redrafting it to include a cap on costs. Doing so would allow them to follow the lead of private developers like Rob Justus to make “affordable-affordable” housing a reality.

Rachel Dawson is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article appeared in The Portland Tribune on July 26, 2018.

Click here for the PDF version:

18-14-Private_Developers_Leading_the_Way_for_Affordable_HousingPDF

Read Blog Detail

Metro’s Waste Reduction Program Lacks Direction and Accountability

By Justus Armstrong

This October, the Portland-area Metro Council will award the first round of grants for its Investment and Innovation program. The program’s goals include strengthening local waste reduction efforts and fostering economic benefits for those from marginalized communities; but with a combination of corporate welfare and vague performance measures, the means by which Metro hopes to obtain these goals are murky at best and unethical at worst.

The program, which sets aside $3 million a year from Metro’s solid waste reserve fund over a three-year pilot period, offers two tiers of grants—one tier ranging from $10,000 to $50,000, the other from $50,000 to $500,000—to nonprofit organizations and for-profit businesses alike. Metro directs the larger capital grants toward “investments in equipment, machinery and/or buildings” for projects in line with its waste reduction goals. In awarding capital to businesses, Metro seeks to improve regional recycling and disposal infrastructure, but seems to have no regard for the program’s marketplace consequences.

By matching assets with public funding, Metro grants an unfair advantage to businesses that follow its environmental agenda. While the grants program limits funding to costs tied to waste reduction projects, padding companies’ overhead and capital costs to benefit these projects goes outside the scope of Metro’s stated goals and undermines the competitive marketplace. Businesses should earn investment capital such as buildings and equipment by themselves, not through taxpayer handouts. Most citizens would oppose the use of their tax dollars to prop up privately owned corporations. Apart from good intentions and “green” packaging, what makes this project demonstrably different? How does it fit into Article XI, Section 9 of Oregon’s Constitution, which states that no municipality shall “raise money for, or loan its credit to, or in aid of, any such company, corporation or association?” Many questions have yet to be addressed.

Even for measuring success, the program’s standards are unclear; and Metro has been down this road before. Metro’s Community Planning and Development Grants program awarded around $19 million from 2006-2015 to help local governments prepare land for development. Like the Investment and Innovation program, these grants were intended to advance Metro’s long-term vision, but a 2016 report from Metro auditor Brian Evans found problems with clear direction. “The program has become less aligned with certain regional planning priorities over time,” Evans wrote. “Changes to the program reduced clarity about what was intended to be achieved and there was no process in place to evaluate the program’s outcomes.”

The Investment and Innovation program faces similar risks. Since the grants outsource waste reduction goals to third parties, Metro can only guess at their potential effectiveness. In a pre-proposal workshop for prospective applicants, Program Manager Suzanne Piluso could offer no estimate of the program’s effect on waste, saying it would take until after the pilot period to “determine if it’s moved the needle.” To be clear, that’s $9 million for a waste reduction program that can’t promise to actually reduce waste. Metro is handing out taxpayer money for hypothetical benefits that are unlikely to match the price tag.

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

Click here for the PDF version:

18-13-Metro’s_Waste_Reduction_Grants_Program_Lacks_Direction_and_AccountabilityPDF (1)

Read Blog Detail

Gov. Brown, lawmakers, unions decry court ruling / Published in News Channel KTVZ

SALEM, Ore. – Top Oregon Democrats, including Gov. Kate Brown and Sen. Jeff Merkley, joined union officials Wednesday in expressing disappointment in a U.S. Supreme Court ruling that struck down an Illinois law allowing unions to assess fees against non-members to help fund collective bargaining efforts.

In reaction to the U.S. Supreme Court’s decision in Janus v. AFSCME, Governor Kate Brown, Tom Chamberlain (president of Oregon AFL-CIO), John Larson (president of the Oregon Education Association), Melissa Unger (executive director of SEIU Local 503), and Stacy Chamberlain (executive director of Oregon AFSCME), released the following joint statement:

“Oregon’s economy is thriving, but the rising economic tide is leaving too many behind. Every day, we hear from families struggling to make ends meet, single parents working two jobs to get by, young people buried by student loans, and seniors who’ve spent down their life savings to keep up with the rising cost of living.

“Today, Oregon families face new challenges, but unions are on the forefront, fighting for working families, fair pay, and more affordable housing. Our union members have led the fights to raise the minimum wage, ensure that women and …

Read full article here

Read Blog Detail

Local unions rally against SCOTUS union decision / Published in KOIN

PORTLAND, Ore. (KOIN) — Unions, and the people that make them up, headed to Portland City Hall on Wednesday night to rally against a Wednesday ruling by the U.S. Supreme Court that ended mandatory union fees that support government employees working in collective bargaining agreements.

Those people say they will not be beaten by the Supreme Court’s 5-4 decision in Janus v. AFSCME Council 31, a decision they say threatens organized labor.

“Our members know what is at stake,” said Stacy Chamberlain, the ex-director of AFSCME. “They know they need to stand together if we are going to be strong and negotiate good contracts and fight against privatization, some of the other things that we know that these anti worker groups are going to try to do.”

Gov. Kate Brown, along with other union leaders, issued a statement, calling the ruling …

Read full article here

Read Blog Detail

Supreme Court deals big setback to labor unions, local groups gather in Portland / Published in KATU

The Supreme Court issued a ruling in an Illinois labor case Wednesday that said public employees can’t be forced to pay fees to labor unions that represent them in collective bargaining.

Union organizers in the Portland area are expected to gather around 5:30 p.m. Wednesday in front of Portland City Hall.

Those in favor of the decision say it’s a victory for freedom of choice and speech for workers who may disagree with a union position and decide not to support the organization financially.

Others like Oregon Senator Jeff Merkley say it is a blow to workers represented by unions.

“This is another movement away from a nation that …

Read full article here

Read Blog Detail

Local unions react the ruling by the Supreme Court / Published in KVAL Eugene Oregon

EUGENE, Ore. – Top public employee unions in Oregon are less than pleased with the big decision on Wednesday when the U.S. Supreme Court ruled on union dues.

The case is called Janus versus AFSCME, and the high court’s ruling on Wednesday is causing a lot of reaction. Supporters of the ruling say that it’s a boost for first amendment rights, but detractors say it’s a big setback for working families.

The Supreme Court ruled that government workers cannot be compelled to contribute fees to labor unions that represent them in collective bargaining. It’s considered a significant financial blow to organized labor.

One of the chief free-market think-tanks in Oregon says that this decision was the right one.

“Public employees, as of today in Oregon and 22 other states that are not right-to-work states, do not have to pay dues to a union that they disagree with,” said Steve Buckstein, the Director of the Cascade Policy Institute.

Some local labor and management agencies refused to go …

Read full article here

Read Blog Detail

Supreme Court Decisions Deals Blow to Labor Unions / Published in KAST 1370AM

The Supreme Court ruled Wednesday that government workers can’t be forced to contribute to labor unions that represent them in collective bargaining, dealing a serious financial blow to organized labor.

The justices are scrapping a 41-year-old decision that had allowed states to require that public employees pay some fees to unions that represent them, even if the workers choose not to join.

The 5-4 decision fulfills a longtime wish of conservatives to get rid of the so-called fair share fees that non-members pay to unions in roughly two dozen states. The court ruled that the laws violate the First Amendment by compelling workers to support unions they may disagree with.

“States and public-sector unions may no longer extract agency fees from nonconsenting employees,” Justice Samuel Alito said in his majority opinion for the court’s five conservative justices.

President Donald Trump weighed in minutes after the decision was handed down, while Alito …

Read full article here

Read Blog Detail

Direct Primary Care Puts Patients First, Lowers Health Care Costs

By Justus Armstrong

Could forgoing health insurance make health care more affordable? That’s the approach taken by many physicians practicing direct primary care, or DPC, an emerging medical movement that seeks to cut out the middleman and put patients first. Instead of billing insurance for individual services, physicians charge a regular fee as low as $60 a month directly to patients, increasing patient access and letting doctors focus on quality of office visits over quantity. Under a direct primary care model, your doctor is more available, with easier appointment scheduling and direct access to medical advice via phone, text, or email. A better doctor-patient relationship allows more personalized care, and research into DPC has yet to find a single instance of malpractice.

Health care without a third party brings entrepreneurship to medicine and saves patients money. While most direct primary care providers recommend patients carry a high-deductible insurance plan to protect against emergencies, taking insurance out of the equation for regular medical expenses allows physicians to reduce their overhead and provide better quality at a lower price.

Oregon is home to many direct care facilities; but current law requires direct providers to obtain a separate license through the state insurance agency, making direct primary care unnecessarily difficult. Let’s get rid of the red tape and take health care in a new direction.

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

Click here for the PDF version:

7-11-18-Direct_Primary_Care_Puts_Patients_First

Read Blog Detail

Is Metro’s Affordable Housing Plan Really That Affordable?

By Rachel Dawson

The Metro City Council voted June 7 to place a housing bond measure of more than $600 million dollars on the ballot this fall. The regional government estimates the cost of new projects will be around $253,000 per unit. There is no cap on cost per unit, so project costs could be much greater, and have proven to be with past bonds.

However, it is possible to decrease the costs of these projects. Rob Justus, with Home First Development, has built a total of 431 public units for an average cost of $90,000 since 2011. He offered to build the city 1,000 homes at $85,000 per unit in 2015, but Portland officials rejected his proposal.

The city could build cheaper apartments by using less expensive materials and contracting with private developers to decrease labor costs. Placing a cap on how much is spent per unit would ensure that the city held itself accountable on project costs. Doing so would decrease the size of the bond and the burden it places on taxpayers.

There is a way to make housing affordable to both taxpayers and renters, and following the lead of private developers like Rob Justus is a way Portland can do just that.

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

Click here for the PDF version:

6-27-18-Is_Metro’s_Affordable_Housing_Plan_Affordable

Read Blog Detail

Time to Stop the PERS Pac-Man from Eating Teachers’ Salaries and Taxpayers’ Pocketbooks

By Steve Buckstein

What do Pac-Man and public pensions have in common? An intriguing 2016 national study of pension debt and teacher salaries recently answered this question. Depending on what economic assumptions are made, it’s likely that unfunded public pension liabilities for all states and local governments exceeded $6 trillion in 2017. Based on the same assumptions, Oregon’s share of those liabilities likely approached $50 billion.

The study, The Pension Pac-Man: How Pension Debt Eats Away at Teacher Salaries, by Chad Aldeman of Bellweather Education Partners, concluded that unfunded public pension liabilities were eating away at teacher salaries in every state—just like the old arcade game Pac-Man. This happens because the school districts teachers work for have to pay an increasingly larger share of their budgets into retirement funds for teachers who are no longer teaching, at the expense of those currently in the classroom.

In effect, America’s public school teachers are being charged on average about $6,800 a year—money that could be boosting their paychecks—to preserve what are becoming increasingly inequitable public pension systems. The inequality stems from the shifting nature of state pension systems that compensate older (and currently retired) teachers at higher rates than they will younger ones.

So where do Oregon teachers stand? Compared to the national average of about $6,800 per teacher, Oregon basically has to charge our teachers $7,398 a year to cover our unfunded PERS liabilities. That’s more than in all but 14 other states.

One might conclude that Oregon teachers consequently have lower salaries than teachers around the country because of this large pension hit. Not true. The nation’s largest teachers union reported that the average Oregon teacher earned $61,862 a year in 2016-17, compared to the national average of $59,660. That put our teachers in thirteenth place for average teacher pay among the 50 states.

Then again, Oregon teachers might be expected to earn more because, again according to that recent union report, in 2017 Oregon had more revenue per student in its public school system than 30 other states. We had $14,827 per student in average daily attendance, compared to the national average of just $13,900.

So, even though Oregon teachers are being hurt by our large public pension debt, they still earn more than teachers nationwide, and even more relative to their Oregon neighbors who pay the taxes to fund those higher teacher salaries while earning less than the national average themselves. All-in-all, Oregonians compensate our public school teachers relatively well.

Even though the latest, so-called Tier 3 or OPSRP PERS system has a less generous defined-contribution element than Tier 1 PERS workers earned, taxpayers should not be on the hook for unknown, and unknowable, pension costs going forward. It’s unknowable costs like these that have led to the current, nearly $7,400 annual debt burden on our teachers, districts, and taxpayers.

If Oregon had no unfunded PERS liabilities, three things could happen. Teachers might argue they should see an average raise of almost $7,400 per year, while school districts might want to put that money toward other district expenses that benefit students. Taxpayers might expect to see their Oregon personal income tax bills reduced if the state managed its public pension funds responsibly.

But none of these outcomes will occur because Oregon hasn’t managed PERS responsibly. As long as this continues, the outcome will be what’s unfolding now: higher taxes and greater school district payments to fund pension liabilities that few saw coming—and that threaten to continue, like Pac-Man, to eat away at teacher salaries, school district budgets, and taxpayer pocketbooks.

To stop the PERS Pac-Man, our Governor and legislators need to get serious about PERS reform, specifically by ending the “defined-benefit” elements of PERS for all work done in the future, either by new employees or current ones. Instead, the legislature should move all public employees, including teachers, to 401(k)-style defined-contribution retirement plans, which are the only kind of plan available to most taxpayers. The costs to future teachers, schools, and taxpayers will only get worse if we don’t end the PERS Pac-Man once and for all.

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

Click here for the PDF version:

18-10-Time_to_Stop_the_PERS_Pac-Man

Read Blog Detail

How the PERS Pac-Man Eats Teacher Salaries

By Steve Buckstein and Kathryn Hickok

What do Pac-Man and public pensions have in common? An intriguing 2016 national study of pension debt and teacher salaries recently answered this question. Depending on what economic assumptions are made, it’s likely that unfunded public pension liabilities for all states and local governments exceeded $6 trillion last year. Based on the same assumptions, Oregon’s share of those liabilities likely approached $50 billion.

The study, The Pension Pac-Man: How Pension Debt Eats Away at Teacher Salaries, by Chad Aldeman of Bellweather Education Partners, concluded that unfunded public pension liabilities are eating away at teacher salaries in every state—just like the arcade game. This happens because the school districts teachers work for have to pay an increasingly larger share of their budgets into retirement funds for teachers who are no longer teaching, at the expense of those currently in the classroom.

To stop the PERS Pac-Man from eating teacher salaries, Oregon’s Governor and state legislators need to get serious about PERS reform. They should end the “defined-benefit” elements of PERS for all work done in the future. Instead, public employees, including teachers, should move to 401(k)-style retirement plans. The costs to future teachers, schools, and taxpayers will only get worse if we don’t end the PERS Pac-Man once and for all.

Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s free market public policy research organization. Kathryn Hickok is Executive Vice President at Cascade.

Click here for the PDF version:

6-13-18-How_the_PERS_Pac-Man_Eats_Teacher_SalariesPDF

Read Blog Detail

New Transportation Tax Is on the Wrong Side of History

By John A. Charles, Jr.

Oregon employers began receiving notices this week regarding the new statewide transit tax that goes into effect on July 1. The law requires all employers to withhold, report, and remit one-tenth of one percent of wages paid to their employees to the Oregon Department of Revenue. The money will go into a Statewide Transportation Improvement Fund to subsidize public transit agencies.

The new tax is being imposed at exactly the wrong time in history. Transit ridership is declining across the country, and it’s not because transit agencies lack money. The problem is that their service models are obsolete.

The ride-hailing revolution brought about by Uber, Lyft, Sidecar, and other start-ups has raised the expectations of customers. People now want on-demand, door-to-door service that they can order through their phones. The coming revolution in driverless cars will only accelerate that change.

The traditional service offered by legacy transit agencies—fixed-route, limited-schedule service on slow buses—just isn’t good enough anymore.

Subsidizing transit with one more tax will simply delay the inevitable. The legislature should repeal this tax as soon as possible.

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

Click here for the PDF version:

5-23-18-New_Transportation_Tax

Read Blog Detail

Underestimating Public School Spending

By Steve Buckstein

A 2017 national poll on education issues found, among other things, that most Americans underestimate how much money is being spent to educate kids in their local public schools. College-educated whites, for example, underestimated school spending by a fourth, while less-educated whites underestimated spending by almost a third. Before finding out the real numbers, 55 percent of the more-educated group favored higher spending, while 46% of the less-educated did so.

But, when told the actual spending levels, support for higher spending dropped by 14% among the more-educated and by 12% among the less-educated.

While the poll didn’t break down results by state, we know the big cry in Oregon is that we aren’t funding schools adequately. In reality, we were recently spending $14,827 per student in average daily attendance, compared to the national average of just $13,900. We spend more than 30 other states.

When more Oregonians learn this surprising truth, their support for higher school spending may drop, hopefully to be replaced by support for policies that might actually make a difference. One such policy is a universal Education Savings Account program that offers a portion of current school spending to families interested in choosing between their local public schools, private, religious, online, and home schools. Such choices can save tax dollars and improve educational outcomes. Win, win.

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

Click here for the PDF version:

5-16-18-Underestimating_Public_School_Spending

Read Blog Detail

Throwing Money at Homelessness Is a Failed Strategy

By John A. Charles, Jr.

Portland Mayor Ted Wheeler hopes to spend $31 million next year addressing homelessness. This is ten percent more than Portland is spending this year. According to the Mayor, the goal is to help place people in permanent housing.

Of course, ending homelessness has been a goal of Portland mayors for decades. They never solve the problem because they conceptualize the homeless as an amorphous blob. But every person who lacks housing has a unique set of circumstances, and that background has to be understood.

It’s much more complicated than simply building more housing. Some people don’t want to live in a traditional home. They may have a psychological need to be outside. Others don’t want the responsibilities that come with home ownership, such as maintaining a yard and paying taxes. Some people have drug addictions that prevent them from earning enough income to afford housing.

While specific facts change, certain principles don’t; and the most important one is that simply giving people free stuff doesn’t work. Everybody deserves a hand up; no one benefits from a handout.

Before spending another $31 million, the Mayor should tell us what will be different this time around. If he can’t answer the question, he shouldn’t get the money.

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

Click here for the PDF version:

5-2-18-Throwing_Money_at_Homelessness_Is_a_Failed_StrategyPDF

Read Blog Detail

What’s Better for Low-Skilled Workers: Higher Minimum Wages or Lower Taxes?

By Kathryn Hickok

What’s better for welfare recipients and low-skilled workers: a higher minimum wage, or a larger Earned Income Tax Credit (EITC)? David Neumark, director of the Economic Self-Sufficiency Policy Research Institute at the University of California, Irvine, explains in a recent op-ed in the Wall Street Journal why the EITC benefits low-income single parents more over time than does a higher minimum wage.

The Earned Income Tax Credit is a tax benefit for low-to-moderate-income wage earners who have dependent children. By reducing the amount of taxes owed, the EITC lessens the impact of taxation on earned income when people enter the workforce, and therefore can provide a strong incentive to transition off public assistance.

“The minimum wage does, of course, provide an immediate boost to earnings of employed workers,” Neumark writes. “But evidence indicates that minimum wages reduce employment among young workers, costing them work experience that generates earnings growth in the long run. One of my recent studies shows that the shift to higher minimum wages since 2000 has contributed significantly to declines in employment among teens in school, which can reduce adult earnings later.”

“Because it promotes work,” he adds, “the EITC should do the opposite among those eligible for its most generous benefits—low-skilled single mothers….The evidence shows that exposure to a more generous EITC leads to markedly higher earnings in the long run among less-educated single mothers.”

Neumark recommends that if lawmakers want to pursue policies “that help turn government assistance…into economic self-sufficiency,” they should incentivize work. Rather than make it harder to enter the workforce, lawmakers should make it easier for working parents to keep more of the money they earn. They’ll not only take home more of their paychecks, but they’ll also increase the skills and experience that will raise their wages. That combination is a winning path out of poverty and government dependence for working parents and their children.

Kathryn Hickok is Executive Vice President at Cascade Policy Institute, Oregon’s free market public policy research organization.

Click here for the PDF version:

4-18-18-What’s_Better_for_Low-Skilled_Workers

Read Blog Detail

End PERS—For a Day!

By Steve Buckstein

Most Oregonians know that our state’s Public Employees Retirement System (PERS) is some $25 billion to $50 billion under water. Promises made to past and present government workers, primarily those hired before 1996, were simply way too generous for taxpayers and entities like school districts to afford.

A misreading of the so-called Contracts Clause in the U.S. Constitution by the Oregon Supreme Court has meant that once a government employee was hired in the state, the terms of his or her employment could not be altered, even for work done in the future.

One remedy for this situation might be to fire all public employees for a day, thus canceling their PERS contracts, and then hire them back the next day under new, less generous terms. If you think that’s a non-starter, something similar actually happened in Oregon before.

In 1953 the Oregon legislature passed a law ending the PERS system—for one day—so that the new system could include public employees in the (then) relatively young federal Social Security program. That one-day change was for the benefit of the workers. But it just might be a precedent to do something similar today for the benefit of taxpayers and public agencies. Let’s see who picks up this controversial ball and runs with it.

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

Click here for the PDF version:

4-4-18-End_PERS_For_a_DayPDF

Read Blog Detail

TriMet Shows Public Pension Reform Is Possible

By John A. Charles, Jr.

The Oregon legislature recently adjourned and once again took no action to reduce the unfunded liabilities of the Oregon Public Employee Retirement System (PERS). The reason is that most legislators think PERS reform is impossible. 

That belief is wrong. 

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 retirement accounts owned by employees. Once those payments are made, the employer has no further financial obligations. 

This stands in contrast to “defined benefit” (DB) programs like PERS in which employees are promised high levels of retirement payments regardless of how investment funds are performing. 

The success of the TriMet reforms can be seen in its latest pension fund valuation, which shows that annual benefit payments for pensions will peak in 2034 at $75 million, then drop to zero by about 2085.           

TriMet’s pension reform offers a guide to the legislature on how to reverse the spiraling PERS disaster, where unfunded liabilities have grown to $25 billion. The state should move all employees to defined-contribution plans as soon as possible. 

This essay summarizes a new Cascade study of TriMet’s successful pension reform program. “Following in TriMet’s Tracks: Defined-Contribution Plans a Necessary First Step to Oregon’s Fiscal Health” can be found here.

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

Click here for the PDF version:

3-21-18-TriMet_Shows_Public_Pension_Reform_Is_PossiblePDF

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

Oregon Small Businesses Deserve the Tax Break They Expected

By Steve Buckstein

While most Americans are reaping the benefits of the recent federal income tax cut, the Oregon legislature has just passed SB 1528 on a partisan vote that could deny several hundred thousand Oregon small businesses an equivalent state income tax cut they should expect.

Proponents of the bill argue that some of these businesses already got a state income tax break in 2013 and therefore shouldn’t benefit any further. But fewer than ten percent of the businesses the bill will hurt got that break. More than 90 percent won’t get any state break if Governor Kate Brown signs the bill.

Oregon is a small business state. Many are family businesses that depend on their business income to support their households.

Governor Brown says of the bill, “We’re looking at the implications for Oregon’s small businesses and Oregon’s economy.” She has until mid-April to sign it into law. Small business groups like NFIB are urging her to veto it.

If she does sign the bill, opponents might gather signatures referring it to voters in November. And hundreds of thousands of those voters will be the very people the bill impacts.

Oregon doesn’t need more tax revenue from small businesses to balance its budget, and giving them a tax break should be good for our economy. If you agree, call the Governor at 503-378-4582 and ask her to veto SB 1528.

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

Click here for the PDF version:

3-14-18-Oregon_Small_Businesses_Deserve_Tax_Break

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

If Health Care Becomes a “Fundamental Right,” Who Pays for It?

By Steve Buckstein

The Oregon House of Representatives has voted for HJR 203, which would add a section to the Oregon Constitution making health care a “fundamental right.” If passed by the Senate, voters will be asked in November to put this language in our Constitution:

“It is the obligation of the state to ensure that every resident of Oregon has access to cost-effective, medically appropriate and affordable health care as a fundamental right.” 

I object to defining health care as a right on a philosophical level, because in America rights don’t come from government; government protects our natural or God-given rights. But on a political level, I understand that government tries to grant such rights all the time.

A key argument against this proposal is the recognition that a “fundamental right” to health care would seem to trump everything else, since the Oregon Constitution doesn’t currently recognize any other “fundamental rights.” If the legislature tries to make good on this “fundamental right,” what happens when voters reject the new taxes needed to pay for it?

The unintended consequences of codifying health care as a “fundamental right” are almost endless. But that’s the way the game is played for now, and the next inning will play out in the Oregon Senate before the end of this short legislative session.

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

Click here for the PDF version:

2-14-18-Health_Care_Fundamental_Right

Read Blog Detail

Innovative Technology Can Reduce Tobacco Harm and Save Oregonians Tax Dollars

By Steve Buckstein

To eventually end cigarette use in America, rather than rely on tobacco taxes, public service announcements, and restrictions on cigarette use, we might look toward innovation. New technologies hold out the promise of ending deadly cigarette use altogether. The biggest impediment standing in the way is the federal government.

That might soon change, however, as the Federal Food and Drug Administration (FDA) is considering approval of a tobacco product that relies on battery-powered heat, instead of fire, to deliver aerosolized nicotine-containing vapor. The distinction is important because, as the late Professor Michael Russell wrote, “people smoke for the nicotine but they die from the tar.”

Traditional options for quitting tobacco use have included nicotine patches, lozenges, and gum, which have relatively low success rates. New “heat-not-burn” technology is proving promising at getting smokers around the world to quit cigarettes in favor of heated tobacco products known as IQOS, sometimes referred to as “I Quit Ordinary Cigarettes.” Using an electronic device to heat a small piece of tobacco without fire or combustion is the purest form of an electronic cigarette. Currently available in nearly three-dozen countries—including Italy, Switzerland, Japan, Germany, and Canada—these products have helped nearly four million adults quit smoking.

According to a recent article in The Economist, “Britain’s Committee on Toxicity recently found that people using heat-not-burn products are exposed to between 50% and 90% fewer ‘harmful and potentially harmful’ compounds compared with conventional cigarettes.”

Such harm reduction could save not only many American lives, but billions of American tax dollars. Between Medicaid, Medicare, and Veterans Affairs, conventional cigarette use may cost American taxpayers more than $100 billion per year.

The Oregon Health Authority (OHA) estimates that some 7,000 people die annually from cigarette use; and harm reduction could help reduce the costs associated with our growing Medicaid program, known as The Oregon Health Plan. Thirty-eight percent of adults on Medicaid smoke cigarettes—more than three times the percentage of Oregonians insured by other providers who smoke. Also, the OHA believes the cost to taxpayers for tobacco-related Medicaid health care is substantial.

If Oregon smokers transitioned to less harmful alternatives, whether by quitting entirely or by switching to a product like IQOS, that would be a win for both public health and public tax expenditures.

In 2009, President Obama signed the Family Smoking Prevention and Tobacco Control Act, a law that gave the FDA authority to regulate tobacco products in the United States. It went further and created a process for introducing new tobacco products that might be less harmful than cigarettes and even created a process for obtaining FDA approval to market those products as such. Permission to sell IQOS and market it as less harmful to adults is what the product’s makers are currently seeking from the FDA.

The FDA has noted that modified-risk tobacco product provisions “may be valuable tools in the effort to promote public health by reducing the morbidity and mortality associated with tobacco use, particularly if companies take advantage of these provisions by making bold, innovative product changes that substantially reduce, or even eliminate altogether, either the toxicity or addictiveness of tobacco products, or both.”

The Tobacco Products Scientific Advisory Committee will meet January 24 to discuss IQOS and make a recommendation to the FDA regarding approval of the product. It should examine the science and consider the importance of providing adult smokers with an alternative to cigarettes, because innovation and consumer choice may prove to be a great incentive to finally quit. The rest of the world has already embraced this technology, and the FDA should also.

Steve Buckstein is Senior Policy Analyst and Founder at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in The Bend Bulletin on January 17, 2018.

Click here for the PDF version:

18-02-Technology_Can_Reduce_Tobacco_Harm

Read Blog Detail

Poll Shows Voters Are Smarter Than Politicians Think

By John A. Charles, Jr.

In November the regional government, Metro, released the results of a new public opinion poll of 800 registered voters living in the tri-county region.

One of the questions was, “In a few words of your own, what is the most important change that could be made to improve the quality of life in the Portland region?”

The top three responses were: dealing with the homeless/poverty (25%); affordable housing (17%); and traffic congestion (14%).

Environmental issues tied for last place (2%), and global warming did not even make the list.

This is roughly the opposite of what we frequently hear from many of the political talking heads. Listening to them, one would think that environmental Armageddon is upon us, especially because Donald Trump is President.

For instance, the top legislative priority for Senator Michael Dembrow (D-Portland), who chairs the Senate Environment Committee, is a bill he hopes to pass in early 2018 that would create a $700 million/year tax on carbon dioxide by establishing a convoluted industrial regulatory program. The ambient environment would not be improved one bit by this tax, but all of our basic necessities—food, clothing, shelter, and energy—would become more expensive.

Sen. Dembrow’s biggest supporter on this issue is Governor Kate Brown, who recently flew to Bonn, Germany to hobnob with celebrities at a United Nations conference on global warming. The two of them are convinced that if they can make energy more expensive, we’ll all use less of it and the world will be saved from “global warming.”

Most voters intuitively know that this is a scam. The term “global warming” doesn’t even have a useful definition. Voters know that the pain-versus-gain equation of global warming taxes is heavily one-sided: the “benefits” of reducing fossil fuel use are highly speculative (and may not exist at all); long-term (potentially thousands of years away); and global in nature. Yet the costs will be known, immediate, and local.

As the Metro poll shows, there is very little grassroots support for this kind of punishment.

It’s not surprising that homelessness, housing, and traffic congestion rank as the top three issues in the Metro poll because these are problems most of us confront daily. They are also things we can take action on.

Unfortunately, government itself has caused much of the mess, so voters will need to think carefully before signing on to more tax-and-spend programs. Almost every time regulators intervene in real estate markets, the result is some combination of less housing production and higher housing prices.

Take the most obvious intervention: urban growth boundaries. Since 1980, the population of the Portland metro region has increased by about 78%, but the available land supply for housing has only gone up by 10%. Making buildable land artificially scarce and thus more expensive is not a winning strategy if you’re trying to provide more housing.

But lack of land is just the start. After you add in ubiquitous farm and forestland zoning, extortionist system development charges, tree protection ordinances, inclusionary zoning requirements, prevailing wage rules on public housing projects, and numerous other interventions, the result is that we have a serious shortage of housing.

Even the government is trapped in government regulation. Last spring the Portland City Council approved spending $3.7 million to purchase a strip club on SE Powell Boulevard near Cleveland High School. The City plans to tear down the building and build 200 to 300 units of low-income public housing on the 50,000-square-foot property. City officials have admitted that it will take two years just to obtain the necessary permits for the redevelopment.

If it takes this long to get the permits for one of Mayor Ted Wheeler’s top priorities, imagine the delays facing a private sector developer.

The housing woes in such cities as Portland, San Francisco, New York, and Seattle are mostly self-inflicted. Housing supply is lagging demand because we’ve created so many barriers to housing construction. Removing those barriers should be a top priority for the state legislature when it convenes in February.

Global warming legislation does not even deserve a hearing.

John A. Charles, Jr. is President and CEO of the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was published by the Pamplin Media Group and appeared in The Portland Tribune.

Click here for the PDF version:

18-01-Poll_Shows_Voters_Are_Smarter

Read Blog Detail

Measure 101 Deserves Your No Vote

By Steve Buckstein

By now you should have your ballot for the January 23rd statewide election asking you to vote Yes or No on Measure 101. It would let Oregon state government raise some additional $300 million this biennium on health care after it has already misspent several times that amount in recent years.

In addition to wasting $300 million on the Cover Oregon website that failed to sign up one person for health insurance, the state has been paying $280 million a year for nearly 55,000 Medicaid recipients recently found to no longer qualify or who failed to respond to an eligibility check. The state also overpaid health care organizations some $74 million over three years to provide expanded Medicaid coverage to some Oregonians.

More recently we learned that the state may have “erroneously paid, allocated, inaccurately recorded or over-claimed $112.4 million in health care funds.”

Measure 101 will tax some hospitals and add a tax to the health care premiums of many Oregonians. It will raise the cost of health care as these taxes are passed on to consumers and patients. These taxes are unfair, hitting some while exempting others. Furthermore, based on the recent failures of the state to spend health care monies properly, there is no assurance that this new money will be spent properly, either.

Measure 101 deserves your No vote.

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

Click here for the PDF version:

1-10-18-Measure_101_Deserves_Your_No_Vote

Read Blog Detail
Taxpayers Aren’t at Fault for Oregon’s Abysmal Graduation Rate

Taxpayers Aren’t at Fault for Oregon’s Abysmal Graduation Rate

By Kathryn Hickok

Willamette Week recently reported that, sadly, Oregon has the third-lowest graduation rate in the country, according to the National Center for Education Statistics. Oregon’s four-year adjusted public high school graduation rate was 74.8% in 2015-16. Only Nevada and New Mexico have lower graduation rates.

Read the rest of the article here.

 

Click here for the PDF version:

12-20-17-Taxpayers_Aren’t_at_Fault_for_Graduation_Rate-2

Read Blog Detail
dont allow skimming of medicaid funds for unions

Don’t Allow the Skimming of Medicaid Funds for Unions

By Aaron Withe and Steve Buckstein

Each year, hundreds of millions of dollars are skimmed off the top of Medicaid payments intended for some of society’s most vulnerable citizens and used for purposes never envisioned by the program’s supporters. Most of us can agree this is wrong.

After all, the whole point of Medicaid is to help low-income individuals—particularly the elderly and disabled—whose lives, dignity and comfort all benefit from the program.

Unfortunately, many politicians don’t see it this way. Oregon is one of nine states that allow labor unions to get a slice of the Medicaid pie by skimming union dues from the Medicaid paychecks of home-based caregivers.

The home-care program allows Medicaid-eligible individuals to avoid institutionalization by receiving daily living assistance in their own homes. In Oregon, Medicaid clients employ approximately 30,000 home-care and personal-support workers (HC/PSWs)—often their own family members—who are compensated through the program for providing basic assistance.

In 2000, however, the Service Employees International Union (SEIU) successfully inserted itself into that arrangement.

It funded a ballot measure that allowed HC/PSWs to be unionized on the shaky logic that their Medicaid payments made them “public employees.” As a result, the state deducts an average of $500 per year in SEIU dues from each caregiver’s Medicaid payments and sends it to SEIU before the assistance money ever reaches the caregiver.

In states where this is happening, caregivers and their clients are understandably upset. Because unions have a limited role to play between family members in a home-based setting, many feel the idea of paying for traditional union services just doesn’t make sense.

Some have pursued legal action to prevent the worst of the dues-skimming abuses. In 2014, the U.S. Supreme Court took up the Harris family’s case and ruled that “partial-public employees” like HC/PSWs could no longer be forced to pay a union against their will.

But it hasn’t been enough. Although the Harris decision technically allows HC/PSWs to make their own choice about whether to pay union dues, Gov. Kate Brown’s complicit administration has continued skimming dues from the Medicaid payments, making it easy for SEIU to keep thousands of caregivers paying dues against their will.

Kyle Osburn, a Portland resident who cares for his disabled son, was one such caregiver. Kyle never signed up for SEIU membership, but the state confiscated dues from his Medicaid checks anyway. Others, like Diana Berman, tried to cancel their union payments after Harris but were told they weren’t allowed to resign until an arbitrary 15-day annual window.

Thousands of caregivers in Oregon remain victimized by the SEIU’s dues-skimming scheme.

And Oregon isn’t alone. At least eight other states deduct dues from Medicaid checks and divert the money into union bank accounts. This practice inevitably goes hand-in-hand with shocking reports of what unions will do to obtain “authorization” for such payments, including forging caregivers’ signatures and pressuring them to sign union cards.

It’s clear federal action is needed to protect the integrity of Medicaid, its beneficiaries and caregivers nationwide.

The U.S. Department of Health and Human Services should immediately adopt administrative rules to ensure that Medicaid dollars are not misdirected toward union dues. Congress could also make it illegal to skim Medicaid funds in this way.

Either move would protect caregivers’ freedom to join a union if they chose to. Preventing state governments from deducting dues from Medicaid checks would make it far easier for caregivers to exercise their rights under Harris, but would in no way prevent caregivers from joining a union and paying dues on their own.

Medicaid dollars should be preserved for improving the lives of disabled, elderly and other Americans in need. They shouldn’t be diverted to special interest groups that often use those dollars for political gain, like propping up the politicians who skim dues for them in the first place.

Federal policymakers should take action now.

Aaron Withe is the Oregon director of the Freedom Foundation, a think and action tank in Salem. Steve Buckstein is Senior Policy Analyst and Founder of Cascade Policy Institute, Oregon’s Portland-based free market public policy research organization. This article originally appeared in The Bend Bulletin on December 8, 2017.

Click here for the PDF version:

17-23-Don’t_Allow_Skimming_Medicaid_Funds

Read Blog Detail

Winning Is Not the Only Thing That Matters

By John A. Charles, Jr.

Last Friday the Republican-controlled Senate passed a 479-page tax reform bill in the dark of night without holding any public hearings.

Moreover, the bill itself was not in final form during the floor debate. The legislation was amended on the fly with handwritten changes. The only way to know what the Senate did was to read the bill after it had been voted on.

The same tactic was used by Democrats in 2016, when the Oregon Legislature passed a complex energy bill that was drafted behind closed doors and passed with almost no public input, in the space of three weeks. Not a single legislator understood what the bill actually would do because many sections, including those dealing with billions of dollars of utility assets, were never discussed.

This kind of behavior is a disgrace. The process is more important than any particular bill. If we tolerate mob rule just because “our team” is in charge, it guarantees that we will be treated the same way when the “other team” has power.

Federal tax reform has been needed for decades. There is no crisis. Congress should slow down, invite public input, and make sure the legislation is actually worth passing.

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

Click here for the PDF version:

12-6-17-Winning_Is_Not_the_Only_Thing

Read Blog Detail
Income

Straightforward policy reforms can reverse Oregon’s lower-than-average incomes and high cost of living

By Eric Fruits, Ph.D.

Oregon’s economy seems to be chugging along, yet many of us feel like we’re losing steam. Employment and incomes are up since last year, but when we compare Oregon with other states, things don’t look so good here.

Oregon’s median family income is about the same as the national average. But according to the Census Bureau, we are 14 percent below our northern neighbor. Oregon’s per capita personal income—another measure—is more than 8 percent lower than the national average. Oregon is not a rich state.

At the same time, according to one widely used survey, Oregon’s cost of living is about 25 percent higher than the national average and 17 percent higher than in Washington. Oregon’s Consumer Price Index has increased 20 percent since 2007, while prices nationwide only increased 16 percent. Much of this disparity is due to Oregon’s increased cost of housing. In addition, prices for food, gasoline, and health care are also higher here.

It’s expensive to live in our state. When adjusting incomes for the cost of living, Oregon goes from the middle of the pack to the bottom of the bunch. Accounting for purchasing power, Oregon’s median family income is 20 percent lower than the nation and 27 percent lower than Washington’s.

While our incomes are lower, they are more evenly distributed. By various measures, Oregon has less income inequality than most other states. Our top one percent of income earners has a smaller share of total incomes, and our poverty rate is lower than the national average.

On the one hand, our state does not have enough deep pockets to feed soak-the-rich tax policies. On the other hand, our below-average incomes mean we don’t have the resources to feed soak-the-middle-class tax policies like the health insurance and provider taxes that a “no” vote on Measure 101 in the upcoming January 23 election would repeal.

It also means we don’t have the resources to feed soak-the-poor tax policies like the carbon tax the legislature is almost certain to take up next February.

Regulations regarding paid time off, employee scheduling, and occupational licensing increase the cost of employing people without directly adding money to workers’ paychecks. The result is reduced employment and lower wages.

Oregon’s land use laws—as well as regulations regarding design review, historic preservation, and inclusionary zoning—have stifled residential development. Demand for housing is outpacing construction, driving up housing prices. The Oregon Office of Economic Analysis estimates that over the past 10 years, the Portland area has underbuilt by 27,000 units.

The application of Oregon’s land use laws has also limited commercial development. While local areas are supposed have a 20-year supply of vacant industrial land, too often much of that land is not development-ready. Modern companies operate in globally competitive markets and cannot wait for a years-long planning process. Instead of waiting, they locate and expand elsewhere, taking jobs with them.

Anyone who drives through the Portland area knows that congestion has worsened over the past few years. It affects more than just commuters. The Oregon Department of Transportation concludes that congestion is affecting freight traffic and businesses throughout the state, threatening their national and international competitiveness. Higher transportation costs result in higher prices for consumers.

With the decline in water traffic in the Port of Portland and increased railway congestion, highway traffic is a key transportation mode for freight. As highway conditions worsen, Oregon is more likely to get crossed off the list of places to do business, resulting in a loss of potential middle-income jobs.

A recent study of income and cost-of-living data between states concludes: “Cost of living is clearly impacted by state policies [such as those noted above].” Oregon can move from being a poor state to a rich state through straightforward policy reforms. These must address our high cost of living as well as our lower incomes. Reforms to speed up and expand real estate development will relieve housing price pressures and attract employers. Construction to relieve congestion will improve our competitiveness while reducing roadway accidents and alleviating commuter stress. Labor market reforms will increase employment and boost Oregonians’ paychecks.

Do these things, and Oregon can meet its promise to all of us.

Eric Fruits, Ph.D. is an Oregon-based economist, adjunct professor at Portland State University, and Academic Advisor for Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was originally published by the Pamplin Media Group and appeared in the Gresham Outlook and The Portland Tribune.

Click here for the PDF version:

17-22-Straightforward_Policy_Reforms_for_Oregon

Read Blog Detail
Vote NO on Health Care Tax Measure 101

Vote NO on Health Care Tax Measure 101

By Steve Buckstein

Oregonians will have the opportunity in January to vote No on Ballot Measure 101, thus rejecting new taxes that the state legislature and the governor tried to impose on health insurance premiums and hospital services. While these and other taxes are meant to shore up state funding of Medicaid services to low-income Oregonians, it has become clear that the state has been misspending such funds for years.

Voters’ Pamphlet statements for and against Measure 101 were due by November 13, and Cascade Policy Institute submitted an Argument in Opposition which you can read below. In it, we noted three ways that the state has mismanaged over $650 million in health care funds entrusted to it by state and federal taxpayers. But, that may be far from the final number.

On November 17, four days after the Voters’ Pamphlet deadline, Oregonians learned that the state may have “erroneously paid, allocated, inaccurately recorded or over-claimed $112.4 million in health care funds, according to a letter Oregon Health Authority (OHA) Director Pat Allen sent to Oregon Gov. Kate Brown. Allen also told state legislators that “the state was likely to see more processing problems come out of the state’s health agency.”

These revelations were too late for Cascade, or anyone else, to include in our Voters’ Pamphlet statements. So voters will need to keep up with all the reasons to vote No on Measure 101. More reasons may emerge when the Secretary of State releases an expected audit of the OHA by early December.

An early version of the Voters’ Pamphlet for Measure 101, including the full text of the Measure and Arguments in Favor and in Opposition can be found at the Secretary of State’s website.

Here is Cascade’s Argument in Opposition:

STOP NEW SALES TAXES ON HEALTH INSURANCE PREMIUMS
AND HOSPITAL SERVICES

Vote No on Measure 101.

Oregon state government has a long history of mismanaging “other people’s health care dollars,” including:

  • Wasting $300 million federal tax dollars building a website, Cover Oregon, that wasn’t able to sign up a single person for health insurance.
  • Paying $280 million a year for nearly 55,000 Medicaid recipients recently found to no longer qualify or who failed to respond to an eligibility check.
  • Overpaying health care organizations $74 million over three years to provide expanded Medicaid coverage to some Oregonians. The state initially only asked for $10 million of those overpayments back, and under political pressure eventually asked for the rest.

As one Oregon economist notes about the taxes in Measure 101:

“The law explicitly allows the new taxes on health insurance providers to be passed on to consumers. With these new taxes, that Silver ACA plan will cost about $625 more in 2019 than in 2018. It’s not just 40-year-olds who will get hit with the insurance tax. Nearly 12,000 college students…will pay the tax. Small group employers…will pay the new tax.

“Taxes on hospitals will raise the costs of care across the board….The cost of these taxes also will be passed on in the form of higher deductibles and premiums. Even if you don’t go to the hospital, you will be paying the hospital tax through higher insurance prices.”*

The cost of health care is already too expensive for many Oregonians. Don’t let the state add even more taxes onto services that are expensive enough already, especially when it has such a poor track record spending the health care tax money it already gets from us.

Say No to these new health care sales taxes.

Vote No on Measure 101.

*source: Health Care Tax Would Hurt Middle Class
at: CascadePolicy.org/Health-Care

(This information furnished by Steve Buckstein, Cascade Policy Institute.)

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

Click here for the PDF version:

17-21-Vote_NO_on_Health_Care_Tax_Measure_101

Read Blog Detail
Metro's New Plan to Keep Voters out of Chehalem ridge nature park

Metro’s New Plan to Keep Voters out of Chehalem Ridge Nature Park

By John A. Charles, Jr.

On October 19 the Metro Council adopted an Access Master Plan for the Chehalem Ridge Nature Park. This is a former industrial tree farm of 1,230 acres that Metro bought from Stimson Lumber Company in 2010.

Chehalem Ridge is Metro’s largest land purchase financed through the bond sale program approved by voters in 1995 and again in 2006. However, it’s not clear why it was ever a priority. Located just east of Gaston, Chehalem Ridge is outside the Metro boundaries and far from any urban population. The roads leading to it are narrow and winding, and there is no public transit. The entrance is gated, and the land has never been open to the public.

Chehalem Ridge is supposed to be the “crown jewel” of the Metro parks system, but the land itself is unremarkable. According to the Master Plan, prior surveys found “no significant natural areas on site.”

Surveys also showed “no historic or archeological materials” and “no cultural resources were found.”

In short, this is a generic parcel of overgrown timberland with minimal ecological value and almost no recreational appeal.

Nonetheless, the Access Master Plan treats it like the second coming of Yellowstone. Of the 1,230 acres, more than 99% are in some kind of “conservation zone” that limits or prohibits active use by the voters who paid for it. The Plan notes that the property could easily accommodate 29.5 miles of recreational trails, in four different separate-use categories—hiking, cycling, equestrian, and multi-purpose—but only three miles are being planned for by Metro. This will create conflicts between cyclists, horseback riders, and walkers.

In comparison, Portland’s revered Forest Park totals 5,157 acres and offers 90 miles of trails. After adjusting for size, Forest Park has seven times more trail miles than Chehalem Ridge will have.

Moreover, dogs are allowed in Forest Park, as they are in virtually all local parks in the metropolitan region. Metro has a strict policy prohibiting dogs.

Chehalem Ridge will have a single parking lot for 80 vehicles, public restrooms, parking for equestrians, a multi-use shelter and picnic area, and a small lawn area for family activities. If you want greater access to nature itself, it will be disallowed or discouraged.

This is consistent with Metro’s over-arching philosophy of buying up vast tracts of green spaces far from where most people live, and then limiting taxpayer use. Other Metro properties near Chehalem Ridge—including Carpenter Creek Natural Area, Wapato View Area, and Penstemon Prairie—are not open to the public, nor is there any plan to do so.

Metro went through a multi-year public outreach effort ostensibly designed to learn what people would like with this new property. According to Appendix C of the Master Plan, comments from the Spanish communities emphasized the importance of “gathering places, places to eat, security and most importantly, places for kids to play, exercise and cool off during the summer.”

Comments for the English-speaking community emphasized “wanting to hike or walk with their dogs, and both advocacy for more bike-specific trails as well as comments around not wanting to mix bikes, pedestrians and horses on the same trail.”

Metro’s Master Plan ignores virtually all these concerns. There will be no playgrounds for kids, few places for families to eat, the trails will create user conflicts, and dogs will be banned.

At the public hearing, I was the only witness to criticize the Plan. I encouraged Metro to build at least 30 miles of trails, with separate facilities for hikers, cyclists, and equestrians. I suggested that a long hiking loop be created with possible campsites for use by Scouting groups and others desiring an easy backpacking experience.

I also encouraged Metro to plan for more family-friendly elements such as disc golf, sand volleyball courts, picnic areas, and playgrounds for young children. These are the kinds of facilities found at Blue Lake Park, one of the region’s most popular recreational destinations.

The Metro Council had zero interest in these ideas. As far as Councilors are concerned, they are letting us use 5.5 acres of the Park and we should be grateful. In his celebratory speech before dropping the gavel, Presiding Officer Tom Hughes proudly defended the status quo by stating, “There will be no ivy and no dogs; both are invasive species.”

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

10-26-17-Metro’s_New_Plan_to_Keep_Voters_out_of_Chehalem_Ridge

Read Blog Detail
When Is a Health Care Tax Not a Tax?

When Is a Health Care Tax Not a Tax?

By Steve Buckstein

Oregon state legislators who voted for you to pay higher health insurance premiums and higher hospital costs don’t want you to think you’ll be paying more because they raised taxes. In their words, they aren’t raising taxes at all; they’re simply putting assessments on these services and letting insurers and hospitals pass on the extra costs to you.

Three legislators who don’t want you to pay these higher costs collected more than enough voter signatures to place Referendum 301 on the ballot in January, so you can vote No and stop these new taxes from going into effect.*

The problem is, when you see your Voters Pamphlet and ballot, you won’t see the words “tax” or “taxes” anywhere in the official statements. You’ll only read about “assessments.” Apparently, tax supporters think you’re more likely to approve them if you don’t believe they’re taxes at all.  Assessments sound so much more palatable, don’t they?

Referendum supporters have asked the Oregon Supreme Court to require that the official statements refer to taxes, not just assessments. Whether this happens or not, hopefully enough voters will understand that they’re being asked to impose new taxes on services that are expensive enough already, and vote No. Learn more at StopHealthCareTaxes.com.

*Referendum 301 is now known as Measure 101 on the January 23, 2018 Oregon ballot.

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

View the PDF version here: 10-18-17-When_Is_a_Health_Care_Tax_Not_a_Tax-1

Read Blog Detail
“Shuffling” Is for Playing Cards, Not School Kids

“Shuffling” Is for Playing Cards, Not School Kids

By Kathryn Hickok

Portland Public Schools is redrawing the boundaries of more than a dozen schools and reassigning 5,000 students, ten percent of its enrollment. According to The Oregonian: “To make sure no school ends up understaffed or overcrowded, students must be shuffled.”

In government-run school districts, kids are cards in a deck. The bureaucracy gets to deal, assigning students to school buildings based on their residences. And even when parents exercise choice by moving into a neighborhood, gaining access to special school-based programs, or enrolling in charter schools located in underused facilities, the district retains the right to shuffle and deal over.

When Oregon enacted an interdistrict open enrollment law in 2012, hundreds of Oregon parents chose schools outside their districts of residence that better met the needs of their children. Empowering parents of every income level to choose schools through open enrollment, more charter schools, and private school choice programs would be more respectful of each student’s dignity—and a better way to address his or her educational needs—than a centrally planned system in which the odds always favor the district “house.” In most aspects of life, Oregonians expect parents to judge what is in the best interests of their children. When it comes to education, the stakes are too high to treat kids like playing cards.

Kathryn Hickok is Publications Director and Director of the Children’s Scholarship Fund-Oregon program at Cascade Policy Institute, Oregon’s free market public policy research organization.

View the PDF version here: 10-11-17-Shuffling_Is_for_Playing_Cards

Read Blog Detail

Too Late to Fix PERS by Fooling Oregonians

By Scott Shepard

Governor Kate Brown’s task force, assigned to find ways to cut Oregon’s yawning unfunded PERS pension liability, is approaching its November 1 reporting deadline. Governor Brown is relatively new at her job, so perhaps she can be forgiven for hoping her PERS task force can produce magical founts of free money. But it can’t.

The Governor wants proposals to cut the admitted pension deficit of about $25 billion by 20 percent ($5 billion). Even if the task force managed this feat, the recognized debt would only return to its 2015 level, before the PERS Board started inching the assumed rate of return down from its long-standing eight percent figure toward more plausible figures. If the Board shifted to an assumed rate that matched risk with the certainty of payment obligations, unfunded pension liabilities would approach $50 billion.

Oregon taxpayers simply cannot—and will not—pay this tab. Oregon is not wealthy or highly populous. Raising an extra $50 billion—or even 25—is likely impossible. Taxes would have to rise and services decline to the point that businesses and families would begin to flee the state. This would spark a vicious cycle. Fewer taxpayers would be taxed even more to pay a fixed, unpayable bill, creating more incentives for emigration, until the state inevitably declared defeat. While this might sound apocalyptic, it’s not far-fetched: Puerto Rico has already slid into this vortex, and Illinois may become the first American state to fall into default and possible federal receivership.

Governor Brown’s task force efforts cannot thwart this process. She has charged it to find “out-of-the-box solutions” for raising these $5 billion. But no such ideas, out of any box whatever, can come without cost to taxpayers. Some ideas recently floated include increased “sin” (e.g., alcohol and tobacco) taxes. Those who don’t drink or smoke might think themselves off the hook, but they’re not. These increases, if not dedicated to PERS payments, could (and probably would) go to other purposes, like funding the state’s perennial non-pension budget deficit.

The same is true of all proposals floated. Money spent one way can’t be spent in others. Raiding the rainy day fund would force tax increases during the next economic downturn, increasing the pain of the next recession. Raiding the workers’ compensation fund would increase fees to employers, which would increase the costs of goods and services and decrease wages. Selling government property for pensions would mean that property is not available for public use or to sell for other purposes.

Governor Brown knows this. When she seeks “out-of-the-box” funding increases, the constraint she seeks to escape is really our knowledge that taxes are rising, public assets are shrinking, services are being curtailed, and our options are closing around us.

The only viable answer to Oregon’s pension and budget crisis is to reduce pension benefits for government workers. They enjoy more generous wages and benefits than those of comparable private-sector workers. Older government workers also earn benefits for every hour of work that are far higher than those earned by their younger peers.

The legislature first must shift all government workers, for work not yet performed, to the lower benefit structure that serves as a permanent cap for newer public employees. A 2015 Oregon Supreme Court opinion* fixed a long-term Court error by recognizing that the state can take this basic, equitable step to put all employees on the same basis for work not yet completed.

Then it must make use of another implication of that 2015 decision: that the Supreme Court has wrongly suppressed a set of amendments added to the Oregon Constitution in 1994 that, if followed, would have averted this crisis. The legislature should pass legislation to facilitate the equitable adjustment of excessive pension payments made for more than 20 years on the basis of the Court’s error, and fast-track review of the legislation to the Court.

Finally, the legislature should move all government employees into the type of 401(k), defined-contribution retirement plans that are the only sort available to most taxpayers.

It is far too late for panels tasked with finding ways to fool the public. Oregon’s pension crisis requires fair but real pension payment adjustments. Nothing else can succeed.


* Moro v. State, 357 Or. 167 (2015).

Measure 8 (1994), incorporated at OR. CONST. art. IX, § 10–13.


Scott Shepard is a Salem lawyer and law professor and author of an academic study on Oregon state pensions published August 1, 2017 by the Mercatus Center at George Mason University. He is also an Academic Advisor to Cascade Policy Institute in Portland. A version of this article appeared in The Portland Tribune on September 28, 2017.

Read Blog Detail

Health Care Tax Would Hurt Middle Class

By Eric Fruits, Ph.D.

Many Oregonians are now spending as much on health insurance and health care as they are on their mortgage payments. The Oregon legislature recently passed House Bill 2391 (signed by Governor Kate Brown) that will spike these costs even higher.

The law provides $605 million in new funds to the Oregon Health Authority. The money is meant to fill the fiscal hole made by the state’s costly expansion of Medicaid under the Affordable Care Act (ACA). Most of the money will come from taxes on health insurance providers, hospitals, managed care providers, and insurance provided through the Public Employee Benefits Board (PEBB).

Two of Oregon’s largest insurance providers on the ACA exchange have been approved for double-digit premium increases: Kaiser at almost 15 percent and Providence at more than 10 percent. For a 40-year-old with a Silver ACA plan, that amounts to an increased cost of about $500 a year.

The law explicitly allows the new taxes on health insurance providers to be passed on to consumers. With these new taxes, that Silver ACA plan will cost about $625 more in 2019 than in 2018. It’s not just 40-year-olds who will get hit with the insurance tax. Nearly 12,000 college students who buy their own health care as a requirement of attending a public college will pay the tax. Small group employers—such as the local coffee shop, auto repair, or bookstore—will pay the new tax.

Taxes on hospitals will raise the costs of care across the board. Emergency room visits, surgeries, diagnostics, and even childbirth will be hit with this new sales tax on hospital services. The cost of these taxes also will be passed on in the form of higher deductibles and premiums. Even if you don’t go to the hospital, you will be paying the hospital tax through higher insurance prices.

Because of the tax on the PEBB, local governments and school districts will also pay higher prices to insure their employees. These higher costs will lead to further cuts in staffing and services. Oregon’s already crowded classrooms will almost certainly get more crowded as districts struggle to fund the PERS crisis and higher insurance costs.

Medicaid providers are also hit with the tax. Because they do not have the pricing flexibility of other providers, they will have a harder time passing on the higher costs to consumers. Instead, they likely will reduce payments to doctors, nurses, and staff. With reduced payments, these professionals may decide to get out of the Medicaid market, thereby worsening the current shortage of Medicaid providers.

The Oregon Health Authority reports it recently removed nearly 55,000 people from its Medicaid program, after the state found they no longer qualified or failed to respond to an eligibility check. State auditors said in May that each of these Medicaid enrollees costs Oregon, on average, about $430 per month, or more than $550 million a biennium. These new savings alone more than cover the legislature’s tax increases.

While nearly everyone will be hit with the cost of these taxes, Oregon’s middle-class families will be hit the hardest. The Census Bureau reports that more than half of Oregon’s uninsured are adults between the ages of 25 and 64 who are not in poverty. These middle-class Oregonians surely want health insurance but have been priced out of the market. According to estimates by the Kaiser Family Foundation, about half of the individuals buying insurance on the Obamacare exchange get no subsidies under the law. This has been called “the middle-class loophole of no help.” Adding the legislature’s new taxes will drive more of the middle class to take their chances with being uninsured. Is this really the state of health care we want for Oregon?

These taxes can be stopped. StopHealthCareTaxes.com is now collecting signatures to put Referendum 301 on the ballot, allowing voters to repeal about $320 million in new taxes on health insurance and health care.* It would save the average household more than $200 a year in new taxes. Middle-class families will see even bigger savings. The referendum won’t stop the cost of health care from rising, but it will stop things from getting worse than they already are for Oregon’s middle class.

* The Referendum did collect enough signatures and is now Ballot Measure 101 on the January 23, 2018 Oregon ballot. A No vote will keep these taxes from going into effect.


Eric Fruits, Ph.D. is an Oregon-based economist, adjunct professor at Portland State University, and Academic Advisor for Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article appeared in The Portland Tribune on September 21, 2017.

17-16-Health_Care_Tax_Would_Hurt_Middle_Class

Read Blog Detail

Governor Brown Wants Oregonians to “Take One for the Global Team” over CO2

By John A. Charles, Jr.

Oregon Governor Kate Brown has announced her intention to pass legislation in the short session of 2018 to place a regulatory limit on emissions of carbon dioxide by large industrial sources. Once a company exceeds the annual limit, it will have to purchase allowances for additional emissions.

Proponents estimate that the regulations will cost businesses $1.4 billion per biennium. These costs will be passed on to consumers.

Such regulations might be appropriate if there were known environmental or health benefits to reducing carbon dioxide. Unfortunately, such a clear link does not exist. Not only are benefits speculative, but they are global in nature and very long term—possibly centuries in the future.

The costs, however, are very clear. They will be known, immediate, and local. Prices of cement, steel, and millions of consumer products will have to go up.

In essence, the Governor is asking Oregonians to “take one for the global team” in the hope that somebody, somewhere will benefit in the misty future.

This is not likely to be embraced by voters who already feel immense strain from the high cost of housing, health insurance, and public employee pensions.

State legislators have many problems to worry about. Regulating CO2 should not be one of them.


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

 

Read Blog Detail

Whose Money Is Your Oregon Kicker Refund?

By Steve Buckstein and Kathryn Hickok

State economists have confirmed that individual Oregon income taxpayers will receive kicker refunds next year. Based on the May revenue forecast, more than $463 million will be returned to taxpayers as a credit on their 2018 tax bills, with the average refund being $227.

But with the news that the coming refunds will reduce our tax liabilities, some are criticizing the way the kicker law works, while others argue the money really belongs to the state, not the taxpayers. They argue that as long as any group of Oregonians—or any state government budget item—has a “need” for that money, then the money should go to them instead of back to the individuals who earned it.

Whether the kicker law is good or bad public policy doesn’t change the answer to a more fundamental question: Whose money is it? Is the kicker a rebate for overpaying your taxes or is it somehow the State of Oregon’s money, better left in government coffers? If we can find a better way to restrain runaway government spending, we should do so. But until that day arrives, Oregon’s kicker law is one defense against those who argue that some of the money you earned belongs to someone else just because they “need” it.


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

Read Blog Detail

Cascade Policy Institute Endorses Referendum 301 to Stop New Health Care Taxes on Oregonians

August 2, 2017

FOR IMMEDIATE RELEASE

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

PORTLAND, Ore. – The Cascade Policy Institute Board of Directors has voted to support State Referendum 301 which seeks to refer certain taxes approved in House Bill 2391 to the November 6, 2018 General Election ballot (unless the date is changed to January 23rd by an Act of the legislature).

The Referendum primarily seeks to refer some $333 million in new taxes, in the form of a 1.5 percent tax on health insurance premiums and a new 0.7 percent tax on certain hospitals. The Referendum does not affect the rest of HB 2391 which specifies how the state collects money to pay for the Oregon Health Plan, the state’s version of Medicaid, through assessments and taxes on health care providers.

Signatures must be filed with the Secretary of State’s office no later than October 5, 2017. The petitioners request that all signatures be returned to them no later than October 1.

Cascade Senior Policy Analyst and Founder Steve Buckstein has written in favor of the Referendum and now makes the following statements about why the Institute believes that Oregon voters should sign it:

• The Oregon legislature passed, and the Governor signed, a bill designed to generate some $550 million in new taxes on health care, hospitals, and health insurance premiums. Ostensibly, this money is needed to help balance the budget, even after strong revenue growth, and to help maintain the controversial Medicaid expansion.

• Since the bill’s passage, it has become clear that that nearly half the Medicaid recipients checked in recent months no longer qualify for benefits. This alone eviscerates the supposed need for most or all of these new tax revenues.

• Referendum 301 only targets the most egregious of the taxes in HB 2391. It allows Oregon voters a say in whether or not they want to slap a sales tax on health care.

• According to an Oregonian editorial, when word got out that someone might refer these new taxes to the ballot, legislative leaders showed “how they’re willing to protect that new revenue at all cost—even hijacking the referendum process at the core of Oregon’s identity.”

• The Oregonial editorial went on to say, “Worse, however, the bill tosses aside the usual process requiring impartial groups to describe the measure on the ballot and in the voter’s pamphlet. Instead, [they gave] all that power to a committee made up of four Democrats and two Republicans.” They also moved the referendum vote up from November 2018 to a January special election that will cost taxpayers more than $3 million. As of August 2, the Governor has not yet signed this referendum hijacking” bill, but is expected to do so.*

Petitions can be downloaded from StopHealthCareTaxes.com. They should be properly signed by registered Oregon voters and returned no later than October 1 to:

Stop Healthcare Taxes
29030 SW Town Center Loop E, Suite 202, #514
Wilsonville, OR 97070

Questions to the petitioners can be addressed to info@stophealthcaretaxes.com.

* The  Governor did sign the bill changing the election date. The Referendum did collect enough signatures, and is now Ballot Measure 101 on the January 23, 2018 Oregon ballot. A No vote will keep these taxes from going into effect.

________________________________________
Cascade Policy Institute is a 501(c)(3) non-partisan, non-profit public policy research organization. Its mission is to promote public policies that foster individual liberty, personal responsibility and economic opportunity in Oregon.

###

Read Blog Detail

Oregon’s New Health Care Taxes Are Unjustifiable

By Lydia White

Soon after the Oregon Legislature passed a bill expected to generate $550 million of tax revenue to help pay for Medicaid, the state found nearly 45% of all Medicaid recipients are currently ineligible to receive health care benefits.

The bill imposes a sales tax on health insurance premiums and hospital revenue that will be borne by Oregonians. For example, 217,000 people in the individual market and over 11,000 college students who buy their own health insurance are among the hundreds of thousands of Oregonians who will pay. Local Oregon school districts will pay some $25 million and community colleges will likely be forced to raise tuition costs, all because of these new taxes.

If the state hadn’t awarded Medicaid benefits to over 37,000 unqualified people, costing $191,000,000, wasted over $300,000,000 on the failed Cover Oregon insurance exchange website, or spent an additional $166,700,000 on another failed IT system, even proponents of these new sales taxes would have had a hard time justifying them.

Fortunately, Rep. Julie Parrish (R) and two other state legislators are gathering signatures to refer these taxes to the ballot at what might be a January special election. They need almost 59,000 voter signatures by October 5th to qualify for the ballot.

To help hold Oregon’s political leaders and health care bureaucracies responsible, download and sign a petition at StopHealthCareTaxes.com.*

* The Referendum did collect enough signatures, and is now Ballot Measure 101 on the January 23, 2018 Oregon ballot. A No vote will keep these taxes from going into effect.


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

Read Blog Detail

Stop Health Care Taxes dot com

By Steve Buckstein

The Oregon legislature just passed, and the Governor signed, a bill designed to generate some $550 million in new taxes on health care, hospitals, and health insurance premiums. Ostensibly, this money is needed to help balance the budget, even after strong revenue growth, and to help maintain the controversial Medicaid expansion.

According to an Oregonian editorial, when word got out that someone might refer these new taxes to the ballot, legislative leaders showed “how they’re willing to protect that new revenue at all cost—even hijacking the referendum process at the core of Oregon’s identity.”

“Worse, however, the bill tosses aside the usual process requiring impartial groups to describe the measure on the ballot and in the voter’s pamphlet. Instead, [they gave] all that power to a committee made up of four Democrats and two Republicans.”

They also moved the referendum vote up from November 2018 to a January special election that will cost taxpayers more than $3 million.

The petitioners have just 90 days to collect nearly 59,000 valid voter signatures to refer the most egregious of these new taxes to the ballot.

These allow insurance companies to pass on to many of us, their policyholders, a new 1.5 percent tax on health insurance premiums in the state, at a time when premiums are rising out of sight already.

If you want to vote on the new premium taxes, go to StopHealthCareTaxes.com, download, sign and return a Petition sheet today.*

* The Referendum did collect enough signatures, and is now Ballot Measure 101 on the January 23, 2018 Oregon ballot. A No vote will keep these taxes from going into effect.


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

Read Blog Detail

Transportation Finance Isn’t as Complicated as Legislators Make It

By John A. Charles, Jr.

Some members of the Oregon Legislature think you don’t pay enough to travel. Therefore, they are considering a 298-page bill that would create multiple new transportation taxes.

The draft legislation, HB 2017, includes dramatic increases to vehicle registration fees, higher gas tax rates, a new sales tax on the purchase of motor vehicles and bicycles, and a statewide tax on all employees to subsidize transit.

In addition, a percentage of money currently paid by customers of investor-owned electric and gas utilities would be diverted to subsidize electric vehicle owners.

Billions of dollars would flow to various bureaucratic entities, with little accountability. Those of us paying the taxes would hardly know we’re paying them, and we would have no idea how the money was being spent.

The legislative strategy of simply “throwing money” at transportation is not going to work, because it’s already been tried. For example, TriMet riders only account for about 10% of all revenue in the FY 18 budget; the rest of TriMet’s income is derived from various backdoor taxes.

The agency’s most lucrative income source is the regional payroll tax, authorized by the legislature decades ago. TriMet has been raising its payroll tax rate almost every year since 2005 and will continue to do so through 2024. As a result, the agency now collects over $366 million annually from employers to subsidize transit operations. Yet, in the first decade after tax rates began rising, TriMet service actually declined.

Much of the new money went to pay for generous union contracts rather than the promised service improvements. The result: In 2016, employee benefits equaled 123% of wages. In other years the ratio has been as high as 149%. This is not a finance model that we should emulate.

The best way to improve any kind of service is to have a tight fit between what we pay as consumers and what we get in return. If we don’t know the real price, we can’t evaluate the purchase. And if taxpayers are being forced to subsidize unrelated services, there can be no fiscal discipline.

A better option would be to euthanize this 298-page monstrosity and work to implement highly-targeted user fees. The social costs of travel such as congestion, road wear, and noise pollution vary considerably by time of day, direction of travel, weight of the vehicle, and other factors. The user fees that we pay should account for these differences.

Gasoline taxes and vehicle registration fees are poor user fees because they are fixed, mostly invisible, and not time-sensitive. But new technologies now allow us to collect the full cost of each trip in real time by all modes of travel.

Some auto insurance companies already collect detailed driving data because they sell mileage-based policies. Millions of American drivers also own toll tags for use in modern tollways. And many transit operators use digital technology to collect variable fees based on distance traveled, type of service, and time of day.

User fees should be precisely calculated, and revenues should be dedicated to maintaining and improving the services paid for by consumers, with no cross-subsidization of other modes.

Transportation finance doesn’t have to be complicated. Legislators only make it that way when they don’t want you to know where the money is going.

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

Click here for the PDF version:

17-24-Transportation_Finance_Isn’t_as_Complicated

Read Blog Detail

Kicker Envy 2017

By Steve Buckstein

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

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

How the kicker works 

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

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

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

Whose money is it? 

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

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

How much is that latte? 

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

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

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

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

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


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


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

 

Read Blog Detail

Overtaxed and Underbuilt

By John A. Charles, Jr.

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

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

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

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

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

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


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

Read Blog Detail

Oregon Legislature Should Make It Easier for Individuals to Enter the Landscaping Business

Below is a letter being distributed to all members of the Oregon House of Representatives prior to their voting on House Bill 3337 in the 2017 Oregon Legislative Session, which would make it easier for individuals to enter into the landscaping business in this state.


April 20, 2017

Floor Letter in support of HB 3337

Cascade Policy Institute supports passage of HB 3337 which creates a limited landscape construction professional license. This bill is in line with the framework for policymakers on occupational licensing issued by the Obama White House in 2015 which found…

“…the current [occupational] licensing regime in the United States…creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across state lines.”  And…

“There is ample evidence that States and other jurisdictions should review current licensing practices with an aim toward rationalizing these regulations and lowering barriers to employment.”

The White House report also argues that reducing barriers to employment is especially helpful for “marginalized persons such as young people, minorities and individuals with felony convictions.” It notes a 2012 report by the Institute for Justice, License to Work, which found that Oregon is the third most broadly and onerously licensed state, placing it in the top tier just below Arizona and California. Oregon licenses 59 of the 102 low-to-moderate-income occupations studied. Surprisingly, only ten states even licensed landscape contractors. Oregon is one of them.

There is growing awareness on both ends of the political spectrum that many state occupational licensing laws actually stifle economic opportunity and make it particularly hard for lower-income people to move their way up the economic ladder and use their entrepreneurial talents for their own benefit and the benefit of all Oregonians. Licensing can also marginalize consumers who suffer the most when goods and services they need cost more by keeping more people from vying for their business.

HB 3337 is a step in the right direction for those Oregonians who want to work and start landscaping businesses without the burden of excessive occupational licensing restrictions. We urge its passage.

Sincerely,
Steve Buckstein, Senior Policy Analyst and Founder, Cascade Policy Institute


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

 

Read Blog Detail

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

By John A. Charles, Jr.

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

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

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

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

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

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

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


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

Read Blog Detail

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

By Eric Fruits, Ph.D.

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

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

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

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

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

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

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

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

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

 

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

 


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

Read Blog Detail

There’s Never Enough Money for Government

By John A. Charles, Jr.

The news from Portland is that despite record levels of revenue, the City Council needs to cut $4 million in spending next year in order to balance the budget.

The news from Salem is that despite record levels of revenue, the Governor needs to close a $1.7 billion dollar budget gap for the next two-year state spending cycle.

It’s not just a coincidence that these messages are the same. Elected officials are almost always poor stewards of public money. No matter how much they receive from property taxes, income taxes, payroll taxes, liquor taxes, garbage taxes, and dozens of other fees and licenses, it’s never enough.

The primary reason is that politicians tend to adopt new programs where the costs are back-loaded. Policies are approved that sound good and don’t seem to cost much in the short-term; but decades out, the costs explode. Public employee pensions are the most painful example of this.

By the time it becomes obvious that we can’t afford the programs, the politicians who approved them are long gone, and the expenses are locked in.

We don’t have a revenue problem in government; we have a spending problem. The top priority at both the Portland City Council and the state legislature should be to reduce or completely eliminate programs before any new taxes are even considered.


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

Read Blog Detail

Metro Should Dump the Garbage Tax

By Allison Coleman

Portland-area voters just approved Ballot Measure 26-178, which imposes a five-year property tax that will generate $80 million dollars for Metro to maintain parks owned by the agency.

On the surface, this seems like a wonderful thing; everyone likes parks, and they need to be maintained. However, local residents are already paying a Metro garbage tax of $2.50 per ton, originally intended for this very purpose.

In 2002 the Metro Council enacted a garbage tax to pay for the operating costs of parks. In 2004 the tax was raised from $1.50 per ton to $2.50 per ton. Between 2004 and 2015, this tax brought in $46.8 million dollars for Metro.

In 2006, Metro “undedicated” the tax, meaning it would still be collected but the money would be swept into the general fund for other purposes.

This year, the Metro Council claimed they needed the operating levy to maintain their parks, but they never told voters about the garbage tax.

Metro should do the honorable thing and repeal the garbage tax. Voters may not mind paying for parks, but there is no reason to tax them twice.


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

Read Blog Detail

Portland’s 100% Renewable Energy Claim Is “Greenwashing”

By Allison Coleman

In 2001, the Portland City Council declared that by 2010, all electricity used by city agencies would come from renewable energy. However, by 2010, only 9 percent of Portland’s power was renewable.

Undeterred, in 2012 Portland leaders again declared that city agencies would achieve 100 percent renewable energy. This time around, the city managed to get up to 14 percent.

Today, Portland has magically declared victory, claiming that municipal electricity use is 100% renewable. However, this is a blatant case of greenwashing. Portland is currently generating only 9 percent of its electricity from city-owned biogas and solar facilities. Another 15 percent is claimed from “green power” sold by Portland General Electric.

The remaining 76 percent of city use comes from a conventional mix of coal, gas, nuclear, and hydro. Portland then pretends to offset this by purchasing so-called “Renewable Energy Certificates” (RECs).

Unfortunately for consumers, an individual REC is not a unit of electricity; it is simply is a certificate claiming to represent the “environmental amenities” associated with one megawatt-hour of electricity generated by sources such as wind and solar. You cannot charge your phone or cook dinner with a pile of RECs because they don’t actually exist.

Last year, Portland spent $104,539 purchasing 74,671 RECs to create the image of 100 percent green power consumption. Every dollar spent buying those RECs was wasted money. Portland taxpayers should demand an end to this green power charade.


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

Read Blog Detail

Something’s Rotten in Metro’s Missing Garbage Tax Money

By John A. Charles, Jr. and Allison Coleman

Metro is asking for a new tax levy this November (Measure 26-178 on your ballot) despite the fact that it already has sufficient funds to operate all its parks.

In 2002, the Metro Council enacted a garbage tax for the specific purpose of funding operations and maintenance of Metro parks. That amount was raised to $2.50 per ton in 2004. Between 2002 and 2015, the garbage tax brought in $46.8 million for Metro parks.

Given that Metro raised all this money for parks, why is Metro asking for voter approval of another $80 million parks levy in the upcoming November election? Where did the $46.8 million in garbage tax money go?

The answer can be found in a bait-and-switch ordinance adopted by Metro in 2006. The Council amended the Metro Code to retain the garbage tax, but “undedicate” its use so that revenues would be swept into the Metro General Fund.

Since 2006, regional taxpayers have paid more than $32 million in garbage taxes that should have gone to parks, but instead went to other purposes. We’ve heard the scare stories before, but it’s time to call Metro’s bluff. Voters should reject the Metro tax levy and demand that all money from the garbage tax be rededicated to parks maintenance, as promised 14 years ago.


John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. Allison Coleman is a Research Associate at Cascade.

Read Blog Detail

Does Oregon Rank Dead Last in Corporate Taxes? NO

Trying to sell voters on the largest tax increase in Oregon history, Measure 97 proponents claim that Oregon ranks dead last in corporate taxes.” But the nation’s leading independent tax policy research organization, The Tax Foundation, says this claim is misleading. It looked at three ways to rate corporate taxes and found:

• Oregon’s top marginal corporate income tax rate is the 18th highest in the nation.
• On a revenue per capita basis, Oregon’s corporate income tax is the 28th highest.
• The Foundation’s State Business Tax Climate Index ranks Oregon 37th nationally for overall corporate income tax structure.

The dead last corporate tax claim relies on two national reports (AEG, COST) that look at total business tax burdens, not just the tax burdens of large C corporations; the only entities directly targeted by Measure 97. Even so, both these reports make clear that they rate Oregon’s business tax burden low not because corporate taxes are low, but rather because Oregon doesn’t have a sales tax.

As the COST report notes, “If sales tax revenue is excluded…[Oregon] moves from the lowest…to the 20th-lowest rate.”

Misleading voters about Oregon’s corporate tax structure may simply be a tactic to keep us from focusing on the fact that Measure 97 is really a hidden sales tax on steroids that will hit every Oregonian. When we realize that, Measure 97 should suffer the same fate as every other statewide sales tax measure – defeat.

Read much more about Measure 97 and why you should vote against it on
Cascade’s Measure 97 webpage.

Read Blog Detail

Does Oregon Rank Dead Last in Corporate Taxes? NO

By Steve Buckstein

Trying to sell voters on the largest tax increase in Oregon history, Measure 97 proponents claim that “Oregon ranks dead last in corporate taxes.” But the nation’s leading independent tax policy research organization, The Tax Foundation, says this claim is misleading. It looked at three ways to rate corporate taxes and found:

  • Oregon’s top marginal corporate income tax rate is the 18th highest in the nation.
  • On a revenue per capita basis, Oregon’s corporate income tax is the 28th highest.
  • The Foundation’s State Business Tax Climate Index ranks Oregon 37th nationally for overall corporate income tax structure.

The “dead last” corporate tax claim relies on two national reports (AEGCOST) that look at total business tax burdens, not just the tax burdens of large C corporations, the only entities directly targeted by Measure 97. Even so, both these reports make clear that they rate Oregon’s business tax burden low not because corporate taxes are low, but rather because Oregon doesn’t have a sales tax.

As the COST report notes, “If sales tax revenue is excluded…[Oregon] moves from the lowest…to the 20th-lowest rate.”

Misleading voters about Oregon’s corporate tax structure may simply be a tactic to keep us from focusing on the fact that Measure 97 is really a hidden sales tax on steroids that will hit every Oregonian. When we realize that, Measure 97 should suffer the same fate as every other statewide sales tax measure—defeat.

Read much more about Measure 97 and why you should vote against it on Cascade’s Measure 97 webpage.

Read Blog Detail

“The Rent Is Too Damn High!” — Why Rent Control Won’t Help

Once again, Portland led the nation this July with its home prices rising 12.4 percent year-over-year versus the national average of just 5.0 percent. As of April, Portland remained the 12th most expensive rental market in the nation. These numbers are not unrelated. Housing prices are often related to what units can be built for, whether they are single-family homes or multifamily apartment houses.

Whatever the causes of rising rents in Portland and elsewhere, the political fix bubbling to the surface not only won’t help most people afford housing, it likely will make the situation worse. That political fix goes by the name of rent control.

Last year, Willamette Week published an informative and entertaining piece entitled “The Five Myths About Portland Apartments.” In response to Myth 3, which is that rent control is the answer, Jerry Johnson of Portland real-estate consulting firm Johnson Economics noted:

“Rent control is an Econ 101-level policy disaster. If you happen to get one of the rent-controlled units, good for you. But it’s basically a lottery of who wins and who loses.”

Apparently unaware of the policy disaster that rent control forebodes, Oregon Speaker of the House Tina Kotek recently proposed allowing localities to enact their own rent control programs. She also wants to end so-called “no-cause” evictions and to ban rent increases above a “reasonable” percentage “for the foreseeable future.” In her prepared remarks she said, “Our housing crisis is a man-made emergency that demands bold action,” and, “We have privileged the right to make a profit on property far above the universal human right to safe and stable housing.”

Our housing crisis may very well be a man-made emergency. If so, the Speaker has misdiagnosed the cause, which has more to do with Oregon’s “man-made” restrictive land use laws than it does greedy landlords. And, the “bold action” she proposes likely will make the situation worse.

Economists of virtually every political stripe reject rent control as a viable way to improve housing affordability. They recognize what too few of our political leaders and voters recognize: namely, that controlling the price of a commodity, in this case rental housing, actually harms the very people the policy is designed to help. They know from economic theory and observation over many decades The High Cost of Rent Control. They know that it misallocates housing resources, heightens tensions between landlords and tenants, stifles private investment in affordable housing, and leads to deterioration and eventual abandonment of the very housing stock that middle- and lower-income tenants wanted it to protect for them at affordable prices.

Three local economists were quick to respond to Speaker Kotek’s suggestions:

“Rent control just sends us a couple hundred miles closer to San Francisco in terms of housing policy,” said Gerard Mildner, director of the Center for Real Estate at Portland State University.

“It’s almost textbook that any form of rent control ultimately harms consumers, as well as landlords,” said Eric Fruits, an economist and editor of Portland State University’s Center for Real Estate quarterly reports. “It may benefit some in the short term, but in the longer term, there will be fewer units available to rent, which will only make matters worse.” Instead, Fruits said, the free market should be allowed to work, with higher prices sending signals to developers that more units are needed.

“The demand for urban living is increasing and cities are not increasing the supply nearly fast enough,” Portland economist Joe Cortright said. “The only solution is to build new housing.”

As an Oregonian editorial then pointed out:

“Among other things, limiting rent growth dampens future investment in housing, inflates rents for unregulated units and discourages residents who secure rent-controlled units from moving, even when it’s in their best interest.”

In a lively discussion on social media following Speaker Kotek’s pronouncements, one person responded to her call for an end to “no-cause” evictions:

“No cause eviction benefits good tenants. When the bad guys move in, they threaten the good tenants who are afraid to testify about their behavior. The good tenants become prisoners in their apartments while the bad guys run wild. A landlord’s only defense is to become more restrictive on who they will rent to, therefore decreasing options for all renters.”

Even self-proclaimed “progressive” Portland city commissioner, Steve Novick, notes:

“…most economists say rent control has unintended consequences, including a decline in the production of new rental housing.”

While this is true, in “progressive” Portland and in the state Capitol economic laws are often trumped by political laws that make people feel better for a while, until economic reality rears its ugly head. Of course by then those who passed the laws have often moved on.

Accountability is rarely a part of the political process, which may be why it so often leads to unintended consequences that harm the very people the politicians were trying to help. Unfortunately, we may be destined to repeat this process again as rent control lurches onto the 2017 legislative agenda.


* Political activist and frequent candidate Jimmy McMillan memorably used “The Rent Is Too Damn High!” as his main campaign issue, slogan, and the name of his political party during his campaigns, including the 2010 New York gubernatorial election.

Read Blog Detail

Cascade Policy Institute Says NO to Measure 97

ELECTION RESULT: 59 percent of Oregon voters said NO to this sales tax on steroids. Only 41 percent voted to impose it on all of us.
Measure 97 on Oregon’s November 2016 ballot would impose the biggest tax increase in Oregon history: a sales tax on steroids, hidden behind the facade of being a $3 billion annual Gross Receipts Tax on business. It will raise taxes by $600 per capita.
Contrary to claims that it is only a tax on big corporations, the nonpartisan Legislative Revenue Office found that it will act largely as a consumption tax on Oregonians, with lower-income households being hurt the most. Prior to receiving its ballot measure number, Measure 97 was known as Initiative Petition 28.
Below are factual and opinion sites to understand what the measure is and why it is in effect a sales tax on steroids, hidden behind the facade of being a tax on business.

•  Text of Measure 97 (IP28)

•  No on Measure 97: Defeat the Tax on Oregon Sales

The official campaign to defeat Measure 97

•  Does Oregon Rank Dead Last in Corporate Taxes? NO

by Steve Buckstein, Cascade Policy Institute, October 2016

•  Improve Education Outcomes Through ESAs, Not Measure 97’s Hidden Sales Tax

by Steve Buckstein, Cascade Policy Institute, September 2016

•  Measure 97: A $30 Billion Gamble Oregon Voters Shouldn’t Make

by Steve Buckstein, Cascade Policy Institute, August 2016

•  Cascade Policy Institute Opposes Measure 97,
the “Sales Tax on Steroids”

Media Release, August 2016

•  Like a Sales Tax on Steroids

by Steve Buckstein, Cascade Policy Institute, July 2016

•  A Sales Tax by Any Other Name

by Steve Buckstein, Cascade Policy Institute, June 2016

•  Assaulting “Corporate Profits” Will Hit Average Oregonians

by Steve Buckstein, Cascade Policy Institute, October 2015

•  Shifting the Cost of Measure 97 Forward

The Tax Foundation, October 2016

•  Supporters of Measure 97 Mislead On Corporate Taxes

The Tax Foundation, September 2016

•  Gross Receipts Taxes: Lessons from Previous State Experiences

The Tax Foundation, August 2016

•  Oregon Initiative Petition 28: The Threat to Oregon’s Tax Climate

The Tax Foundation, April 2016

•  Oregon Legislative Revenue Office Report on IP 28

(now Measure 97)

•  Portland State University Report on IP 28

(now Measure 97)

•  Oregon Legislative Counsel Opinion Letter on Measure 97

Concluding that contrary to proponents’ claims, “the Legislative Assembly may appropriate revenues generated by the measure in any way it chooses.”

Willamette University Economics Professor and Cascade Policy Institute Academic Advisor Fred Thompson has written a series of informative blog posts related to IP28/Measure 97 on the Oregon Economics Blog:

Why Are State Corporate Income Taxes Disappearing?
Tax Mavens Talk About Disappearing State Corporate-Income-Tax Revenues; Oregon Did Something About It
Where, Oh Where, Has Oregon’s Corporate Tax Gone? Where, Oh Where, Can It Be?
Update on IP28
More Background on IP28 (Measure 97?)
Measure 97: Any Pinocchios Yet?
The LRO’S Research on Measure 97

 

Read Blog Detail

Measure 97: A $30 Billion Gamble Oregon Voters Shouldn’t Make

The massive gross receipts tax Measure 97 on Oregon’s November ballot (previously known as Initiative Petition 28) is guaranteed to suck more than three billion dollars a year out of the productive private sector and deposit them in state coffers. What isn’t guaranteed is how all this new government spending might impact the state economy.

While union proponents of this “sales tax on steroids” argue that putting more money into education and other public services will be good for the state, two reputable economic studies don’t show it.

A nonpartisan Legislative Revenue Office report looks ahead five years and sees no positive economic effects showing up by then. While LRO economists may believe there will be positive effects later, that assumes the money will be spent effectively by a state that has a poor track record of doing so.

A Portland State University report, actually paid for by the measure’s public employee union proponents, looked ahead ten years and still found no positive economic effects showing up. Again, the PSU economists assume there will be positive effects eventually, but their model doesn’t show them.

So, we’re left with this inconvenient truth: If Measure 97 passes, taxpayers will send more than $30 billion to the state over the next ten years without any noticeable positive economic effects to show for it. That’s a $30 billion gamble that Oregon voters should turn down.

Read Blog Detail

Oregonians Should Oppose Measure 97’s Regressive Taxation

The biggest proposed tax increase in Oregon history now has a measure number. Measure 97 on this November’s ballot would create a 2.5 percent gross receipts tax on C corporations with Oregon sales above $25 million.

Contrary to union claims, Measure 97 will not simply tax big out-of-state corporations. As the non-partisan Legislative Revenue Office Report has found, it will act primarily as a consumption tax on Oregonians. The estimated cost of this tax is $600 per year per person, with lower-income households being hurt the most. It is an eight-times-larger tax increase than Measures 66 and 67, which voters approved six years ago.

“Corporate taxes” are really paid by individuals, including consumers in the form of higher prices, employees in the form of lower compensation, and owners in the form of lower profits. The union backers of Measure 97 know this but claim that it will simply make corporations “pay their fair share.” This tactic is not only misleading, but if successful will harm every Oregon taxpayer.

Consumers will see price increases that in many cases will be much more than the stated 2.5 percent rate, without having any idea that the cause is Measure 97. As such, Measure 97 is the epitome of a regressive tax, and Oregonians should oppose it.

Read Blog Detail