Posted on October 26, 2011

Earlier this year, public employee unions launched television ads attacking my colleague Rep. Dennis Richardson for his efforts to set aside $460 million in reserves in the state budget.   They attacked the Republican from Central Point because he co-chairs the budget-writing Joint Ways and Means Committee, along with two Democratic legislators.  What a difference a few months make.

The budgetary reserves, Richardson argued in March, were necessary to protect critical services in case Oregon’s economy failed to recover.  Though the reserves had bipartisan support, Richardson was singled-out and criticized for saving too much money when state economists were predicting economic growth and increasing tax revenues.  In addition to demonizing a key Republican, the attack ads were designed to pressure Democratic budget-writers into opposing the reserves.  The unions, and even some Democratic leaders, were relentless in their calls to spend every available dollar immediately.  It is a significant bipartisan accomplishment that Republicans and enough Democrats did not cave to this pressure.

Seven months later, Richardson has been vindicated.  Since the 2011-13 state budget was adopted, state officials have lowered their economic and revenue forecasts amid continuing uncertainty in our state’s economy.  Today tax revenues are falling and economic danger signs are everywhere.  University of Oregon’s Index of Economic Indicators has declined five consecutive months, and economists are beginning to discuss the possibility of a “double-dip” recession.  Oregon’s unemployment rate has inched higher, and our state has experienced little job growth if any.  Families continue to suffer, with one in every five Oregonians on food stamps.

Thanks to Richardson’s foresight, these prudent reserves will allow the Legislature to address the current budget shortfall, without making additional and immediate cuts to education, public safety and human services.  It’s difficult to imagine Oregon’s fiscal situation if the Legislature had caved to these special interests by spending more money than we were actually collecting.  Unfortunately, it appears these reserves may only protect Oregon in the short-term.  Not only are tax revenues continuing to decline, but state personnel costs are continuing to increase and consume a larger share of the state budget.

In September, legislative budget analysts estimated that personnel costs, including those under the new collective bargaining agreement, will exceed what was originally budgeted for the 2011-13 biennium.  These costs include pay raises for state employees and health benefits that are still among the most generous in the nation.  This will result in a $122 million total funds deficit in the current state budget, and because the pay raises and benefits are set in stone, Oregon taxpayers must pay the bill.  

Faced with declining state revenues, increasing personnel costs and escalating demands for social services, the Legislature will likely face more difficult decisions when we return to the Capitol for a short session in February.  There are few options left to consider.  Oregon has already raised taxes on corporations and the wealthy, as some protesters have recently demanded from their elected representatives. If we are to avoid further cuts to schools and other essential programs, the Legislature must be take bold action and find new and innovative ways to reduce costs and deliver services.

In 2012, the Legislature must revisit cost-saving reforms that were proposed, but rejected in the last legislative session. House Republicans have proposed eliminating or reducing the PERS six percent “pick-up” that strains state, local and school district budgets.  We have proposed forcing disclosure of hidden government liabilities, and ending the state’s practice of funding vacant state positions without actually filling them.

Most importantly, the Legislature must refocus on supporting private sector businesses to improve our economy and create jobs.  Next year we will introduce measures to give small businesses new incentives to hire unemployed Oregonians.  We will seek to eliminate unnecessary regulations that only serve to stifle job growth.  We will propose tax reforms that encourage private sector reinvestment in our state’s business and workers, and to give more spending power to families and low-income Oregonians.

Unless Oregon’s economy dramatically recovers in the next few months, our state, our citizens and its elected leaders will continue to face enormous challenges.  However, I am optimistic.  Oregonians are pragmatic and intelligent. If we are willing to put the “Welcome” mat out for investor and inventors, and work hard to clear government obstacles in front of them, they will create more jobs, and Oregon will thrive once again.

Category: News