Kitzhaber announces budget plan
Kari Chisholm
Today, Governor John Kitzhaber announced his budget plan. As expected, it's a $14.76 billion budget. The budget maintains flat program budgets throughout state government - while spending the $1.2 billion in increased revenue on key priorities. From the Portland Tribune:
Kitzhaber’s shifts include funding job creation programs, consolidating disparate early childhood programs and restructuring health care delivery to lower costs and improve quality of care.
Of course, with the rising costs of services - inflation, health care costs, and increased demands on public services in a recession - a flat budget necessarily means reductions in services provided. There are lots of details that folks will be sussing out of the 395-page budget document (PDF).
One follow-up to my post this morning. In the comments, Michael Pingree noted:
Thanks for that data. My first thought was that maybe our budget per capita was really high in comparison. That turns out not to be the case. We fell on the low side of the middle.
Clearly, spending isn't the overwhelming problem that some want to make it out to be. What we have is a revenue problem. How we address that issue is up for debate, but at least we know what to address.
I went ahead and updated my spreadsheet and Michael's right. Of the 42 states listed (the original source only included states with budget shortfalls, and didn't have data on a few), Oregon ranked #25.
So Michael's right. Oregon isn't a place where spending has run amok. Not at all. While it's always a good thing to look for efficiencies in spending, and while we make sure we're adjust spending to match our priorities (and please, Kevin Mannix, stop already with the prison-stuffing nonsense), what we've got here is a revenue problem -- both in terms of amount of revenue, and the stability and predictability of the revenue stream.
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3:17 p.m.
Feb 1, '11
What are the possible solutions to the "revenue problem"? Sales tax? (Probably wouldn't fly.) Federal grant? (Possible.) User fees? (Often counter-productive.) Excise tax? (Soak the rich.) Accounting gimmickry. (Chickens come home to roost.) Deficit spending? (Hmmm... Change the State Constitution? Might work?)
4:18 p.m.
Feb 1, '11
Well, clearly accounting gimmickry and deficit spending aren't actually ways to raise revenue.
You left out two obvious options for additional revenue -- adjust income and property taxes.
As I see it, there are two problems - total revenue, and the wild fluctuations in revenue.
Regardless of one's political persuasion, I think we can all agree that finding a way to improve revenue stability - or, more precisely, to save money during the peaks to fill in the troughs (i.e. rainy day fund), is a no-brainer. (The key is to have the discipline to do it; instead of spending it.)
Beyond that, yeah, we're talking about a need for tough and creative thinking. What revenue solutions are politically achievable, economically feasible, practically possible, and budgetarily realistic?
4:34 p.m.
Feb 1, '11
On the revenue side, I agree totally. We need a broader and more stable revenue stream and some kind of reserve fund to get us through the downs periods will a minimum of pain.(So many say that government should be run like a business, well guess what, businesses have money in the bank to even out unstable cash flow periods.)
Now, when and on what we spend the "rainy day fund" is another debate, but the need for one should be obvious to everyone who isn't blinded by partisan ideology.
4:41 p.m.
Feb 1, '11
The problem in raising property or income taxes is that, because we have no sales tax, we are already on the high side of those taxes when looking at other states. Whenever you get too far off center in some area it causes distortions. Some businesses or individuals are unequally impacted and don't want to do business there.
There are places where we are way low on taxes, but the additional revenue will not be a major source of revenue. The beer tax is way low, but bringing us up to par with our neighbors raises tens of millions, not hundreds.
The biggest single thing we could do is kick the kicker which does amount to billions of dollars over time.
Lastly, because of the constant Republican rhetoric that we don't have a revenue problem, we have a spending problem and the defensive posture of most Democrats, the public is inclined to side with the Republicans on this issue regardless of the facts.
4:58 p.m.
Feb 1, '11
The kicker is the kicker. That's the "rainy day fund" Michael is talking about.
Increased Property Taxes definitely won't fly - already high.
Increasing Business taxes won't play well at all!
A lot of income tax is being paid by Washington (via Clark County), so raising income taxes is better value for the buck.
2:23 p.m.
Feb 2, '11
Raising property taxes is a completely viable solution. Right now we're laboring under two property tax limits: one from an up-or-down vote on a stupid idea by Don McIntyre, and one from a stupid legislative revision of a REALLY stupid idea from Bill Sizemore. Our property taxes are not "high": maximum of 1.5% of real market value, and assessments on older properties limited to 1996 values.
Solution: the legislature needs to develop a new system for property tax limitation. It needs to be done through an open public process with input from various stakeholders and public policy experts. It will need to address the real need to limit taxes on private homes (which generate no revenue to pay the tax) while still providing for a stable local government revenue base -- including adequate school funding.
This would actually be a good time to do it: the legislature is split as evenly as it can be, so both parties would need to sign on to it, and it would require a constitutional revision, requiring 2/3rd of both houses plus a vote of the people. Anything that actually gets through both houses will, by necessity, have substantial buy-in from both parties and at least a decent-sized section of the business community.
4:04 p.m.
Feb 3, '11
If we raise income tax enough perhaps many Washingtonians who work in Oregon will find work in their home state. That would alleviate rush hour interstate traffic, and we could end the goofy mega-bridge discussion.
7:18 p.m.
Feb 1, '11
The sad reality is that Republicans would say we were spending too much even if we had the lowest per capita spending in the US.
2:13 p.m.
Feb 2, '11
They'd also say taxes were too high even if we had the lowest overall tax rates in the US.
3:30 p.m.
Feb 1, '11
Just to clarify, I think Kari is stating that we are 25th highest per capita out of 42 and my statement was based on being 18th lowest out of 42. That's why I said "We fell on the low side of the middle."
4:14 p.m.
Feb 1, '11
Exactly.
3:50 p.m.
Feb 1, '11
Its always a revenue problem. Budgets typically align with the necessary services (i.e. demands) expected by citizens, while also expressing the complexities of modern society?
How to fix the revenue problem. Increase the number of taxpayers is an obvious solution, which could also allow the opportunity to keep taxes low. Otherwise, the state needs to become dependent on another source of revenue besides property taxes that are vulnerable to market manipulation, with the eventual bottoming out resulting in cries of "out of control spending."
As for sales tax, I'll never forget shopping in pre-Katrina New Orelans and jokingly asking the clerk if I could have the sales tax waived because I was an Oregon resident. The clerk replied, "Oregon doesn't have a sales tax? How do you provide basic services?" My response was: "Exactly."
4:28 p.m.
Feb 1, '11
One state that pops out at me from the data is Colorado. They have 31% more people, yet the same budget.
Many of these "best places" polls rank CO/cities in the top 10 of places to live/work/do business.
It would be interesting to see a comparison of what OR spends vs. what CO spends in a line-item sort of fashion.
4:50 p.m.
Feb 1, '11
Allen Alley did just that, but he used the all-funds budget and that causes all sorts of comparison problems. It is on-line somewhere.
The other factor in comparing states is that you really have to look at state and local funding combined. What we include in the state budget other states may get done locally and vice versa. 20 years ago 75% of the Oregon school budget was local and now 75% is done at the state level. Every state is different.
I also remember hearing that Colorado has done real damage to itself because the budget has been cut so much, but I do not have any sources to back up my memory.
2:06 p.m.
Feb 2, '11
Worth noting that it depends on the timeframe you're looking at. Colorado has just been through a paroxysm of spending cuts -- the effects of which may take a couple of decades to be seen.
Fortunately for Coloradoans, they've figured it out and are sorting things back out rather quickly.
4:48 p.m.
Feb 1, '11
Job creation is a big key to dealing with the revenue issue. We need to find creative ways to put Oregonians back to work.
Not only do more jobs increase payrolls, and tax revenue, but it has a second impact on state services: When more people are working, they rely less on social services.
5:36 p.m.
Feb 1, '11
While I certainly agree with this, employment requires longterm systemic changes. Not this year's budget nor next's or even the year after that can be affected.
Creating jobs is the Holy Grail of social economics.
9:49 a.m.
Feb 2, '11
Exactly. However, I think our gov't has to be a part of the solution and I am not sure they know how to create jobs.
Our leaders are always looking for the media generating "home run" of luring a company with 1000 jobs here. I would rather the work at creating 100 new companies with 10 jobs each. Much more stable and greater potential for job growth.
I don't know what gov't has to do to create biz here. I am beginning to think that even if we cut biz taxes to 0%, we wouldn't get much out of it in terms of jobs.
3:23 p.m.
Feb 2, '11
I think entrepreneurs are rare – really rare – like 1 in 1000 rare. Even starting a hotdog stand is tough - working long hours for little pay, and no benefits. Many small business owners have their wife and kids helping out, no pay. And there’s the indignity of hiring someone who is then protected from long hours and provided social security, healthcare and guaranteed minimum wage by nanny-state oversight. As the employee benefits go up: childcare leave, unemployment insurance, workplace rules – being the one responsible for all that stuff, especially at the equivalent of $2 an hour, just ain’t worth it. If small business (with emphasis on “small”) is really the job engine then the poor schmucks who run them should be recognized for what they are. Hardly any of them will ever amount to a hill of beans but they got “The American Dream.” If you want to encourage their activities then take away the financial barriers of business taxes, employee mandates, and other fees.
Don’t get me wrong, I’ll all for nanny-state protections, but if a society is imposing them, then the society should pay for them – not the SMALL BUSINESS PERSON. However, once a business is “big,” meaning it has PUBLIC stockholders, then lay the burden on it – it’s not a person anymore.
2:08 p.m.
Feb 2, '11
OK, Jason. You say "job creation" like it's as simple as saying it.
We've already got among the lowest business taxes in the country -- so that's clearly not the answer.
Any specific suggestions?
6:03 p.m.
Feb 2, '11
Develop West Hayden Island.
3:58 p.m.
Feb 2, '11
Kari, your ranking of Oregon at 25th, with an annual $7.2 billion per year, ignores almost 3/4ths of Oregon government spending.
Kitzhaber's proposed budget calls for $27.5 billion, not $7.2 billion. You can't just look at the general fund.
9:48 p.m.
Feb 2, '11
Well, I suppose it's possible to consider the "all funds" budget, rather than the general fund.
But that's the apples-to-apples comparison that the CBPP did.
And, of course, it's the general fund that the Legislature and Governor control -- the all funds budget is mostly restricted money, much of it federal pass-through dollars.
The League of Women Voters succinctly described them thusly:
So, if you're wanting to talk about what the legislature and governor should do about taxes and spending, well, you're talking about the General Fund, not the All Funds budget.