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When they’re not raising taxes, too often big-spending politicians are trying to sock future taxpayers with the tab for big increases in government borrowing. Last week, quick work by Oregon CSE helped derail a new borrowing plan that would have destabilized state finances.
As is often the case when they’re up to no good, Oregon politicians moved quickly and quietly. Late in the day on Friday July 11, 2003, the Oregon House Revenue committee passed HJR 18, a bill to dramatically expand the borrowing power of the Legislative Assembly. Such a sweeping bill requires Oregon voter approval, so the House also passed an election authorization bill, HB 2651.
The following Monday morning the package passed the State House by a 45-11 vote. Before you could blink, the borrow-and-spend train had left the station and was headed for a special election scheduled for September 16, 2003.
HJR 18, as passed from the House, had 6 major provisions:
1. It altered the State Constitution to give the Legislative Assembly complete bonding authority, removing the requirement that all new bonds greater than $50,000 are passed by a vote of the people.
2. It allowed the legislature to issue General Obligation Bonds, valued at 2 percent the value of all state properties, or $5 billion. As the value of public properties grows, so would the amount of the bond.
3. It allowed the Treasurer of the State to roll $2.36 billion in PERS debt from current bonds into the new General Obligation Bonds. This positive provision would save taxpayers and the State of Oregon an estimated $40 million.
4. It allowed the State Legislature to spend the remaining $2.62 billion on any other expense, in effect providing the Legislature with a $5 billion line of credit. The State Legislature could continue to spend like drunken sailors and stick future taxpayers with the tab.
5. It allowed the legislature to use the bond to pay down other PERS debt, potential impacting, HB 2003 and HB 2004 by shifting the responsibility for the recovery of the PERS un-funded liability (UAL) from public employees to the taxpayers of the State of Oregon, triggering a shift in the reform and an over-all increases in the cost of PERS as a percent of payroll.
6. It provided a fall back for the State Supreme Court if they were to throw out the PERS reform in HB 2003 and HB 2004. The State Supreme Court should have to calculate all the potential financial impacts before throwing out PERS reform. The legislature should not provide a mechanism that hides the debt by shifting it to taxpayers through general obligation bonds.
Although there were other potential impacts, CSE believed that if we could remove the provisions harmful to taxpayers and allow the Treasurer to refinance already existing debt, we could save taxpayers $40 million. We had to move quickly. Monday evening I meet with Senator Beyer and discussed the issue. At the time, most of the Senate Republican leadership had not even been notified that the bill had passed the House. I contacted the other members of the Rules committee and expressed CSE’s concerns with the bill.
It was also time to alert the media. On Tuesday morning, we called the state talk show hosts and informed them of the issue at hand. I did two talk radio programs that day: one hour with Larry George on KUIK and one hour with Lars Larson statewide on his network.
Most importantly, CSE activists were on the case, calling Senate and House leadership offices throughout the week expressing their opposition to the bonding package.
The Senate Rules Committee met Tuesday afternoon and heard testimony on the bill. On the Rules Committee, Senator Atkinson, Beyer and Clarno were all dogged questioners, examining the impact of the bill on borrowing and state debt.
The bill needed to pass out of the Senate Committee that day, or it could not meet the constitutional requirement for the September special election. The Republicans held strong and said, “No.” Senator Beyer created a number of positive amendments—many based on CSE ideas-- and made it clear that the bill would not move without the amendments.
At this point, a political observer who is also a friend of mine commented to me, “So, do you know who caused the train crash?” I looked at him and said, “Yes.” He said, “Who?” I responded with “CSE.” He smiled, nodded in agreement, and walked away.
The Rules committee reconvened on Wednesday and again attempted to move the bill. Finally our good amendments were accepted, and we won the day.
1. The bill passed authorizing the Legislature to issue General Obligation Bonds to “financing pension indebtedness.”
2. The bill limited the amount of bonds to 1 percent of the value of the State’s properties or roughly $2.5 billion.
3. Senator Atkinson and Beyer both defined for the record the intent of the bill and clearly stated that no part of the bill authorizes bonding for future or existing pension debt outside of that already bonded.
I want to say thanks to all of the great Oregon legislators, CSE activists, and everyone else who helped protect Oregon taxpayers by forcing positive changes to this bill. CSE once again proved we could get the job done.