Rep. Richardson’s April Update

Oregon’s Special Session—DHS, Education & Taxes

The likely issues for the recently announced April 20th Special Session of the Oregon Legislature, are likely to include (1.) resolving the Department of Human Services’ (DHS) unfunded liability, (2.) sprinkling among Oregon school districts an unexpected $42 million of pre-election largess, and (3.) opening the door for the Portland School District to raise an additional $15.8 million in local property taxes without a vote of the citizens who will be called on to pay them.

After stating in last January’s newsletter that the $172 million Department of Human Services (DHS) shortfall was inflated by inaccurate forecasting, we concluded by saying, “First we must determine what the actual DHS shortfall is and how it occurred. Only then can the Governor, Senate and House leadership determine an appropriate course of action.” As expected, with the Spring ’06 Forecast, DHS revised its key caseloads downward. This revised forecast, along with other adjustments, resulted in a $32 million reduction of red ink–certainly welcome news, but a $140 million hole remained to be filled.

DHS has had 5 Directors in the past 5 years, so a key requirement to improving the agency was for the Governor to recruit a DHS Director who has experience, credibility and tenacity. The new DHS Director, Bruce Goldberg M.D., assumed the post last November and, after four months, has gained the respect of both Democrats and Republicans for his open and non-partisan approach to identifying DHS problems and his willingness to work to correct them.

First the good news. Substantial progress is being made to improve DHS’s forecasting capabilities, operations and management,

Director Goldberg’s initial action for dealing with the huge flood of red ink was to determine if DHS administration costs could be lowered without reducing its capacity to deliver services. This resulted in a $4 million savings, which lowered the deficit to $136 million. Next he ordered a review of DHS forecasting procedures and requested changes so that more recent caseload information would be considered in the forecasting formula. A Caseload Work Group was organized (of which I am a member), that convenes every 4-6 weeks to consider current caseload information and identify trends that could affect future forecasts and their affects on the human services budget. Our Caseload Work Group has already met twice in the past two months.

The Director has also focused on evaluating DHS’s accounting and revenue tracking procedures. As you may recall, in our October ’05 newsletter we discussed the amazing fact that part of the DHS 2005-07 budget was based on receiving federal money from a program that no longer existed. To deal with such revenue and accounting deficiencies Director Goldberg assembled an Operations Review Team and recruited the expertise of State Controller, John Radford, to lead it. In addition to Mr. Radford, Oregon’s State Treasury Finance Director, Darren Bond, was also recruited to serve, along with DHS Deputy Director Clyde Saiki, as the Director’s Executive Oversight Team.

The DHS Operations Review Team includes more than 20 members, experienced in both government and non-government organizations. To help assure adequate coordination with the Legislature, the Speaker recently requested Rep. Susan Morgan and myself to serve on the Operations Review Team (ORT). We attended our first meeting of the ORT last Wednesday, and it was encouraging to see the progress being made.

The ORT has been reviewing, analyzing and comparing DHS financial policies and is preparing three phases of recommendations: those that can be implemented within 3 months, within one year, and those that will take more than a year to fully implement. To get their arms around the DHS revenue and accounting situation, the ORT divided into 5 sub groups: Accounting, Budget, Treasury & Banking, Accounts Receivables & Recovery, and Internal Controls.

One of the early conclusions reached by Director Goldberg was the need for an experienced Chief Financial Officer, who would serve as his Deputy Director of Finance. The search for an experienced and capable CFO for this $10 billion agency continues today. The cost to hire a CFO with the level of expertise and ability needed by DHS normally would be more than DHS could afford to pay. Hopefully, the right person will step forward–someone with a high sense of civic duty and a desire to make a difference for Oregon—a true “public servant”. Certainly the DHS CFO will make multiples of what Legislators get paid, but even if the pay was considerably less than he or she might make in the private sector, the satisfaction gained from helping Oregon to have a better state government is worth more than just a paycheck.

If anyone reading this newsletter knows of a highly qualified, civic minded, corporate chief financial officer, who might like to indirectly help improve the lives of 600,000 poor and needy Oregonians by serving as the new DHS CFO, please contact Director Goldberg or email me with that information. Quite possibly this might be someone who has recently retired from a CFO or CEO position, and now would like to make their final legacy through service to others.

In addition to the recruitment of a CFO and the work of the Operations Review Team, Director Goldberg has also established a “blue ribbon” advisory group composed of financial and management experts, from large multinational corporations and other successful organizations. The advisory group will have its initial meeting on April 19th, and will bring a private sector perspective to the DHS review table.

My purpose for going into such detail regarding Dr. Goldberg’s activities in his four months at the DHS helm is to make clear that with committed and capable people, open dialogue and cooperative attitudes, progress can be made, even in a large governmental agency. Time will tell whether today’s encouraging effort in the Director’s office will result in a more effective and efficient department of human services tomorrow.

Notwithstanding the progress taking place in DHS, there still remains a $136.2 million liability to fund. The April 20th Legislative Special Session will have that task on the top of the list.

With extra income tax revenues generated by our booming Oregon economy, higher-than-anticipated revenues from state lottery fund “line games”, use of Emergency Board reserve funds and unexpected savings from projected expenses, there exists a pool of nearly $179 million from which to cover the $136 million DHS shortfall, plus $42 million left over for some pre-election largess for school districts across the state, primarily in Portland.

In addition to spending Oregon’s interim coffers dry, the Special Session is likely to address a request by the Portland School District to pass a bill extending the local property tax surcharge for Portland residents. This bill would allow the Portland School District to raise an additional $15.8 million in local property taxes without a vote of the Portland residents who will have to pay them. Everyone knows the current plight of the Portland School District, but the questions remain, will $15.8 million solve that plight and is a state-enabled continuation of a local property tax measure an appropriate way to raise the money? I know what the answer would be in southern Oregon, but Portland truly is a long way from southern Oregon.

Sincerely,

Dennis Richardson
State Representative
Speaker Pro Tempore