The shortest-lived commitment to schools ever

By Tim Nesbitt of Portland, Oregon. Tim is the president of the Oregon AFL-CIO. Previously, Tim contributed "Calling All Rich Waitresses: Step Forward for Pay Cuts".

In what might be the shortest-lived commitment to school funding in the history of the state legislature, House Republicans are supporting a bill that would slice hundreds of millions of dollars from a "Stable Schools Plan" announced by House Speaker Karen Minnis five weeks ago.

On March 30, Minnis announced "a plan to dedicate half of state personal income tax receipts to fund K-12 education, giving public schools a stable, dedicated source of funding for future years." Minnis called her plan a means to provide schools with "a reliable and predictable funding source."

Following Minnis' announcement, there was a spirited debate about whether half of the state's personal income tax will be enough to provide adequate funding for schools. We think it won't be (see below). But the Speaker earned points on editorial pages for at least talking about a way to build a foundation for school funding in the future. Now, five weeks later, her own caucus is threatening to undermine that foundation.

Last week, the Republican members of the House Revenue Committee approved a bill that will eventually slice $100 million a year from that "stable, dedicated" funding for schools in order to create a new tax shelter for wealthy investors. House Bill 2332-A, approved by the committee on a party line vote, will exempt ever-larger shares of investment profits from state income taxes, beginning in July 2007. When fully implemented in 2011, HB 2332-A would allow investors and businesses to shelter 50% of their investment profits from state income taxes, even though workers' paychecks will continue to be taxed at current rates. (Read a summary of the bill from the Legislative Revenue Office here.)

The unfairness of cutting taxes on investment profits while maintaining taxes on workers' wages is a hot issue. 73% of the tax benefits of this bill will flow to the highest-earning five per cent of Oregon households. Working families have little to gain, since most of their assets wouldn't be affected by HB 2332-A's tax shelters. (The first $500,000 of profit from the sale of one's primary residence is not subject to income taxes under current law, while pension payments and the proceeds of 401(k)-style savings plans won't qualify for HB 2332-A's exemptions.)

"HB 2332-A is a new tax shelter for wealthy investors," says Chris Coughlin, executive director of the Our Oregon Coalition, "with very few, if any, benefits for working families."

But the impact of this "new tax shelter for wealthy investors" on schools has become an even hotter issue, now that Minnis' school funding plan is on the table. Backers of the bill were careful to delay the implementation of HB 2332-A so that its tax shelters don't start phasing in until the 2007-09 budget period and don't take effect in full until 2011-13. By so doing, legislators can ignore the effects of HB 2332-A's revenue losses as they wrestle with short-term funding for schools in the 2005-07 budget period.

But HB 2332-A will have dramatic effects on state revenues in the future, forcing steep reductions in funding for Minnis' "Stable Schools Plan."

Here is our estimate of the amounts of revenue given up to HB 2332-A's tax shelters for wealthy investors in future budget periods and our estimates of the number of school days that could be funded with this revenue in each of these periods. Note: These revenue losses are calculated after adding back in the so-called "feedback effects" of additional tax revenue obtained from investors selling more of their assets and the increased economic activity from the sale of these assets.

Budget Period Total Revenue Losses from HB 2332-A Revenue Losses for K-12 Education* Impact on Oregon School Kids**
2007-2009 $48.5 million $24.3 million 0.9 fewer days of school.
2009-2011 $215.7 million $107.9 million 3.5 fewer days of school.
2011-2013 $407.8 million $201.7 million 6.0 fewer days of school.


50% of personal income tax portion of revenues lost (excluding corporate income taxes).
*Based on 2004-05 cost of $22.8 million per school day for K-12, adjusted by 5% per year for student population growth and inflation.
Sources: March Revenue Forecast, DAS; Revenue Impact Statement for HB 2332-A, Legislative Revenue Office.

"This is all about the future of our state and our children and whether we will ever be able to climb out of the budget hole we're in now," says Oregon AFL-CIO President Tim Nesbitt. "This bill will cut off the benefits of a rebounding economy that we were counting on to improve funding for our schools and other state-funded services just to create a new tax shelter for wealthy investors. What's more important here -- tax shelters for the wealthy or funding for our schools?"

Nesbitt notes that even the 50% formula that Minnis proposed for "stable school funding" would be inadequate by recent standards. Since 1997-99, following the full implementation of property tax reductions under Measure 5 and Measures 47 and 50, the state's funding for schools has averaged 55.3% of personal income tax revenues -- including one year in which 90 school districts shaved an average of five classroom days from their calendars. "So it's not as if 50% would represent a high water maker," says Nesbitt. "What the Revenue Committee is trying to do is make a low level of support for schools even lower."

House Bill 2332-A is expected to reach the House floor early next week. So contact your legislator in the House of Representatives now and urge him or her to reject this new tax shelter for wealthy investors and preserve funding for our schools

Democrats on the House Revenue Committee have drafted an alternative (known as a "minority report") to House Bill 2332-A that will provide a reasonable and modest tax break for all Oregon taxpayers on the first $2,000 per year of profits earned on investments in Oregon. Drafted by Rep. Larry Galizio (D-Tigard) and spearheaded by Rep. Mark Hass (D-Beaverton), their alternative would take effect immediately, apply more evenly to working families and reduce revenues only slightly by approximately $4 million to $5 million per year.

The Oregon AFL-CIO has offered conditional support for the minority report, provided it is referred to the Ways and Means Committee and can be squared with a balanced budget for schools and other services in the next biennium.

  • Sally (unverified)
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    Never mind schools, this could be just the sort of information I scratch bald spots on my head trying to figger into the figures on Oregon's tax rankings vs. my own experience. It could also help explain why the economic strata have become more sharply divided in Oregon over the last decade or so, even more than in most states. And it could even explain why there is such tax resistance on the ground, because even though "the rankings" insist that Oregon is not highly taxed, the "averages" do not show the story.

    A story that this bill would make measurably worse.

    This is a part of what Oregon has to look at in terms of real tax reform, rather than ceaseless and often divisive whining for more revenue than so many feel (rightfully?!) put upon by -- eg, the Multnomah County Income Tax or the failed M30.

    Is this an example of the (partisan or not) elephant in Oregon's Revenue Room?

  • LT (unverified)
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    This is an example of some legislators not being intellectually honest.

    I called my Republican state rep's office today and suggested a serious explanation of this bill (like perhaps by a member of the Revenue committee) explaining why it is a good idea. For instance: why is it beneficial to the state as a whole (the common good) to have a tax break which they kick down the road in order to obligate a future legislature, rather than making the effective date this year?

    All our school board candidates here did an excellent job at a recent candidate forum discussing serious issues seriously. I suggested that it would help the reputation of the House majority to give an equally serious argument in favor of this bill. We'll see if that happens.

    I also suggested that since Wayne Scott and Oregon Restaurant Assoc. appear on the masthead of this bill, it is time to evaluate the ORA effect of lobbying on leadership.

    People who are not active in a party can still get upset about the tone of legislative debate. Everything Wayne Scott has said about the budget, Democrats, and the teachers union could be flipped on its head. Just replace "Democrats" with "Republicans", "the teachers union" with "ORA or another business lobby" and it would give a very different picture of the same problem--political leadership and powerful lobby groups.

    There is no reason to believe that one party ALWAYS listens to lobby supporters but another never does. The truth is in the voting record, bills introduced, etc.

    Let's have a serious, thoughtful discussion.

  • Marvin McConoughey (unverified)
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    Given the extreme angst over alleged funding insufficiency for education, one might reasonably expect vast legislative attention being given to improving education system efficiency in Oregon. One might expect to read dozens of scholarly studies and dissertations on how cost effectiveness can be improved. A focused cost analysis of CIM/CAM would be a prominent document. The wisdom of combining very high salary benefits for teacher seniority along with pay-to-quit bonuses would certainly receive a strong legislative look. One might, overall, expect wisdom from the Oregon State Legislature. Don't hold your breath.

  • LT (unverified)
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    SB 766 seems to me to be wisdom from the State Senate, unless one thinks that administrative salaries are never too high.

    Which is why I question this. The wisdom of combining very high salary benefits for teacher seniority along with pay-to-quit bonuses would certainly receive a strong legislative look. One might, overall, expect wisdom from the Oregon State Legislature.

  • your friend (unverified)
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    Tim, I am wondering how you feel about Democrats defending CIM/CAM and blocking a bill to rid our schools of this unfunded mandate. Our school reform has been a collosal failure yet will continue so that those who perpetrate it can save face.

    I believe I heard Senate education committee chair Sen. Vicky Walker (D) say she will block any bill to dump CIM/CAM.

    She also defended her conmmittee's movement of SB 50 for another unfunded mandate of the worst kind. Subjective, politicized, worthless, unwanted Cultural Competency requirements for teachers. The "social justice advocacy" Bill. Great.

    So thank Democrats for the continued meddling and distruption in our schools which further erodes public trust and support.

    They choose for our children , more CIM to waste more classroom time and effort, CAM to force students to plan careers starting in 10th grade, and a Cultural Competency program to force teachers to become advocates for someone's version of social justcie.

    None of which were requested with chants by parents students and teachers on the steps of the capital. All of which will come before all the things parents and students do want.

    This brand of leadership guarantees a decline in crediblity, less accountability, less stability and an overalll weaker public school system.

    Does it matter?

  • gus (unverified)
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    Under "Oregon School Reform for the Twenty First Century" we are supposed to be offering 220 days of public K-12 annually. That is 20% more days than the current 180. A 20% increase to Oregon's average annual teacher salary of $50,000 yearly would boost the average salary by $10,000 a year. For 28,000 teachers that adds 280 million annually to current K-12 funding.

    Perhaps to free up some funds we need to cut CIM and CAM activities at ODE and in the schools. The Armed Forces Vocational Aptitude Battery is available free for the asking from the feds. Idaho has 90% of its high school students taking it. Oregon's high schoolers in Advanced Placement classes would benefit materially from taking AP exams administered by the College Board with college credits awarded to those who score well on the tests. Fifty three percent of Oregon high school seniors already take the more basic SAT I tests used by college admissions offices. Only 32.5% of Oregon public school graduates took the CIM (A tenth grade certificate.) in 2003-2004.

    Can anyone tell me how much Portland's PALT tests cost that district? Or how much it costs to reconcile the results to the statewide tests most Oregon public school students take? Or if schools or districts in other states are buying the allegedly superior Oregon tests in preferenced to the nationally standardized Iowa or Stanford Achievement Tests?

    If we are ever going to have major league public education in Oregon we are going to have to get rid of the current minor league K-12 paradigm.

  • your friend (unverified)
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    As an outcome of nearly 14 years of our school reform Oregon is currently ranked near the bottom in high school math & English course requirements for graduation. Some high standards we have acheived.

    There is little mystery in education. If all the establishment did was give parents and students what they really want things would be far better.

    Music, art, sciences, a broad range of electives, shop classes, PE, sports, englich imersion, a full plate of basic courses for the entire student spectrum with AP and special ed where needed. Provide all these things for a while without the extra nonsense.

    Then as soon as these basics are acheived and stablilized come talk to us about whether or not we want your stupid, cooked up nonsense back again.

  • McBain (unverified)
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    your friend, gus, et al,

    What about Minnis and the House R's failure to live up to their own commitments. To start picking at the details of our school funding system with a house that is at best inconsistent and at worst dishonest is foolish.

    It is time to look at stability in school funding, and even if we were to switch (as someone suggested above) to the Armed Forces Vocational Aptitude test, I hardly believe that this would be free. We have to adminster, and that does cost money.

    Finally, the cry of "teachers make too much money and receive too much in benefits" is getting old. Who are you to argue what a teacher is worth?

    I want the best education possible for my children and I see our system failing to get there. Largely because people like those above do not want to spend the money it takes on a quality education system, period.

    Even those like the House R's won't even give us an honest answer on how to get there after they make a commitment.

  • (Show?)

    YF, you say... "Music, art, sciences, a broad range of electives, shop classes, PE, sports, englich imersion, a full plate of basic courses for the entire student spectrum with AP and special ed where needed. Provide all these things for a while without the extra nonsense."

    Would you mind sharing a list of the things that schools are doing or trying to do besides the list that you gave?

    Frankly, I see many schools failing to offer music, arts, AP, and a broad range of electives. So, we might just be in agreement - more money, more teachers, more academic offerings.

    That is, unless your list of "extra nonsense" is very extensive. And I can't imagine that it is.

  • yf (unverified)
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    The extra nonsense is plentiful and remains because of people who say things like

    "Largely because people like those above do not want to spend the money it takes on a quality education system, period."

    That's a typical remark.

    The problem you fail to recognize is the observations made by many Oregonians which causes them to be unwilling to fork over more money.

    Claims are made that all the basics will be served with more money. On what basis is that claim continually hammered? Many people know better. They see CIM nonsense year in year out delivering nothing but busy work and worthless certificates. Are folks supposed to just ignore this waste? They see spiraling out of control compensation packages agreed to by school boards even when the money does not exist to fund them and other cuts must be made. Look at the PPS health care costs problem which should have been addressed years ago. Why do you pretend that didn't taint the public's view of management? Why shouldn't the public not think more of the same is straight ahead when it certainly is? CAM is waiting in the wings to devour current and any new money in every school district. A "Cultural Competency program is on the way to chew up more. Bilingual education remains the dominate and most costly way to integrate ESL students.

    Your hopelessly flawed pretense is that none of this matters. It does and enough people are sick about it and talk about it that you better get off your partisan backside and help purge our schools of the nonsense.

    I get the impression that active Oregon Democrats think that if they just don't talk about these somehow know one really knows how bad they are.

    That's hardly the avenue towards more support.

    Even for the policy wonks who pretend that the Oregon Education Model has some basis or validity don't want to talk about that either. Never mind that central promise in the model is a complete fabrication. That being that 95% of our student will meet benchmarks if we throw another $2 billion at the same system, with the same people doing the same things.

    Do you understand what a fabrication is? Kind of like weapons of mass destruction. Now do you know?

    What's most extensive in our public school system is BS.

    There's no getting around it, nothing you will do about it and no way to get more support with it.

    Castillo hasn't the slightest idea how to improve our school system and is forever throwing up road blocks and making excuses for everything.

    But she is right on top of the Cultural Competency thing. The State Board is considering CIM requirement for graduation. Now that's a real in-touch thing to be pondering.

    Please one of you explain to me how our State Board would be considering such an asinine thing?

    Explain why the Senate education committee chair Vicky Walker (D) is going to kill any bill to end CIM/CAM?

    If the State Board, the Governor, Castillo and Democrat legislators think preserving CIM/CAM is anything but a detriment to our schools then they are nuts. If you sit back and say nothing then you are also nuts.

    There is not a single upside to keeping our reform. Saving face for the perpetrators is not an upside.

    Telling people they are stupid or greedy and unwilling to fund schools is not either.

  • Sally (unverified)
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    Tough stuff, yf. I agree. Especially with this ever-overlooked little nugget: "Look at the PPS health care costs problem which should have been addressed years ago. Why do you pretend that didn't taint the public's view of management?" And your summary: "Telling people they are stupid or greedy and unwilling to fund schools is not [an upside] either."

  • ron ledbury (unverified)
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    Tim,

    You are talking about schools? Is this like the OEA head going to chat with the state treasurer about medical coverage for striking Safeway workers in California in January 2004.

    I have no medical insurance and cannot afford any. I just cross my finger and hope for the best on that issue. If the government pays perhaps 800 per month, arguably all on account of coverage for a teacher, then this is 9,600 dollars per year. If a private sector persona paid medical insurance like that, after tax, their income would have to be roughly 12,800 dollars straight off the bottom; assuming health care is an essential. That is just a smidgen below the income of a full time minimum wage earner.

    How eager is the medical care provider community to serve the minimum wage earner, when the profit per visit is so much greater for workers who can claim that they work for the government rather than for a private employer? The poor cannot compete . . . . they cannot compete withe market distortion. Monopoly pricing theory offers a good analysis as to the ability of a provider to maximize their total revenue, and profit, by splitting up the market to as to get extra dollars from their richer clients; here, that would be the government client.

    If you want to stop monopoly pricing of medical services, and thereby aid the private sector labor community, then you should oppose any measure, and particularly here with teachers, that sets a base insurance rate for coverage that is so high that low wage workers can never ever expect to match (nor, as is often the case, can their employers.) You would, or should, favor straight pay, from which an employee could choose in the marketplace if, and from whom, they wish to obtain medical coverage. The bargain with the devil, as I see it, is the use of a government dollars coupled with a captive market of clients to then serve the profit goals of medical providers and allow them to charge monopoly pricing for the service.

    Monopoly pricing implies cutting back on services, as an express policy, to maximize revenue and/or profit. It is not good for the general public even though it might be good for one segment of the population.

    Perhaps you could benefit all Oregonians by boosting the Standard Deduction for taxes on the poor by 9,600, so as to at least let them have a fair shake at trying to earn tax free dollars to cover the overpriced medical services.

    I could move on to address several other market distortions that make it more costly to live, for the poor, because of extra benefits given to one segment of the population or another (and all the while aiding in some else's unreasonable profit or extraction of economic rent and even capital gains on assets that are derived from increasing their monopoly power). I could also pull out of a hat a number that partially remedies some of these distortions, at least as it pertains to state income taxes, and say that the standard deduction should today be no lower than 26,000 dollars.

    Yet, I could hear the voices of folks complaining, but where will we come up with replacement revenue if we cannot tax the poor. But we are already taxing the poor in the marketplace by not restraining the temptation to support monopoly pricing, so long as the government and some theoretical other taxpayer will cover the extra price.

    Every effort to to use government to boost wages for one group or another is seemingly matched by increasing monopoly power by one business or another, to the harm of other potential business, and the burden is invariably borne most directly by poor folks.

    So, while you race to attack the rich in your revenue plan, I would hope that you find the time to pay some attention to the poor workers and boost the standard deduction. Who knows, maybe you will read my little plan for the creation of a "Personal Reserve" pegged to the bottom of the income, and wealth, scale, rather than pegged to ideological attacks on folks who are perceived to be wealthy. (Flier blog post here, with link to Poor Man's Anti-Tax Measure.) Target all the poor, rather than targeting just a fraction of the poor like it was some sort of lottery scheme where there is never enough to go around to make everyone wealthy. Wealth is only relative anyway, isn't it?

    <h2>But please do not not help the poor by arguing that you cannot obtain replacement revenue from the rich. That is no excuse at all; though it does offer a convenient political distraction. Taxing the poor to pay up to others is not an excuse either, and is patently regressive.</h2>
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