No Pat on the Back

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No Pat on the Back

InsideCapitolDome
The recent decision by House Speaker Karen Minnis to disengage from the bi-partisan budget talks and unravel the joint House and Senate Ways and Means process raised quite a stir in the Capitol. Much of the feuding over Minnis' move to push her own plan through the Republican-controlled House concerned whether it would slow down budget negotiations or jump-start a stalled process.

No Pat on the Back

The recent decision by House Speaker Karen Minnis to disengage from the bi-partisan budget talks and unravel the joint House and Senate Ways and Means process raised quite a stir in the Capitol. Much of the feuding over Minnis’ move to push her own plan through the Republican-controlled House concerned whether it would slow down budget negotiations or jump-start a stalled process.

These rival speculations mask bigger issues at stake in the funding of state programs and services. The gap between the two parties’ budgets in the House is actually relatively small (less than 3% difference, about $400 million), but each plan falls well short of sustaining vital public services important to Oregon’s economy. Under both plans there would be deep cuts to education, public safety, and human services programs.

To be sure, there are notable differences between the two parties’ budget plans. For example, Republicans favor increased borrowing by floating bonds. Democrats are pushing for more spending on education and human services than the Republicans, financed with more tax increases and curtailing more tax breaks than the Republicans.

The Republican plan proposes nearly $1.2 billion in additional revenue and the Democratic plan nearly $1.5 billion. Just to fund the level of services approved by the previous legislature, however, the state needs $3.2 billion. Some in Salem have been patting themselves on the back for simply getting to the point of acknowledging that Oregon needs additional revenue, but neither party’s proposal makes up for revenue declines over the last several years. Simply keeping taxes at the same share of Oregon’s economy as in 1999-01 would raise $1.9 billion in additional revenue. Far from ambitious, the new revenues proposed by both parties still result in a lower tax burden than Oregonians faced a few years ago.

Exactly why has the response of policy makers to Oregon’s serious revenue shortfall been so timid? One important reason is that many in Salem have accepted the incorrect, but often repeated, notion that raising revenue to fund government services is bad for the economy. The basic services provided by government, education, transportation, and public safety, are critical to the sound functioning of a state’s economy. Human services programs bring hundreds of millions of dollars in federal aid into Oregon’s economy, and provide a safety net to the most vulnerable when the economy falters.

Public services make communities livable places where businesses want to locate. The best thing that government can do in an economic downturn is to do its job, providing these basic services. Scaling back programs and laying off public employees will only make our current downturn worse, further reducing economic activity and making the state less livable.

If House budget writers could dispel themselves of the myth that paying for teachers, state troopers, and road crews is bad for Oregon’s economy and accept the idea that attracting hundreds of millions of federal dollars is good for Oregon, then the budgeting process would not only go smoother, but would do better at narrowing the now huge gap between expected revenues and the needs for state services. With more than $2.5 billion in federal tax cuts flowing to the richest fifth of Oregon households between 2003 and 2005, the Legislature can surely find the money to fund state services adequately and to help prevent Oregon communities from slipping further into economic morass.

OCPP

OCPP

Written by staff at the Oregon Center for Public Policy.

Jeff Thompson

Jeff Thompson is an economist and policy analyst with the Oregon Center for Public Policy.

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