State of the State: Oregon
A massive $1.7 billion budget deficit looms over this year’s legislative session in Oregon. In addressing the budget woes, Governor Kate Brown discussed pension reform, streamlining government and tax fairness in her inaugural address. The governor also identified infrastructure, jobs, healthcare and education as primary areas of focus for Oregon.
To help close the state’s alarming budget deficit, the governor announced the creation of a panel of public and private leaders to focus on government efficiency. The panel will make recommendations just in time for the 2018 legislative session. Governor Brown is right that the business as usual budgeting approach has failed Oregon families. Oregon’s neighbor, Washington, used priority-based budgeting in 2003 to close a $2.4 billion budget shortfall without raising taxes. The ALEC Center for State Fiscal Reform report, The State Budget Reform Toolkit, discusses this solution along with others that can relieve fiscal stress without increasing the tax burden.
Despite Oregon’s budget problems, Governor Brown hinted at expanded infrastructure spending. While she did not specify an exact price tag of her desired transportation package this session, she expressed a hope that infrastructure projects will create jobs for Oregonians. Government spending of tax dollars is a far inferior jobs creation plan, however. As Rich States, Poor States shows, states with a diminished economic burden on job creators experience greater growth.
Governor Brown also acknowledged Oregon’s unfunded pension promises. According to the ALEC Center for State Fiscal Reform study, Unaccountable and Unaffordable 2016, Oregon’s unfunded pension liabilities total more than $97 billion when assuming a risk-free rate of return. The price tag for Oregon’s pension promises is $24,270 for every man, woman and child in the state. Finally, Oregon’s pension plans are a mere 36.3 percent funded. Governor Brown explained Oregon’s unfunded pension promises account for an estimated one fifth of the budget deficit. As a remedy, the governor suggested bringing investment services in-house. This may be a politically safe suggestion, but does little to solve the underlying structural problems. As the ALEC report Keeping the Promise: State Solutions for Government Pension Reform articulates, additional measures such as offering a defined-contribution plan for new hires can help states honor pension promises.
Finally, Governor Brown called for “fair and balanced” tax system in Oregon. Real reform would be welcomed relief for residents enduring some of the highest personal and corporate income taxes nationally. Oregon’s neighbors, Idaho and Washington (with no personal income tax), already enjoy lower income taxes.
Improving the Beaver State’s dismal 41 out of 50 economic outlook rank demands serious reforms. Streamlining government and reforming pensions can help address Oregon’s massive budget shortfall. Pro-growth tax reform would be another step in the right direction and would encourage more families, job creators and taxpayers to call Oregon home.