What's next for Oregon?

PHOTO

Gov. Ted Kulongoski helped lead efforts in support of Measure 30. The measure’s defeat forces Kulongoski and other lawmakers to stretch government dollars.

February 8, 2004

So, Oregon voters killed a major tax increase last week?

What else is new?

They turned down sales taxes nine out of nine chances since that idea first made the ballot in 1933.

They rejected higher income taxes 15 times out of 17 since 1912 and haven’t approved one since 1930, when a proposal squeaked through that also lowered property taxes.

The reality is that voters might vote to raise cigarette taxes or property taxes when it helps local schools or police. But given the chance to raise their payments to state government, they routinely say no.

Nevertheless, the Measure 30 defeat could have far-reaching consequences for Oregon’s political climate, its economy and its reputation throughout the nation.

State must focus on savings and efficiencies

Tom Schavland of Salem, a retired military and public employee, said he hopes that the failure of the state tax increase will force a deeper look at agency efficiencies and high salaries for some executives.

“What we need to do is come together in a bipartisan way and focus on how we reform government to stretch our dollars,” said Sen. Frank Morse, R-Albany, a retired business executive who voted for the tax increase.

Gov. Ted Kulongoski said that work started during the 2003 session by cutting government jobs, streamlining regulations and reducing the future liability for public pensions.

Now, the governor is moving forward on using the state’s buying power to save on its purchases, changing how the state manages its motor fleets, consolidating computer data centers and networks and enabling citizens and businesses to buy goods and services electronically.

He said the savings will not approach the $500 million that critics of the tax increase allege that he had stashed away.

Group that fought tax is gaining strength

Oregon voters thrashed Measure 30 by a 59 percent to 41 percent margin, giving fresh momentum to forces seeking smaller government and lower taxes. And the defeat enhances the prestige and clout of Citizens for a Sound Economy, a national group that led the campaign against the tax package.

“It established them as the primary anti-tax organization in the state,” said Chuck Adams, a political consultant for Republicans and conservative causes.

Russ Walker of Keizer, leader of Citizens for a Sound Economy’s Oregon chapter, stepped into the leadership vacuum in the antitax movement left by Bill Sizemore of Oregon Taxpayers Union, who has suffered from fund-raising and legal setbacks.

Sizemore played a minor role in the Measure 30 campaign. And the Taxpayers Association of Oregon — led by Don McIntire, co-author of a pivotal 1990 plan to limit property taxes — took a back seat to Walker in the campaign.

Walker emerged with a potent database: the names and addresses of more than 170,000 people who signed petitions to put Measure 30 before voters.

“It’s a new tool that’s going to be very powerful (in the) long term,” Adams said. “It’s a commodity that didn’t exist three months ago.”

Walker will enlist those people to help in his ambitious agenda for future projects, perhaps a state spending limitation to put before voters. “We think there needs to be some control on the growth of government,” he said.

Citizens for a Sound Economy also will work on tax reform, easing land-use and other regulations, and tort reform.

Lawmakers losing control of state money

Oregon voters never have been shy about using their power to enact their own laws or pass judgment on the Legislature’s actions in the past century. But Tuesday’s vote capped a series of actions limiting the discretion of the Legislature and governor in the past few years:

•A 1990 limit on local property taxes that shifted financing of public schools to the state income tax. Voters tightened the limit further in 1996 and 1997.

•A 1994 requirement for violent criminals to serve minimum terms, prompting the state to build and staff more prisons.

•1996 and 2002 increases in the cigarette tax for state-supported health insurance.

•The 2003 rejection of a three-year income-tax increase.

“Voters now are the primary governors of the state,” said Jim Moore, a Portland political analyst.

“It’s a clear message to the Legislature and governor that with anything that affects the fiscal health of the state, they have to look over their shoulders and assume that it will go to the voters.”

Tax-reform efforts are being scaled back

Critics say that Oregon relies too much on the income tax for schools and state services — about 90 percent — yet is one of five states without a general sales tax.

“The state needs to stabilize its revenue stream and stop depending upon the ups and downs of the employment picture for its revenue,” said Jeffrey Romeo, a state employee who opposed Measure 30.

“Nothing is going to be right in this state until we have a sales tax; we need tax reform,” said Norma Paulus of Salem, former secretary of state and state schools superintendent.

A legislative committee is assigned to present recommendations for a special session of the Legislature in June. But co-chairman Rep. Lane Shetterly of Dallas and Rep. Max Williams of Tigard, both Republicans who championed change, have taken full-time state jobs.

“They’re not even going to be here for the exercise,” said Dave Barrows, dean of Capitol lobbyists.

Longtime business lobbyist Fred VanNatta said that based on Tuesday’s vote, he doubts that voters are ready for far-reaching change: “I think that tends to freeze us in place with the existing system for a while,” he said.

Gov. Ted Kulongoski said he might urge a narrower agenda: ask voters to limit state spending and set up a reserve fund with future income-tax surpluses.

VanNatta suggested that the only reform that could pass muster with voters is raising the property-tax limits for schools, so Oregonians could pay up to $10 per $1,000 of taxable value — double the statewide limit that voters approved in 1990.

But Leslie Frane, executive director of Local 503 of the Service Employees International Union, said that change shouldn’t be written off despite Tuesday’s vote.

“I heard few people say they voted no because they like things the way they are,” said Frane, whose union represents 40 percent of the state work force.

Spending shrinks, but the budget is on more stable ground

Rejection of Measure 30 comes 12 months and one week after voters defeated Measure 28, a smaller tax increase, by a 54 percent to 46 percent margin.

The twin defeats, and the more lopsided defeat of Measure 30, likely will bring an era of lower expectations for spending in Salem.

State spending mushroomed in the 1990s, even after Republicans took control of the Legislature for the first time in four decades. GOP leaders, sharing power with Democratic governors, proved far more able and willing to cut taxes than state spending.

“The conservative Republicans who were running the Legislature saw unmet needs and tried to meet them because they had the money,” longtime lobbyist Dave Barrows said.

With their vote last week, voters eliminated $800 million used to balance the $12.7 billion general fund and lottery budget for 2003-05, including other discretionary dollars available to the Legislature.

Gov. Ted Kulongoski has put his foot down against more borrowing to patch that hole. Legislative leaders and the governor say that tax increases now are out of the question.

“Other sources of more revenue have a variety of guards standing at the door,” veteran lobbyist Fred VanNatta said.

That makes major spending reductions likely, particularly for public schools and health services for the poor.

Kulongoski is wary of stop-gap solutions that spare services now when there is no money to pay for them in the future. “I think the ’05-’07 session, the roll-up costs, are a serious issue with anything we do here,” Kulongoski said after the Measure 30 vote.

That means that he wants to pare services down to a sustainable level that can be paid for with the state’s current taxes.

In that respect, cutting $300 million in state school aid for 2003-05, and removing 50,000 people from the Oregon Health Plan, will make it easier to balance the 2005-07 budget.

State budget managers had predicted that lawmakers could face a $1 billion shortfall when they return to Salem next January to write the next budget. The Measure 30 cuts should shrink that deficit.

Brokering solutions will become harder

To pass the 2003 tax increase, Democrats were joined by five Republicans in the Senate and 11 in the House. Some predict that if Democrats win control of the Senate outright this year and Republicans maintain a majority in the House, it will result in a continued stalemate.

“Given the current political leadership, it will probably paralyze lawmakers rather than encourage them to be creative,” Portland political analyst Jim Moore said. “They’ll look for the lowest common denominator, rather than identify big problems and what they can do about them.”

Sen. Frank Morse is not so pessimistic. He is working in a bipartisan group to identify better support for the state university system and said that legislators in both parties are interested in schools.

“We have to put this issue behind us, take what the voters have given us and make things work better,” he said. “There is no point in fighting over the past.”

Public-services reputation fading

There is a flip side to easing the load on taxpayers. Call it the Doonesbury Factor.

Once envied for its top-notch public schools, Oregon now is lampooned in Garry Trudeau’s comic strip for shutting down schools early.

A state that introduced innovative and cost-saving ways to provide elder care now is kicking seniors out of nursing homes and cutting in-home care and other senior services.

A state that pioneered the idea of rationing health care as a cost-effective way to serve more poor people now is kicking 50,000 people off that health coverage.

Instead of visiting a doctor in clinics when they have a worrisome problem, low-income people will get their treatments later, in the hospital emergency room, said Jacqueline Zimmer Jones, a senior services specialist in Salem.

“This is the U.S.S. Oregon,” she said. “We’ve been attacked and we have holes in our boat, and we’re addressing it by throwing people overboard.”

Others worry that school program cuts and college-tuition increases will make the economic recovery tougher.

Hillsboro School District, home to Intel’s largest manufacturing base, trimmed 17 days from its school calendar last year. Similar school closings loom this spring and next.

“It’s hard to retain business and it’s harder to entice businesses without an educated work force,” former state official Norma Paulus said.

Leaders failing to work as a team

Former Gov. Vic Atiyeh, the most recent Republican to hold the office in Oregon, dealt with Democratic legislative majorities in 1982 when they approved income-tax increases to balance the budget. Those increases never went on the ballot.

“People had watched me perform as governor for four years, so I think we had established a level of trust that we would deal with things fairly,” he said. Because of his 20 previous years as a legislator, “I was able to talk with them about how to resolve the problem. I think we had mutual respect, rather than partisan fighting.”

Senate President Peter Courtney, a Salem Democrat and first-term lawmaker during the three special sessions in 1982, said that it’s a different era now.

“The Legislature as we know it has been dramatically altered in this state,” he said. “It is no longer viable as an equal branch of government.”

Atiyeh endorsed Measure 30 but said that Kulongoski and lawmakers might have gone further to convince voters that it was not business as usual.

“They went as far as they could politically,” he said. “But to me, they could have done more.”

Sherry Carroll, an accountant for the Oregon State Police, said lawmakers should get an “A” for effort.

“They tried to bring consensus to a ‘damned if you do, damned if you don’t’ process,” she said.

Steve Law can be reached at (503) 399-6615.

Peter Wong can be reached at (503) 399-6745.

Emergency board

The Legislative Emergency Board, which consists of 17 lawmakers, will meet April 8-9 to consider Gov. Kulongoski’s request for $3.9 million for the state police forensics labs, as well as a likely juggling of the human-services budget to avert selected cuts in health care. Republicans say that they might have ideas of their own.

The governor can find internal savings within agencies, but only lawmakers can transfer money between agencies.