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Voters' message? Fix the economy

Portland Tribune
November 11, 2014

by Peter Wong

Even as Oregon continues its recovery from the downturn that started seven years ago, for returning Gov. John Kitzhaber and incoming lawmakers of both parties, it’s still the economy, stupid.

While differences remain between Democrats and Republicans — and their allies in labor and social services and businesses — they agree there’s more work to be done on economic issues in the legislative session that opens Jan. 12.

“The priorities we heard from voters were the economy and education,” says House Speaker Tina Kotek, D-Portland. “Not everyone is finding success in our economic recovery, so the question is how we make sure that people who are working hard are getting ahead.”

Democrats will remain in charge of the Oregon Legislature. They added one seat in the House for a 35-25 majority over Republicans, and at least one seat in the Senate for a 17-12 majority. Undetermined is a Senate seat held by Republican Bruce Starr of Hillsboro. That race seems to be breaking in favor of Democrat Chuck Riley, who is ahead by 221 votes.

“Democrats have enough votes to pass things through both chambers, so I look for them to do quite well with what they want,” says Ed Dover, a political scientist at Western Oregon University.

It will be only the second time in Kitzhaber’s record tenure as governor that Democrats will have legislative majorities. Democrats are still short by one vote in each chamber to approve higher taxes and fees without Republican support.

Kitzhaber will return for a fourth nonconsecutive term with just under 50 percent of the votes tallied last week. Still, he defeated Republican Dennis Richardson by 5 percentage points, more than his win four years ago of 1.5 percentage points against Republican Chris Dudley.

Sen. Jackie Winters, a Republican from Salem returning for her fourth term, says there is already bipartisan support for economic action in the form of the Oregon Business Plan.

“We cannot talk about how vibrant we are as a state without creating economic growth in rural areas,” she says. “I am hoping it will be high on everyone’s priority list.”

Among the plan’s goals are for Oregon to create 25,000 jobs annually through 2020, raise per-capita income to the national average and reduce to 10 percent the number of people under the federal poverty level. It also acknowledges that the latter two goals cannot be achieved through economic recovery alone.

“Employment hasn’t yet returned to pre-recession levels in most parts of Oregon and our incomes remain stubbornly below the national average,” according to the plan. “Perhaps most important, far too many Oregonians — including nearly one quarter of children — are living in poverty.”

Oregon’s poverty rate is 16.7 percent.

Although overshadowed by the controversies about the role of his fiancée, Cylvia Hayes, Kitzhaber drew clear differences with Richardson on how he would take on many of these issues.

He says that starting his final term, he’s ready to move forward. “I know most legislators personally, and I have worked with many of them over the years, so I believe it’s not going to affect my ability to move an agenda,” he says.

Senate President Peter Courtney, D-Salem, says: “He has been chosen to be governor again, and he takes that responsibility seriously. Whether the questions are cleared up or not, he’s going to have to decide them in his own way.”

Courtney says he does not want to say too much about policy issues or political relationships until his Democratic colleagues meet this weekend, and until the legislative leaders meet with Kitzhaber to get an advance look at his next two-year state budget, which Kitzhaber will unveil Dec. 1.

“We’re in pre-season practice, so it’s hard to tell what our teams are going to look like and how they are going to relate to each other,” he says.

Specifics still lacking

Oregon’s minimum wage in 2015 will be $9.25 per hour, second only to Washington state’s $9.47. Voters in both states approved linking annual increases to inflation.

“I believe that after 12 years of having our minimum wage tied to the Consumer Price Index, it’s time for us to have another discussion about an increase in the minimum wage that would be good for Oregon,” Labor Commissioner Brad Avakian says.

Avakian says he’s not ready to put forth a specific proposal, but there is talk about linking future increases to the federal poverty level.

“If you want to lift most people out of poverty, that is the way to do it,” says Chuck Sheketoff, executive director of the Oregon Center for Public Policy, a think tank based in Silverton that advocates for low- and moderate-income people. “We ought to pay them more so that they are not poor.”

But Kitzhaber says though he favors an increase, it would not be enough in itself.

“If all you do is raise the minimum wage and do not address the relationship between higher income and (eligibility for) support services such as employment-related day care, they actually lose ground,” he says.

People used to lose state-supported care under the Oregon Health Plan when their incomes rose, but Kitzhaber says that problem was resolved by the national health care overhaul and subsequent expansion of state or private coverage to 95 percent of Oregonians.

Lawmakers also are expected to debate a requirement for paid sick leave, which they heard in 2013 but did not advance. California, Connecticut and Massachusetts have adopted such requirements, as have Portland and Eugene among U.S. cities; Eugene’s will take effect in July.

The Oregon Business Plan avoids mention of those specifics, but says that support services are needed for lower-income working families.

The plan emphasizes education and training to improve the skills of current and future workers, and job-creating programs tailored to those not sharing in Oregon’s economic recovery.

“I am hoping we look at ways to improve the economy for them,” Winters says.

Kotek says state support of public schools, community colleges and state universities — education accounts for half the state’s tax-supported general fund — will be a continuing concern.

A coalition is also preparing to offer a financing plan for transportation improvements, and not limited to roads and bridges.

Tax talk again

Kitzhaber once foresaw that the 2015 session would be the one for an overhaul of Oregon’s finances. State services and public schools rely on state income taxes, and local services on voter-limited property taxes.

“I think it’s important that we not waste an opportunity to have a conversation about our tax code,” Kitzhaber says.

But according to the 2013 Oregon Values & Beliefs Project, conducted by DHM Research of Portland for a coalition of public and nonprofit organizations, the public remains split over whether Oregon’s system is too “unstable” and should be supported by a general sales tax — which Oregon and four other states do not have. Voters have rejected sales tax proposals nine times, most recently in 1993.

While 63 percent of those sampled say Oregon’s tax system is not fair, 64 percent concluded they do not trust government to spend tax money wisely.

In addition to Kitzhaber’s suggestion for lawmakers to look at the “benefits cliff,” Kitzhaber says he’s still interested in considering a limited tax cut on capital gains — profits from the sale of assets such as stock — if the proceeds are reinvested in Oregon.

His proposal to do so in 2011 went nowhere in the Legislature.

“Such talk ought to be banned from the (legislative) caucus room,” says Sheketoff, whose think tank opposes tax cuts benefiting higher-income households. “The first rule is do no harm — don’t exacerbate income inequality by enriching the coffers of the wealthiest


Lawmakers will review some tax breaks, including a tax credit for child-care costs, that will expire in 2016 unless they renew them.

They also are likely to re-examine the Gain Share program, under which the state makes payments to counties that grant some property tax breaks for businesses, linked to a portion of state income taxes generated by the new workers hired by those businesses. Washington County, which received $38 million earlier this year, is the largest recipient.

“My general take is that let’s not do reform just to do reform,” Kotek says. “We should ask ourselves what we are trying to achieve. For me, it’s about helping families get ahead.”

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