“Umbrella” for Sale – Measure 48 TABOR Rainy Day Amendment

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“Umbrella” for Sale – Measure 48 TABOR Rainy Day Amendment

InsideCapitolDome
Proponents of a ballot initiative that imposes an overly harsh and arbitrary spending limit in Oregon’s constitution are calling their measure the “rainy day amendment.” This is like trying to sell a lightning rod by calling it an “umbrella.”

“Umbrella” for Sale – Measure 48 TABOR Rainy Day Amendment

Proponents of a ballot initiative that imposes an overly harsh and arbitrary spending limit in Oregon’s constitution are calling their measure the “rainy day amendment.” This is like trying to sell a lightning rod by calling it an “umbrella.”

Oregon does need a rainy day fund that can be used to maintain schools, public safety and other state services when the economic weather turns foul. Such a fund should be established by Oregon’s Legislature. Despite its name, the “rainy day amendment” does not create a rainy day fund, and the amendment’s sponsor has said as much.

Even worse, if the Legislature ever finally creates a rainy day fund, the misnamed “rainy day amendment” will render the fund impotent to help protect services during a downturn.

Here’s how.

The amendment counts unemployment insurance payments under the spending limit. In a downturn, when many people are laid off, unemployment insurance payments increase. When the 2001 recession hit, unemployment insurance payments from the state to laid-off workers increased by $1.3 billion.

Oregon prepares for inevitable, periodic recessions by funding unemployment benefits through a trust fund held separately from the rest of the state budget. No state income taxes support the unemployment compensation system. The amendment being pushed by proponents of TABOR would nevertheless include unemployment payments in the arbitrary new spending limit it would create.

As a result, when the inevitable business downturn hits, rising unemployment payments would squeeze out funding for all other services such as schools, senior programs, courts, prisons, the Oregon Health Plan, and universities, Cuts in many of these areas can hamper economic recovery.

While the measure’s proponents promise that schools and other public services can grow at the rate of population and inflation, in reality they will get considerably less than that because the increased demand for unemployment compensation will use up most of the arbitrary limit.

This misnamed initiative is modeled on Colorado’s “taxpayer bill of rights,” commonly referred to as “TABOR” and considered the nation’s harshest spending limit. Last November, Colorado voters suspended use of TABOR for five years after Republican Governor Bill Owens, business leaders, and the state legislature agreed that TABOR was damaging Colorado’s universities, health care system, road maintenance, and other crucial public services.

Proponents of TABOR in Oregon are trying to distance themselves from Colorado’s TABOR since voters in Colorado gave TABOR a “failed experiment” stamp of disapproval.

Like Colorado’s TABOR, the proposed Oregon measure restricts spending growth to the rate of population growth plus inflation, a level that forces deep and unpopular cuts to schools, public safety, and other public services.

If the TABOR amendment had passed in 1990, state services in Oregon would have had $7.3 billion less in the current 2005-07 budget cycle. That amounts to a 24 percent cut in current state spending and service levels. That would be like eliminating state funding for all of the following services and departments combined: K-12 education, the Oregon Health Plan, corrections, state police, environmental quality, and agriculture.

Today, the Legislature is free to create a rainy day fund without amending our constitution. Calling a scheme the “rainy day amendment,” even though the measure renders a potential rainy day fund useless, is a joke. But if voters place this ruse in Oregon’s constitution, it will not be a laughing matter.

OCPP

OCPP

Written by staff at the Oregon Center for Public Policy.

Michael Leachman

Michael Leachman is a policy analyst at the Oregon Center for Public Policy, which does in-depth research and analysis on budget, tax, and economic issues with the goal to improve decision making and generate more opportunities for all Oregonians.

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