Tag: Kate Brown

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You can count on the “Every Mile Counts” plan to make life costlier for Oregonians

By Rachel Dawson

Governor Kate Brown took carbon policy into her own hands earlier this year after the failure of Oregon’s cap-and-trade bill by issuing Executive Order 20-04. This order creates new greenhouse gas (GHG) emissions reduction goals and directs various agencies to take actions and exercise their authority to reduce GHG emissions.

Four agencies, the Department of Transportation (ODOT), Department of Land Conservation and Development (DLC), Department of Environmental Quality (DEQ), and Department of Energy (ODOE), collaborated to develop a draft statewide work plan in response to the governor’s directive, known as the Every Mile Counts initiative.

The strategy is fundamentally flawed. On the one hand, it duplicates efforts already underway. On the other hand, it does so in a way that will impose additional costs on Oregonians without producing any measurable effects on global climate change.

Objective 1: Reduce VMT per capita

The work plan proposes a number of action items aimed at decreasing statewide vehicle miles traveled. In the 2004 Statewide Congestion Overview for Oregon report, ODOT predicted that we could expect an additional 15,500 vehicle miles traveled (VMT) annually for every job created in Oregon and 360 additional VMT for every $1,000 increase in total state personal income.

Traffic is tied to economic activity. Increased traffic is a sign of a growing economy, and VMT plummets during recessions. As the state’s economy came to a standstill during the COVID-19 pandemic, traffic volumes on Oregon roads steeply dropped. Stifling economic activity is the surest way to reduce VMT in state. Efforts to aggressively reduce VMT in Oregon go hand-in-hand with efforts to reduce employment and income growth.

Increasing VMT in Oregon is a sign that more people and businesses are moving to our state. More people are consuming goods and services; and thus, our economy is growing. Oregon is already experiencing record-high levels of unemployment due to COVID-19. The state should not actively be promoting a reduction in VMT.

This is especially important now with COVID-19. The Center for Disease Control (CDC) has concluded that cars are a better option than transit during the crisis and has urged businesses to offer their employees incentives to “use forms of transportation that minimize close contact with others,” such as driving alone or biking. This plan’s objective to reduce single-occupancy trips directly contradicts the CDC’s advice.

Business owners, and not state agencies, have a deeper knowledge of their firms’ transportation requirements. If trip reduction efforts, such as telecommuting and flexible work hours, will benefit their business and employees they should be willing to engage in such efforts without the need for government intervention.

Objective 2: Support use of cleaner vehicles and fuels

State agencies should not support a zero emission vehicle plan. This is redundant as Oregon utilities are already required by the PUC to support transportation electrification plans, which will invest ratepayer funds in statewide electric vehicle (EV) charging infrastructure and increase outreach efforts on EV adoption. Having four more agencies engage in the same type of investments would be an inefficient use of taxpayer funds.

Objective 3: Consider GHG in decision making

Finally, state agencies should not require local GHG reduction planning and related performance measures. One of the largest rulemaking efforts these agencies plan on engaging in an update to the Transportation Planning Rule (TPR) to require that local governments “plan for  transportation systems and land uses to reduce GHG emissions.”

However, the TPR already indirectly works towards reducing GHG emissions by promoting the development of transportation systems designed to reduce reliance on passenger vehicles. While explicitly adding GHG emissions reduction in the TPR may be a worthy endeavor, including it to an already lengthy list of objectives will make the planning process more complex and time-consuming for cities. According to ODOT, completing all elements of a TSP “typically takes 12-15 months, with additional time for public adoption.” This proposed change will simply add another layer of compliance.

It is not clear if the proposed actions derived from Brown’s EO are necessary given Oregon’s steady decrease in per capita emissions over the past few years. Oregon per capita emissions have decreased by 22.8% since 1990, and emissions per unit of GDP have dropped by 50.7%. According to ODOE, Oregon’s energy use per capita is the lowest it has been since 1960; and Oregonians have decreased energy consumption per capita by 37% since it peaked in 1972.

Oregon’s environmental goals need to consider the dramatic progress that has already been made in reducing emissions. For this reason, Governor Brown should suspend her costly Executive Order.

Policymakers also should acknowledge the truth about the vital role automobility plays in a strong statewide economy and rising personal incomes. The above state agencies should provide an explicit cost-benefit analysis demonstrating how the benefits of each action item will outweigh its costs. If they cannot clearly outline such an analysis, the plan should not move forward. During the midst of a financial recession and global pandemic Oregonians need stability and relief, not more costly government regulation with vague benefits.

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

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COVID-19 Is Killing the Economy; New Business Taxes Are Bayonetting the Wounded

By Eric Fruits, Ph.D.

Many Oregon businesses are looking forward toward May 15. That’s the day the state expects to ease some of Governor Kate Brown’s COVID-19 “Stay Home, Stay Safe” order.

But, many businesses are considering whether they should they re-open at all. Dakine is closing its Hood River office and moving the outdoor gear company’s headquarters to Southern California. Nordstrom announced it is closing its Clackamas Town Center store. World of Speed motorsport museum in Wilsonville is permanently shutting down and sending its exhibits to schools and other museums.

As the state slowly re-opens, some businesses will be facing a seemingly insurmountable debt burden: delayed rent and utility payments will come due, Paycheck Protection Program loans may have to be repaid, lines of credit will have to be restored, and deferred taxes will have to be paid.

Coronavirus is only one of many new challenges facing Oregon businesses. Leading up to the pandemic, Oregon business owners were sweating the state’s new Corporate Activities Tax. Last year, in anticipation of the CAT and other new taxes, Stimson Lumber laid off 40% of its workforce in Forest Grove and moved some of the operations to Idaho and Montana.

While the rules governing this new gross receipts tax won’t be finalized until sometime in June, the first quarterly payments were due on April 30. Because it’s a tax on sales, the tax is due even if the business is losing money.

Portland’s Chown Hardware claims its first quarterly payment was approximately $30,000. Because of the combination of coronavirus and the new tax, the owner laid off 25 of his 100 employees. Facing a $10,000 quarterly tax bill, a pharmacist in the small town of Banks shut down his pharmacy and laid off his six employees.

In the middle of the pandemic, Multnomah County commissioners approved a steep increase in the county’s Business Income Tax, from 1.45% to 2%. The county expects the hike to increase business income tax revenues by one-third, or $900-$1,000 per affected business. These new taxes are on top of Portland’s 1% tax on the sales of large retailers which went into effect last year, with the money earmarked for so-called “clean energy” projects.

As if that’s not enough, the May 2020 ballot has Metro Measure 26-210. This measure imposes two new income taxes: one on businesses with more than $5 million in sales, and another on households with more than $125,000 in income ($200,000 if filing jointly). Business owners who earn pass-through income—many small and medium sized businesses—will be taxed twice under Metro’s measure.

Consider a pass-through business with income of $150,000 on just over $5 million in sales (that’s a 3% profit rate). The owner will be looking at more than $17,000 in new taxes this year:

Corporate Activities Tax $15,000
Multnomah County Business Income Tax 800
Metro business income tax 1,500
Metro personal income tax 75
Total $17,375

 

That’s the increase in taxes relative to last year, and it amounts to more than one month’s work—just to pay the new taxes.

As the economy slowly re-opens, business owners are going to go through the same calculus as Chown and the Banks pharmacist and ask themselves: “What’s the point?” Their businesses have been wiped out, they’ve racked up debt with unpaid rent and other bills, and to make matters worse they’re staring down steep new tax bills.

State and local politicians blandly remind us, “We’re all in this together.” But we’re not. You’re on your own. For business owners, your job is to toe the line on the state’s shutdown orders and cut checks to feed the government bureaucracies that got bloated during the boom times. No matter how much your taxes increase, they’ll keep saying your business doesn’t pay its fair share.

Someday, and that day may come soon, business owners will look at their financials and come to the conclusion that it’s easier to run a bookstore in Boise, open a restaurant in Reno, or a be financial adviser in Vancouver. Portland doesn’t have a monopoly on livability.

COVID is already killing the economy. We cannot let tax increases bayonet the wounded.

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

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Nature 1, Lockdown 0

John A. Charles, Jr.

Public officials are angry that thousands of Oregonians have been enjoying the good weather by engaging in outdoor recreation. They can’t understand why people are ignoring the government closure of parks, trails and beaches.

There is a simple reason: the closures are extreme and unnecessary.

People need exercise, and not everyone has a private backyard. While there are health risks associated with using public parks right now, individuals have strong incentives to maintain safe distances from each other.

Public officials would be better off focusing scarce resources on the most vulnerable segment of the population – people over the age of 70 living in crowded environments, such as nursing homes and retirement communities.

At her April 14th press conference, Gov. Brown stated that all decisions about re-opening the economy will be based on science.  If that’s the case, she can start by modifying the “stay at home” order she issued three weeks ago. Why are fitness centers and beaches closed, but liquor stores and cannabis shops still open? There’s not a lot of science behind that policy.

Oregonians love their parks, and right now they need them more than ever.

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

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As more people work remotely, a reliable grid is needed now more than ever

By Rachel Dawson

“The vast disparity between the rich and the poor is, in large part, designed by the disparity between those who have electricity and those who scrape by on small quantities of juice or none at all.”
– Robert Bryce

Electricity is at the epicenter of modern life, yet rarely does the average person consider the complexities behind the power grid when a light is turned on. The advent of technology, fueled by electricity, has created an era of human prosperity unseen throughout the history of mankind. We can pick up our smartphones and call friends from across the world, cook meals on a stovetop, and pay for goods and services with electronic banking without a second thought.

Electricity has proven to be especially important during the COVID-19 outbreak. Governor Kate Brown issued an executive order on March 23, 2020 that directs Oregonians to stay at home, closing many businesses and requiring social distancing measures. Many who did not suddenly find themselves out of a job were forced to work remotely. These workers rely on the grid to power their computers and connect them to distant coworkers via video conferencing websites. If communities in Oregon were to face a major electricity blackout that lasted 3-4 days, the state would be paralyzed.

We take for granted the access we have to the cheap and abundant electricity available here in the United States, especially in the Northwest with hydroelectric dams. While we can study, work, and play at all hours of the day, millions around the world continue to live in the dark. Their lack of electricity inhibits children’s abilities to study at night and further their education. It threatens people’s health due to unclean water and cooking on open fires in homes.

Unfortunately, our access to cheap and reliable energy in the Northwest is at risk. Oregon’s only coal-fired power plant, located at Boardman, will be decommissioned at the end of 2020 due to an environmental lawsuit settled a decade ago. A second coal plant located in Centralia, Washington will also go dark this year; and a total of 4,800 MW of coal power will be taken off the Western Interconnection (the power grid that connects most western states with British Columbia and Alberta) over the next several years. Unfortunately, utilities seem to have no real plans for replacing those megawatts with firm power.

Former Bonneville Power Administration (BPA) Administrator Steve Wright stated that this “is pretty much unprecedented” and that “we are quite concerned about whether we have enough time to address this issue.”

Wright himself has experience dealing with inadequate electricity resources. He was in charge of BPA during the 2001 energy crisis when a drought significantly reduced power from hydroelectric dams and threatened rolling blackouts in the Northwest. To conserve power, BPA took back electricity previously sold to the aluminum industry. In doing so, BPA essentially shut down the aluminum industry in Oregon, putting 5,000 aluminum employees out of work.

This isn’t a future problem for our region: Oregon’s grid is at risk right now. Frank Afranji, the President of the Northwest Power Pool, stated in an Oregon House Interim Committee on Energy and Environment that brownouts in Oregon could occur starting in 2020 and “we have an urgent situation because of the capacity deficit. We really need to move expeditiously and come up with a solution.”

Afranji also stated that battery storage technology cannot bridge the gap between supply and demand.

The Power Pool is a voluntary organization that includes electric utilities from the Pacific Northwest, Alberta, and British Columbia, and it is focused on power planning in the Northwest. The Power Pool published a report on resource adequacy in 2019 that concluded:

  1. The region may begin to experience power shortages as soon as this year.
  2. By the mid-2020s, the region may face a capacity deficit of thousands of megawatts which may result in both extreme price volatility and unacceptable loss-of-load, or blackouts.

With more employees currently working from home and communicating electronically, utilities must ensure that our region has enough reliable electricity to meet current and future demand. State policymakers and utilities can, and should, do a number of things to prevent another crisis, including:

  • Delaying the decommissioning of the Boardman Coal Plant until its principal owner, PGE, can replace the lost megawatts with reliable power; and
  • Removing the state moratorium on nuclear power to allow Oregon to invest in reliable and carbon-free power.

The Northwest Power and Conservation Council stated that the 2001 crisis developed largely unnoticed over a number of years before striking the region. It is imperative that we are not caught flat-footed again.

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

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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.

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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.

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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.

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Kate Brown’s Environmental Showmanship Has No Substance

By John A. Charles, Jr.

Governor Kate Brown has announced a legislative proposal that she claims is necessary to “resist” the Trump administration’s changes to federal environmental regulations.

While this bit of showmanship will play well to her base, it has no actual substance. The Oregon Environmental Quality Commission has long had the authority to adopt its own standards that are equivalent to or stronger than federal regulations, and it has done so many times.

In fact, it’s entirely plausible that if federal statutes such as the Clean Air Act and the Clean Water Act were completely repealed by Congress, there would be no measurable effect on Oregon. The state runs its own environmental programs and doesn’t need Congress or the Environmental Protection Agency.

Gov. Brown may find it convenient to manufacture an environmental crisis; but ambient loadings of air and water pollution have been falling for decades and will continue to do so, regardless of who is President. This is a great American success story, driven mostly by technological innovation and a commitment by corporate boards to continually reduce emissions.

We don’t have an environmental crisis, and we don’t need another law. Gov. Brown should stop using President Trump as a prop in her re-election campaign.

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

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Kate Brown’s Attention Deficit Disorder

By John A. Charles, Jr.

The most serious problem facing Oregon right now is the exploding costs of the Public Employee Retirement System (PERS). The PERS crisis is so severe that the Oregon Legislature should make it the only issue addressed in the February 2018 legislative session.

But Governor Brown isn’t interested in reducing the PERS liability. That would take too much work and might offend her public employee union campaign contributors. So instead she has signed two Executive Orders purporting to address “climate change,” ahead of her jaunt to Bonn, Germany next week to attend a United Nations conference on global warming.

Her Executive Orders impose a blizzard of costly requirements on new buildings, including requirements for new homes to meet energy efficiency guidelines by 2023, and mandates for new homes to be solar-panel-ready by 2020. New buildings will also have to accommodate electric vehicles, regardless of whether the owners ever intend to own such vehicles.

The Governor is also setting a fantasy policy goal that Oregonians own 50,000 electric vehicles by 2020, more than three times the current ownership level.

Oregon desperately needs political leadership to avoid a PERS-induced death spiral. Unfortunately, all we’re getting is a Governor flying halfway around the world to escape reality.

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

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

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

Summary

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

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