By editorial board • 

It's time to revise kicker law to boost state rainy day fund

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Comments

Spongebob

I am in total agreement with keeping the kicker as a reserve fund. When the legislature approves a budget based on the May revenue forecast, the tax rate is fixed based upon the estimated economic vitality for the next two years. If the economy improves sufficiently enough to trigger the kicker, the tax rate imposed two years earlier shouldn't necessarily be lowered retroactively (which is, roughly, what the kicker does). It simply means that the economic activity that feeds the state budget has improved, resulting in more than expected funds for the state. If the kicker is tagged for a rainy day fund - and not for expanded state programing - there is no breach with the taxpayers, based upon the anticipated economic outlook from two years earlier. The real headache is trying to determine when the reserve funds can be accessed, and how they will be distributed. But, that's why the legislators get the big bucks.

Don Dix

Does anyone really trust the state to only access a rainy day fund when necessary?

Look at it with these phrases in mind ~public employees, unions, Democratic legislators, complicit state officials ... and an idle pile of untouched cash. These entities have displayed little conscience where money is concerned. As soon as the legislature began this session, more revenue was their goal ( publically stated ). In fact, all of the above have displayed a penchant to enrich themselves and their benefactors for over 3 decades.

Carbon tax, sales tax, gas tax, cigarette tax, liquor tax, marijuana tax ( which will create another level of government ), etc., are either new, proposed, or raised on a regular basis. Adding local beer and wine tax proposals is also on the table. There is abundant evidence that the operative and main objective is always more revenue. And throwing money at situational problems is usually the contrived solution.

As noble as a rainy day fund sounds, there is no guarantee it won't be under attack from day one. And creating a crisis seems to be a specialty within most governments. The combination of those two perspectives bodes a 'stormy' life of any rainy day fund, in my opinion.









kona

A "rainy day fund" takes the edge off from any negotiations. It would be any public sector union's dream come true.

rebmc

From the article: What goes up must come down---except government spending and taxes

Rotwang

No! Not another penny! My income tax is ungodly high as it is. The last tax increase was supposed to fix things. The trough-feeding pigs in Salem will never be satisfied. If they can't produce a budget with what they take now, fire them and elect people who will.

Jeb Bladine

This discussion is evidence that the most negative force in politics is not disagreement, but distrust.

We might agree that a "rainy day fund" -- or any number of other actions -- makes sense. But we hesitate to do the right thing out of distrust that others will misuse the approved policy.

I took this position in last week's column: "A portion of future tax kickers — perhaps one-third or even one-half — should finance a capped rainy day fund, with taxpayers receiving all kicker money once the savings account is fully funded. There should be stringent rules for how, and when, that fund can be used, limited to times of significant financial shortfalls that threaten basic services."

It's a shame we don't believe our leaders can create a state savings account with conservative, acceptable spending policies. It's really not rocket-science ... but we simply don't trust the spenders to control themselves when they get into power.

Distrust kills a lot of needed political decision-making.

Don Dix

Oregon's government history of spending is ample proof that the people who have doubts about the safety of a rainy day fund are justified. Legislators owe favors to those who threw cash into the political arena. and they expect payback. Idle money is the pinnacle of temptation for those folks.

Simply stated, leaving control of your livestock to those identified as wolves is a fast track to becoming vegan!

Jeb Bladine

Don,
Maybe that's why we hear the R's over in Salem saying, "Pass the legumes, please."

kona

Jeb, The "distrust" is another timely topic for you. It certainly is valid at any level of government. It gets loose when people (public officials) are spending money/revenue that is not their own. It is human nature for those in public service to please their constituents (and contributors). It makes them feel like they are serving their position well. The only problem is that so many of these people are not "numbers people. They are led in their reasoning qualitatively and not quantitatively.

Jeb Bladine

Kona,

Maybe the worst kind of distrust is that we don't trust ourselves. As in, "we, the people" so often can't do what needs to be done because we don't trust ourselves (the people) to stop future distortion of the policy or the program or the action that needs doing.

It's a messy reality of Democracy, I guess.

Don Dix

Consider this scenario -- The kicker is in the Oregon Constitution. For all intents and purposes, it is a contract that the government return excess tax revenue when it exceeds 2% of estimate.

PERS is also a contract. The government recently attempted to adjust the PERS contract, but was denied by the Ore. Supreme Court (basically ruling a contract is a contract).

Since that ruling, the state has a $5B deficit (re-enacting the proposed changes) looming next biennium (since the present biennium budget is already set with the changes). Where to find that money is the quest.

Enter the kicker -- money in the possession of the state, but legally required to be returned to the taxpayers. Instead of actually attempting to reduce unnecessary spending and waste, what does the legislature do? Push to retain the kicker, presumably so the only damage will be to the taxpayer (and none to political contributors of all shapes).

Today, the kicker is sacred taxpayer ground. By moving the kicker from the accounts of taxpayers to a rainy day fund, it changes the whole dynamic of accessibility. And that is precisely the legislative scam -- make that fund available to perpetuate the spending and fulfill promises made. Business as usual -- but operating on extra cash that obviously wasn't an issue until the SC shot down the PERS reforms.

History reveals the state will spend every dollar available, the more the better. Put money within reach and there will be a raid, a need, an idea, a plan. It's an easy prediction. And when the fund is drained, the quest will begin anew!



Michael

Why not spend the money on the mandated-by-law fund for the PERS deficit and/or fixing the roads and bridges about which there is constant discussion?

kona

Michael said, "Why not spend the money on the mandated-by-law fund for the PERS deficit".

I think I am becoming (more) ill.

Spongebob

Don, the state does not have "a $5B deficit...looming next biennium" due to the court's PERS ruling. The PERS unfunded liability may grow to $5B, but that is a much longer view than the next biennium. The PERS rates for public employers have been set for the next biennium, but the budgets have not.

That's part of the difficulty with setting tax rates for budgets two years down the road, based on current-year estimates. Everybody wants a share of the money back when the economy out-performs the estimates, but nobody wants to pay extra when the economy tanks.

I'm not advocating for increased taxes during a recession, but I do think keeping the kicker as a means to soften the blow of a recession isn't a bad idea.

kona

Spongebob, who is there to "soften the blow" for the taxpayer during a recession?

Spongebob

kona, that would be the aforementioned reserve created by the kicker, so that when revenues decline, cuts to services are not as harsh.

kona

Spongebob, So you are suggesting that our state government knows how to spend our money better than individuals know how to spend their own money?

Spongebob

I'm not suggesting that at all, kona. I'm just saying that when the legislature approves a budget to provide public services, based upon an economic forecast for the next two years, and that forecast gets upended by circumstances beyond our control, the fall-out can be very painful for those dependent upon the services provided. Budgets get cut in ways that affect people's lives. If we can create a reserve out of unanticipated revenues, during good economic times, it could make the service cuts during down times less painful.

If you have arguments against particular aspects of the state budget, as it is being prepared, those should be addressed to the legislature, and certainly during election cycles.

This discussion is not about the advisability of the state's spending priortities when the budget is created, but rather about the advisability of creating a rainy day fund out of unanticipated revenue above the forecast from two years ago.

kona

We just had one of the worst recessions of the century in 2008. What part of the public sector was hurt? Teachers still got compensation increases, state public employees still got compensation increases, food stamps continued at record levels (Oregon among the highest of all states). There are so many "rainy day" funds already built into state and educational budgets. It seems like individuals suffered much more during the recession than did our state government. Perhaps our state government should spend the available revenue more wisely than "blow" the hundreds of millions of dollars that they have blown just in the last five years with nothing to show for it.

Spongebob

Just because you didn't see the hurt, kona, doesn't mean it wasn't there. If public employees did get compensation increases, it was due to contracts that were in place before the recession hit hard. Many public employees had their wages frozen for several years, or made other concessions just to keep their jobs. If they didn't lose their jobs directly, vacancies created through attrition were left unfilled for years, as work loads increased. Some schools had to cut instructional days to the point where they were in danger of violating state mandates. State police patrols were cut to their lowest levels in decades. Seniors eligible for in-home care were put on waiting lists, as the money disappeared. Facility maintenace plans were put on hold all across the state. There are many more examples of actual service cuts that could be enumerated.

You may not have seen any of this, but I assure you, people were hurt by cuts to public budgets. Every responsible public budget does have a contingency fund, and some unapproprated ending fund balance, but many of those have been cut to dangerously low levels. These may be your idea of a "rainy day" fund, but they are inadequate for a long term maintenance of effort.

We can all point to our favorite examples of inefficiency, waste and fraud as reasons for wanting to cut public funding. I am not an apologist for growing state budgets, or a defender of the current state of affairs regarding funding priorities. What I am in favor of is finding a mechanism to try to mitigate the uncertainty of large swings to the state coffers for providing the services people depend on. If all you want to do is punish the public sector for their high-profile failures, that is another matter.

Don Dix

Spongebob,

You are correct that the state does not have a $5B deficit. But the PERS liability just added that much back. 90% of the savings expected when the 2013 legislature lowered the COLA formula of PERS vanished when the SC ruled otherwise. Resulting increases in employer payments will likely begin in 2017 because rates have already been set for the 2015 to 2017 biennium. Employer payments come out of everybody's pocket.

My point was the quest for more $$$$, and the kicker, which has been under attack since it's inception. Money 'just laying around in a public trough', will always be under duress. The present legislature made it very clear that this session would be about more revenue, so it follows. Seems to be the plan every session.

The legislation was just a slight of hand move anyway. I'm guessing many of the legislators who voted for it knew it would be shot down, so they look good on paper.

kona

Spongebob, I agree with many of the points you made and I could agree with using the kicker if it weren't for the state of politics in Oregon. Oregon is among the most unionized (public sector and private sector, currently 8th most) of all states. In every negotiation that I have been involved, a primary discussion is centered around "available revenue". With the symbiotical relationship of Oregon public sector unions and the Oregon Democratic Party the retained "rainy day fund" would always be at risk to be spent. The leverage in any negotiation would be compromised.

Jeb Bladine

How about this: Commit one-third of the income tax kicker to a fund capped at, say, $500 million adjusted by inflation and population growth; allow use of that fund to cover up to 50 percent of a biennial shortfall in estimated state revenue with a maximum $250 million use in any biennium; require 75 percent approval by the Legislature to access the fund; and put all of that into the Constitution to require voter approval of any change.

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