Oregon PERS restructuring, Democrats need for
more tax $
For the past
several months, the legislative Democrat leadership has
been steadfast, in telling anyone who would listen, that
they needed at least $275 million in new revenue, in
order to balance the state budgets. The Republican
Senate has been equally steadfast, in telling anyone
that would listen, that meaningful restructuring of the
Public Employee Retirement System is essential to
balance state, school and local budgets.
At least two Republican
votes are needed in the Senate to achieve the sixty
percent majority vote constitutionally required to enact
a tax. The same sixty percent majority votes are
required to reduce or eliminate a tax deduction or a tax
credit. For that reason, Republican Senators have
refused to vote for any revenue increases until and
unless meaningful PERS restructuring is achieved.
Last week, the Oregon
state economist predicted that state revenue collection
would increase by about $272 million over the next two
years. This fortuitous prediction allegedly resolves the
Democrat “steadfast need” for an additional $275 million
in tax revenue. Political coincidences can and do occur,
but one of this magnitude would certainly be rare.
Governor Kitzhaber then
made a “take it or leave it” proposition; wherein, he
would support up to $902 million in specified PERS cost
reductions, in exchange for $200 million in unspecified
tax increases. His offer was “on the table” for about 24
hours. Republican Senators did not accept this brief
offer, because it addressed only about one third of the
PERS problem, and because the Governor did not make
clear who he proposes to tax.
The Governor, and
Democrat legislative leadership, immediately attempted
to paint Senate Republicans as intransigent, and
unwilling to compromise. They stated their plans to move
forward on their own with the state budgets, without
additional revenue beyond the new found $272 million,
and without the critically needed PERS restructuring.
Their new plan is to
spend the projected $272 million increase in revenue in
order to balance the budgets. They ignore the fact that
this money they plan to spend is only forecasted,
predicted to be available. They further ignore the fact
that the state economists’ prophesies have been reliably
wrong for nearly a decade. Worse, the forecasted revenue
has consistently been overstated, often by wide margins.
The cost of funding the
Public Employee Retirement System is scheduled to
increase about $2.4 billion over six years. That
enormous sum of money will be due and payable each
two-year budget period into the foreseeable future. To
put the huge increase into perspective, that amount of
money would pay the average salary and benefits for more
than 17,000 state local and school employees.
Senate Republicans are
attempting to roll-back the PERS taxpayer costs by about
$2 billion per two year budget cycle. Reducing the PERS
costs by $2 billion would save state government more
than half a billion dollars. The approximate one and one
half billion dollars savings that remains would be
shared by beleaguered school districts and local
consideration of Senate Republicans, since the beginning
of this legislative session, has been focused on how to
resolve the essential need for restructuring the Public
Employee Retirement System.
Taxpayers have already
borne the burden of one billion one hundred million
dollars in PERS cost increases during the current two
year budget period. That PERS cost is scheduled to
increase an additional $128 million starting this July 1st
and by yet another $809 million on July 1st
expansions in PERS cost are occurring even after the
provisions of the partisan, Democrat-sponsored, Senate
Bill 822 have been implemented. Moreover, these are not
one-time cost increases. The PERS actuaries tell us that
these expanded PERS costs will continue each two year
budget period into the foreseeable future. These
increases may be substantially worse in the event that
the PERS Trust Fund continues to fail to earn its
projected eight percent annual return on investment.
simply believe that these unaffordable and unsustainable
cost increases must be curtailed.
I strongly believe the
latest revenue forecast is, once again, grossly
overstated. My analysis is based in part on the fact
that many taxpayers moved taxable income and capital
gains forward, in order to pay the lower tax rates that
were in effect for the year 2012. These financial
decisions were exacerbated by the impending fiscal cliff
that was looming at the time the tax decisions were
Fortunate for taxpayers,
their taxes are not due and payable twice. The taxes
moved forward for payment in 2013 will not be payable in
2014. This means that the taxes collected next year may
be expected to be reduced by about the same amount as is
currently being prepaid this year.
Similar tax collection
numbers are being experienced at the federal level.
Federal tax revenue is up nearly $100 billion this year,
largely because people were attempting to avoid the
fiscal tax cliff. Federal tax collectors are predicting
that tax collections will be down about an equal amount
next year. It is not clear why our state economists do
not seem to be making similar adjustments.
It appears that the
Governor, and Democrat legislative leadership, is
willing to do whatever it takes to continue to protect
the bloated costs of the Public Employee Retirement
System. They seem to have little sympathy for the local
governments and school districts that have no control
over the enormous PERS cost increases that are
decimating their budgets. They appear to have even less
empathy for the taxpayer, who continues to pay more, for
This sad and
unsustainable budget reality will continue until
meaningful changes are made to address the PERS
structural budget deficit.
Please remember, if we
do not stand up for rural Oregon no one will.