Sustainable Budget Turns on Significant PERS Reforms

Oregon may never get its revenues and spending in sustainable alignment until it figures out how to manage the cost of the Public Employees Retirement System.

Oregon may never get its revenues and spending in sustainable alignment until it figures out how to manage the cost of the Public Employees Retirement System.

Oregonians cannot possibly pay enough in taxes to keep their state and local governments afloat.

Government costs are rising far faster than government revenues. Even if massive state tax increases were enacted, such as the one envisioned in Measure 97 that voters defeated last month, government spending eventually would outpace the added revenue.

One reason is that the Oregon Health Plan (OHP) will get less money from the federal government, so the state either has to pay for that insurance coverage itself or lop thousands of low-income Oregonians off the plan. That difficult choice is further complicated by not knowing how far President-elect Donald Trump will go in slashing Medicaid, which funds OHP, as he goes about undoing Obamacare.

But the greater, systemic issue is the still-uncontrolled cost of Oregon’s government pension program, PERS. Governors, legislators and voters have made significant reforms to the Public Employees Retirement System since the 1990s, but many were overturned by the Oregon Supreme Court.

PERS costs are projected to grow more than three times faster than state revenues during the next several budget cycles. Those PERS liabilities will keep growing regardless of how the Oregon economy does. And when the economy falters, that means lower income tax collections to run state government and schools … and to pay the expanding PERS bill.

No matter what anyone claims, that trend is financially unsustainable for Oregon. The state must get its expenses and its revenues in line with each other.

As one longtime government-watcher said, “The unfunded liability eats at every level of government and it reflects promises made by legislators past that haunt legislators in the present – and in the future, unless a solution is reached and sustained.”

There are reasonable, legal ways of slowing that trend without going overboard. Meanwhile, business leaders appear open to accepting some tax increases in return for those PERS reforms. That is a compromise that the state’s political leaders should embrace … and lead.

In the proposed 2017-19 state budget that Governor Kate Brown released Thursday, she calls for maintaining the current Oregon Health Plan, while adding an estimated 13,000 to 15,000 children, so that every eligible child would have health care.

But Brown’s budget keeps the status quo for PERS, paying those soaring costs and not resolving them. That drew a strong response from the Oregon Business Association, which pledged to examine “the unsustainable cost drivers in the budget.”

As governor after governor has learned, it’s the legislature that actually writes the state budget. Brown’s political strength as governor will be reflected in how much of her proposal the 2017 legislature keeps intact.

Meanwhile, the political mood for resolving Oregon’s budget dilemma is not good.  The fight over Measure 97 – backed by public-employee unions and opposed by business – left deep scars. But civil discussions – testing leaders’ ability to set aside election-year animosities – need to happen before the Legislature convenes early next year.

The 14th Oregon Leadership Summit on Monday offers a hopeful start. More than 1,000 public- and private-sector leaders from throughout the state will gather in Portland. They will talk about how to strengthen the economy. They will discuss ideas for increasing government revenue – nothing is off the table, although a traditional sales tax is unlikely and a reprise of Measure 97 would be unacceptable. And they will look at how to control government costs.

Then comes the even harder part. Oregon’s political leaders, starting with Governor Brown, must take the initiative. It is their responsibility to ensure that Oregon gets control of its expenses, including PERS.

It makes no sense that state revenues will increase by more than $1 billion during 2015-17, yet the state faces a $1.7 billion shortfall unless programs are reduced and/or taxes are raised.

Dick Hughes, a freelance journalist specializing in Oregon government and rural/urban issues, has 40 years’ experience as an Oregon journalist and was the longtime editorial page editor, writing coach and Sunday columnist for Statesman Journal Media in Salem. Contact him at TheHughesisms@Gmail.com or Twitter@DickHughes. 

Medicaid Spending Could Be Oregon Budget Lynchpin

Oregon officials a major budget hole, which could get unpredictably worse depending on what the Trump Administration and a GOP Congress comes up with to replace Obamacare and its expansion of Medicaid coverage.

Oregon officials a major budget hole, which could get unpredictably worse depending on what the Trump Administration and a GOP Congress comes up with to replace Obamacare and its expansion of Medicaid coverage.

Governor Brown unveiled her recommended budget today, with the gloomy prospect of a $1.4 billion budget shortfall to overcome. However, what may haunt her budget more than anything else is the unknown impact of decisions on health care by the incoming Donald Trump administration.

Brown can’t count on a big pot of new revenue after voter rejection of Measure 97 and she knows the Public Employees Retirement System impact on spending looms large. What she or no one knows for certain is how the anticipated repeal of Obamacare, including funding for a major Medicaid expansion, will impact state budgets.

States that expanded Medicaid eligibility under Obamacare and received federal funding to cover a big chunk of the cost already face the reality of a federal funding phase down, putting more pressure on state funding. If the Medicaid expansion subsidies under Obamacare go away, the big question is what, if anything, will replace them.

Congressional Republicans, including Congressman Tom Price, R-Georgia, who will become secretary of Health and Human Services under President Trump, have argued for block grants to states. They say block grants give states more flexibility in managing their Medicaid programs. But that doesn’t mean the block grants would be large enough to patch the budget hole left by repealing Obamacare Medicaid subsidies. The funding difference could aggravate the existing $250 million+ hole to pay for expanded Medicaid enrollment.

Obamacare repeal also would potentially eliminate the individual health exchange. Republicans are talking about replacing the Obamacare mandate with tax incentives to encourage uninsured people to take out their own health insurance. Depending on whether the provision regarding pre-existing conditions is maintained or qualified, some people – for example, people with chronic diseases such as diabetes –  could find themselves priced out of the market. That might be politically untenable and ethically suspect to leave what could be a significant cohort of people dangling in the wind without any health insurance.

While repeal or alterations of Obamacare seems like a given, when a replacement will be agreed to is less certain. That could mean the Oregon legislature – as well as legislatures across the country – could be wrapping up their budgets while Congress is still deciding on how to replace Obamacare provisions.

Whatever one thinks of Obamacare as ealth care policy, one fact is indisputable – its provisions are interdependent. Pull a string here and something unravels over there. That’s especially true regarding budgetary impacts. Brown said in her budget message she would protect funding for Medicaid patients “without reducing eligibility or the level of services required.”

While it’s true many health insurers have abandoned the individual health insurance market, it’s not a certainty they will rush back under a new plan, especially one that may not have any more market power than the Obamacare approach. 

These gives and takes have broader implications, but in the short term they pose serious problems for Oregon policymakers who must pass a balanced budget. Adding insult to injury, the federal government under a new administration may push for a cut of the Oregon settlement with Oracle over the Cover Oregon fiasco. So far, Oregon has offered used Oracle servers.

Familiar Players and Policy Choices

Cutline: Governor Brown and Oregon lawmakers face a huge budget hole and a potentially challenging political environment to find compromises on spending cuts or tax increases.

Cutline: Governor Brown and Oregon lawmakers face a huge budget hole and a potentially challenging political environment to find compromises on spending cuts or tax increases.

As the dust settles from the election, the view of the 2017 legislative session is becoming clear – and familiar.

Democrats remain in control. Experienced presiding officers, Senate Peter Courtney and Speaker Tina Kotek, will lead the legislature. Governor Kate Brown will continue to fulfill Governor Kitzhaber’s term. Fifteen freshman legislators, one in the Senate and 14 in the House, will join the ranks. Then there is a budget to balance and a transportation funding package to debate.

Familiarity, however, will not make the tasks at hand any easier.

On February 1, 2017 the legislature will begin the arduous task of balancing a budget with a predicted $1.4 billion deficit. It is a deficit made more challenging by the strain on the general fund from the statewide ballot measures Oregonians passed this November – money for veterans, technical education and outdoor school for all.

Legislators wont be able to count on additional revenue from Measure 97, the gross sales tax measure Oregonians widely rejected. To balance the 2017-19 budget, legislators must cut spending or find more revenue – or both. Courtney told reporters he isnt sure he has the votes right now for a tax increase or major budget cuts.

The search for alternative revenue opportunities is already underway, but so far with no consensus. There may not be a consensus for a while. Because Democrats lack supermajorities in the House and Senate, they will be required to find at least one Republican in each chamber to pass a revenue-raiser.  It remains to be seen whether business leaders, fresh from spending millions to defeat Measure 97, will be willing to sit down to negotiate another tax plan.

It is customary that revenue-raising goes hand in hand with other legislative actions, especially budgets, which stand to be cut. Brown asked her state agency heads to submit pro forma budgets with 10 percent cuts. She is constitutionally obliged to submit a balanced budget without using new revenues, a requirement recently observed more in the breach than reality. Her budget is due out December 1.

What could make the 2017 session different is a change in game plan in Washington, DC on Medicaid. Oregon is one of the states that expanded Medicaid eligibility and the cost is a significant part of the budget hole lawmakers face. If Congress switched to Medicaid block grants to states, that budget hole could widen.

There is a broad consensus on the need for a transportation funding package. Last session, the package was derailed over other legislation. It probably will fall to Brown to recommend a new starting place for a transportation funding package.

Transit advocates are pushing for a funding component, but that is complicated because any revenue raised taxing cars, trucks or the fuel they consume is constitutionally dedicated to the Oregon Highway Trust Fund for road and bridge improvements.

Another wild card is President-elect Donald Trump’s $1 trillion infrastructure investment plan, which CFM’s Joel Rubin has observed is noteworthy because it doesn’t involve any new federal spending on transportation. The plan relies on tax credits and investments by private contractors, which may not be very applicable to Oregon’s highways, bridges and transit systems.

While the players and policies are familiar in Salem, there could be surprising new turns that Brown and legislators will face. With Brown facing re-election in 2018 and at least two potential rivals encamped in the Capitol – Secretary of State-elect Dennis Richardson and Rep Knute Buehler – finding common ground on mountainous issues could be more challenging.

Public affairs associate Ellen Miller recently earned her MBA from Willamette’s Atkinson Graduate School of Management, with a focus on public management and policy. 

Oregon Election Results Mostly Predictable

Dennis Richardson broke a decades-long streak for Republicans as he won the open Oregon secretary of state race in a state election that was mostly predictable.

Dennis Richardson broke a decades-long streak for Republicans as he won the open Oregon secretary of state race in a state election that was mostly predictable.

Because 1.5 million Oregonians voted by mail before election day, initial results Tuesday night were conclusive, showing solid victories by Hillary Clinton for president and Governor Kate Brown for re-election. 

Results also showed Measure 97, which would have subjected large corporation to a gross receipts tax, was headed for defeat despite earlier polling showing support.

Senator Ron Wyden, Oregon’s five Members of Congress and Attorney General Ellen Rosenblum cruised to re-election.

Dennis Richardson became the first Oregon Republican in decades to capture a state constitutional office as he defeated Democrat Brad Avakian in an open race for secretary of state. Gordon Smith was the last Republican to win a statewide office when he was elected U.S. senator in 2002.

Tobias Read held a lead to become Oregon treasurer, benefitting from a strong showing by independent Chris Telfer. The combined total votes for Telfer, a former Republican legislator, and GOP candidate Jeff Gudman exceeded Read’s total.

In many ways, Measure 97 overshadowed everything else on the Oregon ballot. Its proponents said the projected $3 billion in annual new tax revenue was needed to fund K-12 schools adequately and prevent cuts in health care and senior services because of a looming budget hole in the next biennium. Opponents said the tax would stifle Oregon’s business growth and wind up raising prices for Oregon consumers.

The defeat of Measure 97 doesn’t spell the end of a tax debate, but it narrows options and rules out anything as large as the initiative proposed.

Democrats will retain control of both the House and Senate, but they lost their 36-vote supermajority in the House and may not gain one in the Senate. Democrats need a three-fifths supermajority in both chambers to pass tax measures without any Republican votes. 

One of the more popular and successful measures on local ballots imposed restrictions or sales taxes on recreational marijuana retailing. Clackamas County elected Jim Bernard as its new commission chair. Portlanders broke precedent and unseated City Commissioner Steve Novick.

Budget Fight Expected in 2017 Legislative Session

Measure 97 has been an expensive, contentious ballot measure and, win or lose, it will generate more contention in the 2017 Oregon legislature that must decide how to spend new tax money or fill the large projected budget hole.

Measure 97 has been an expensive, contentious ballot measure and, win or lose, it will generate more contention in the 2017 Oregon legislature that must decide how to spend new tax money or fill the large projected budget hole.

No matter what happens at the ballot box next week, Salem insiders expect a long and contentious 2017 Oregon legislative session revolving around budget issues. If Measure 97 is approved November 8, the debate will focus on how legislators allocate the expected $6 billion in additional tax revenues. If Measure 97 is defeated, advocates and legislators will struggle with deep budget cuts.

Passage of Measure 97 will mean higher taxes on larger businesses, generating an estimated 30 percent increase in state general fund revenues. The legislature would be politically obliged to spend a big chunk of additional funds on education, healthcare and services for seniors as promised by measure supporters. However, lawmakers are not obligated to do so and legally could spend this new funding in whatever way they deem appropriate.

Citizens can expect fireworks over just how much of the new revenue pie should be dedicated to education, healthcare and services for seniors and how much should be available for other programs. In at least one case, money will have to go to another purpose. 

Because companies such as Chevron would be subject to the Measure 97 gross receipts tax, a portion of their tax revenue would go into the Oregon Highway Trust Fund. The Oregon Constitution requires any tax revenue derived from fuel consumption to be dedicated to road and bridge construction and repair. The Legislative Revenue Office estimates as much as $300 million of Measure 97 revenues fall into this category. The new money for roads may dampen legislative interest in a transportation funding measure that would include transit.

Oregon’s seven public universities would also advocate for a piece of the budget pie. The funds allocated by the state for these institutions has dropped significantly over the past decade, resulting in rapid tuition increases. Slowing those tuition increases will be a key argument for more funding by universities and higher-ed supporters. Other areas that will seek more funding will be public safety and natural resource programs. 

An unspoken claimant for funding is Public Employees Retirement System (PERS) and its climbing unfunded liability. Higher PERS payments, estimated at around $885 million in the coming biennium, will affect most Oregon public agencies, putting pressure on existing programs and personnel levels.

If Measure 97 fails, the session would follow an entirely different and more desperate path. Across the board budget cuts of about 10 percent are expected without the additional revenue generated by Measure 97. The focus will be on where to cut funding and by how much. 

A small group of lawmakers already is looking at more modest Measure 97 alternatives, which could be in play even if the ballot measure passes. The big question would be whether business groups are willing to participate in Measure 97 replacement talks after spending millions to defeat it.

Fragments From a Fractious Political Fracas

The widow of the late Democratic Senator Alan Bates said he valued the high road over the low road in politics as she called out the Democrat seeking to succeed him for running negative advertising.

The widow of the late Democratic Senator Alan Bates said he valued the high road over the low road in politics as she called out the Democrat seeking to succeed him for running negative advertising.

With the 2016 election less than two weeks away, here are some news updates:

A re-emergent John Kitzhaber shared on Facebook his opposition to Measure 97. His revelation earned him sharp rebukes from Measure 97 backers who accused the former governor of failing to achieve a durable grand bargain that generated adequate state revenue and taxpayer equity. For his part, Kitzhaber said more revenue is needed and corporations should pay it, but Measure 97 wasn’t the way to do it…

Willamette Week’s Nigel Jaquiss reports that Oregon Democrats have cast more ballots in early voting than Republicans, reversing a historical pattern. It is tempting to speculate Republicans aren’t rushing to the polls because of reservations about the guy at the top of the GOP ballot. Democrats may suggest an early voting surge reflects enthusiasm for Hillary Clinton. Of course, it may just be a short-term anomaly….

The wife of the late Senator Alan Bates, a Democrat, chastised the Democratic candidate to succeed him for airing negative ads against her Republican opponent. Laurie Bates, in a guest column appearing the Medford Mail Tribune, cited the adage, :how you run for office reflects how you will serve in office.” She said her late husband “modeled that belief” and “would rather lose on the high ground the win on the low ground.” The Republican candidate has limited campaign contributions and refused negative advertising. That isn’t expected to help his long-shot candidacy, despite praise from Mrs. Bates….

The Oregon governor’s race between Kate Brown and Bud Pierce is either a walk-over for Brown or neck-and-neck. Take your pick based on recent polls with disparate results. Different public opinion polling methodologies can account for some variation, but these polls are, as they say, miles apart. Polling more consistently has predicted a tight race between Democrat Brad Avakian and Republican Dennis Richardson for Oregon secretary of state. Richardson has captured many top newspaper endorsements amid questions about some of Avakian’s positions, including voter registration through election day. As a result, Republicans appear to have their best shot in years to capture a statewide elected post….

Attorney General Ellen Rosenbaum is a shoe-in for re-election, but finds herself with an awkward lawsuit filed by her civil rights director alleging racial discrimination….

Pew Research reports voters are pessimistic about the ability of either Hillary Clinton or Donald Trump to heal wounds inflicted during a brass-knuckles 2016 presidential campaign or to bridge deep political divisions that have stymied the federal government over the past eight years. Two-thirds of Clinton supporters doubt political divisions will subside if she is elected, and 25 percent expect divisions to deepen. Almost half of Trump supports anticipate any change in the toxic political atmosphere in Washington, DC, which suggests the election may not end the fractious campaign.

Health Care Policy and Funding Moves Front and Center

Health care policy returned to center stage as Governor Brown pledged to protect funding for the Oregon Health Plan and Oregon’s former health care policy doctor John Kitzhaber resurfaced to urge a shift in funds from medical care to human services that influence people’s health.

Health care policy returned to center stage as Governor Brown pledged to protect funding for the Oregon Health Plan and Oregon’s former health care policy doctor John Kitzhaber resurfaced to urge a shift in funds from medical care to human services that influence people’s health.

Health care policy has assumed a higher profile in the 2016 gubernatorial election, punctuated by the public resurfacing of former Governor John Kitzhaber, Oregon’s long-time policy doctor.

In a debate with her GOP challenger Bud Pierce, Governor Kate Brown said she will protect funding for the Oregon Health Plan, which could face a budget hole next biennium of anywhere between $250 to $750 million. Pierce said he would avoid lopping anyone off the Oregon Health Plan, but deal with the budget gap by reducing services.

Meanwhile, Kitzhaber re-emerged from his self-imposed exile by calling for a shift in funding from medical services to social determinants of health, which are human services proven to help people stay healthy, but not always available or accessible to all low-income Oregonians.

What Kitzhaber proposes may already by set in action by Brown’s administration, which is preparing to ask for another Medicaid waiver and $1.3 billion in new federal funding to do just what the former governor recommended. Oregon previously received $1.9 billion in federal funds to support creation of CCOs as a way to hold down rising health care costs, which they have so far succeeded in accomplishing.

The waiver request would direct Coordinated Care Organizations (CCOs), which were created under Kitzhaber’s watch, to establish broad-based community partnerships to make certain human services more readily available and integrated with the health care system.

CCOs were established as a way to “bend the cost curve” on health care spending by eliminating inefficiencies in the health care delivery system and focusing on medical procedures with a track record of success. In many respects, part of the job of CCOs is to keep people out of the hospital or limit how long they stayed in the hospital, so an additional role of connecting patients to human services wouldn’t be that foreign.

Connecting mainstream health care to other systems, including public health, school clinics and veterans care, hasn’t been easy. Trying to make a connection with human services, which are provided by a mosaic of government and nonprofit organizations, could be an even more daunting challenge. CCOs could serve as an existing and capable center-point around which to organize medical and human services for lower income Oregonians.

Brown’s bigger challenger, if she is re-elected as expected, will be to keep her pledge to protect the Oregon Health Plan budget. Passage of Measure 97, which would add a projected $3 billion in tax revenue to the state’s general fund, could help plug the Plan’s budget shortfall, but there is no guarantee that Brown or the legislature would use Measure 97 funding for that purpose.

In fact, Brown may already be looking for other revenue sources to rescue Oregon’s expanded Medicaid coverage as federal funding under Obamacare begins to phase down. If Measure 97 fails, those revenue sources may go from possibilities to probabilities in the defense of the Oregon Health Plan. While there has been no public discussion of funding options, larger Oregon hospitals and health systems might be a tempting target. 

Health care costs have received more attention thanks to anti-Measure 97 campaign ads that claim the gross receipts tax on large corporations could increase health care prices in Oregon by as much as $100 million annually.

Oregon Treads Where Nevada Already Has Trudged

Oregonians will vote November 8 on Measure 97 that would impose a gross receipts on corporations with $25 million or more in annual sales in the state, following a path trod by Nevada that adopted a business tax in 2015 based on gross revenues.

Oregonians will vote November 8 on Measure 97 that would impose a gross receipts on corporations with $25 million or more in annual sales in the state, following a path trod by Nevada that adopted a business tax in 2015 based on gross revenues.

Oregonians are experiencing a barrage of pro and con advertising on Measure 97, the corporate gross receipts initiative. Nevadans can relate.

Like most states, Nevada has struggled to raise revenue for its public schools as the state’s full-time population has grown and revenue from gambling operations hasn’t kept pace. Since Nevada’s constitution expressly prohibits a personal income tax, lawmakers have centered their attention on corporations.

They began with what is called a Modified Business Tax (MBT), which roughly resembles a payroll tax that applies to gross wages of employees. The MBT hasn’t generated enough revenue, so in 2014 Nevadans voted on an initiative to impose a “margin tax, modeled after the Texas Franchise Tax, with all proceeds dedicate to public education. They rejected the idea by a 78 percent majority.

Republican Governor Brian Sandoval, who was re-elected in November 2015 by a percentage similar to the margin tax ballot measure defeat that he opposed, convinced the 2015 Nevada legislature to adopt Senate Bill 483, which provides for a “commerce tax” that by any other name is a gross receipts tax. Nevada businesses subject to the tax begin paying it this year. Opponents are trying to repeal the Commerce Tax.

Couched as a tax on the “privilege of engaging in a business” in Nevada, the tax is based on gross revenues, with no subtractions for cost of goods or expenses. The first $4 million in gross revenue is exempt and there is a long list of exclusions that includes complementary goods and services, the value of cash discounts and the sale of exchanges of trademarks or other intellectual property.

Another feature of the Nevada Commerce Tax is varying rates applicable to different business sectors. For example, the Commerce Tax rate for for mining is 0.051 percent compared to 0.091 percent for manufacturing, 0.111 percent for retail trade and and 0.261 percent for waste services.

Passage of Measure 97 in Oregon this fall will likely require legislative action to provide similar kinds of details as contained in Nevada’s Commerce Tax to address a variety of business circumstances. Failure of Measure 97 might result in a corporate tax restructuring with many of the nuances Nevada lawmakers embraced in SB 483. In either case, it will be a Mardi Gras for special interest lobbyists in the 2017 Oregon  legislative session.

Some tax experts warn that gross receipt taxes have inherent flaws, not the least of which is being regressive, which accounts for why most of them have been cashiered. Nevada opted for a version of a gross receipts tax because of a political aversion to a corporate income tax.

Oregon already has a corporate income tax. Measure 97 would act in many respects like a corporate minimum tax on corporations with $25 million or more in annual sales in Oregon. In fact, a gross receipts tax has been proposed previously in the Oregon legislature as a corporate minimum tax, but never gained much political traction.

The corporate income tax in Oregon is based on a single sales factor, which means corporations pay a portion of their taxable income based on the percentage of sales they have in Oregon, not on how much property or how many employees they have in the state. The single sales factor was lobbied into law by a coalition of large corporations. Retention of the single sales factor was the reason Nike threatened not to expand here unless it was assured that factor couldn’t be changed in calculating its Oregon income tax liability tax.

Nevada’s experience with the Commerce Tax is just underway in the shadow of a repeal effort that has ben clogged up in court by defenders of the tax. That might presage what life in Oregon will be like regardless whether Measure 97 passes or fails November 8.

New Workplace Battlefront Opens on Flexible Scheduling

The next workplace battlefield is emerging over flexible scheduling of workers in sectors such as fast food restaurants. The situation further rankles Oregon business leaders who are still upset over paid sick leave, a higher minimum wage and Measure 97.

The next workplace battlefield is emerging over flexible scheduling of workers in sectors such as fast food restaurants. The situation further rankles Oregon business leaders who are still upset over paid sick leave, a higher minimum wage and Measure 97.

Democratic lawmakers are teeing up legislation for the 2017 session to mandate scheduling rules for some workers, which could make testy relations with Oregon’s business community even testier.

Senator Michael Dembrow, a Portland Democrat, says it’s timely to tackle the legislation next session. He noted the 2015 Oregon legislature imposed a moratorium on municipalities passing “flexible schedule” ordinances. That moratorium expires next year.

Dembrow’s legislation probably would mirror ordinances adopted in Seattle and San Francisco that require employers with large numbers of part-time workers to provide advance schedules or pay extra compensation.

Supporters say sudden work schedule changes make it hard and costly for low-wage workers to arrange for child care or balance work for second and third jobs. Business advocates say employers need the ability to adjust worker schedules to deal with emergencies and when employees call in sick.

Business groups are already rankled about workplace legislation following the 2015 session when Democrats pushed through bills to mandate paid sick leave and raise the state’s minimum wage.

They haven’t cooled down as business representatives walked away after Dembrow's first interim work group meeting on the flexible scheduling bill.

There is broad business opposition to Measure 97, the initiative appearing on the November 8 general election ballot that would impose a gross receipts tax on corporations with more than $25 million in annual sales in Oregon. Business leaders predict business closures or departures if the measure passes and warn they will be reluctant participants in any negotiations on an alternative if it fails. That wariness could extend to other issues, including the flexible scheduling bill.

After demurring, Governor Kate Brown endorsed Measure 97, even though she says she hates it. Brown based her support on the need for substantial additional revenue to plug a $1.25 billion or larger projected budget hole in the 2017-2019 biennium. Brown and her GOP challenger Bud Pierce will hold their first gubernatorial debate Saturday in Bend and can expect to be asked about the flexible scheduling bill.

When push comes to shove, some business leaders may prefer statewide flexible scheduling legislation as opposed to the specter of cities such as Portland and Eugene adopting their own local ordinances. But bruised political feelings among business leaders also could diminish or even extinguish their willingness to compromise.

Pierce Dumps Trump as Gubernatorial Debates Loom

GOP gubernatorial candidate Bud Pierce jettisoned his endorsement of Donald Trump on the run-up to this Saturday’s first debate with Governor Kate Brown in Bend. Four more debates will follow into mid-October.

GOP gubernatorial candidate Bud Pierce jettisoned his endorsement of Donald Trump on the run-up to this Saturday’s first debate with Governor Kate Brown in Bend. Four more debates will follow into mid-October.

Few people aside from Donald Trump believe the unconventional GOP presidential candidate can capture Oregon in the November 8 general election. Now Oregon’s GOP gubernatorial candidate Bud Pierce has joined the chorus.

Pierce withdrew his endorsement of Trump this week, claiming the New York real estate magnate isn’t unifying the Republican party and is driving away Hispanic voters. Pierce says Hispanic voters have a natural attraction to political conservatives and he is actively seeking their support to upset Governor Kate Brown.

In an interview last month, Brown urged Pierce to disavow Trump and “do the right thing.” Whatever the right thing might be, Pierce stopped short of pledging to vote for Democrat Hillary Clinton. He said he won't cast a ballot for anyone in the presidential race this year.

Jacob Daniels, Trump’s Oregon campaign chairman and perhaps the only person in the state who thinks his man will win here, dismissed Pierce’s dropped endorsement as insignificant.

The most recent public polling shows Brown with a comfortable double-digit lead over Pierce, but some Oregon Democrats have been uneasy over her largely invisible campaign while she hit the campaign fundraising trail. Pierce hit the airwaves with hard-hitting TV ads last month. Brown went up in the last few days with a softer ad that describes her political start as a children’s advocate and her achievement s governor boosting state K-12 school funding.

Brown and Pierce are scheduled to square off in their first face-to-face debate on Saturday in Bend, which may only rate second billing to home football games in Eugene and Corvallis. The gubernatorial candidates debate again September 30 in front of the Portland City Club, October 6 in Eugene, October 13 in Medford and October 20 in Portland.

Pierce has called for fresh thinking in Salem while Brown has touted her leadership as the successor to John Kitzhaber, who resigned at the beginning of his unprecedented fourth term. No seminal issues have created a sharp division in the race, though the Oregon-Oracle $100 million settlement of the Cover Oregon fiasco may have averted a flash point in the race. The settlement that involved six separate legal actions came just before Brown was scheduled to be deposed.

The debates are likely to underscore Pierce’s opposition to and Brown’s endorsement of Measure 97, the initiative that would impose a gross receipts tax on corporations with more than $25 million in annual sales in Oregon. Proponents and opponents of the tax measure are waging a vigorous campaign that pivots on how much of the tax will filter down to small businesses and ultimately Oregon consumers. Early polling indicates the measure has strong support.

The gubernatorial candidates should be pressed on how they would respond if the tax measure passes or fails. Measure 97 is projected to generate $3 billion in new state tax revenue annually, which would more than plug the state’s anticipated $1.5 billion biennial budget hole. However, the state will face severe spending challenges on education and health care spending if the measure fails.

As the debates unfold, a key target for each candidate will be attracting non-affiliated voters. Brown can generally count on the Democratic majority in urban areas from Portland to Eugene. To win, Pierce may need to catch some of the same populist wind that propelled voters in Oregon to support Trump and Bernie Sanders.

What an Effective Lobbyist Really Does

Good lobbyists do a lot more than schmoozing and handing out campaign cash. Their work to pass or kill bills is strenuous, stressful and sometimes monotonous, and it can span multiple legislative sessions.

Good lobbyists do a lot more than schmoozing and handing out campaign cash. Their work to pass or kill bills is strenuous, stressful and sometimes monotonous, and it can span multiple legislative sessions.

Getting a bill passed is a lot more complicated than you may think. Rarely does legislation follow a straight line from its introduction to the day it lands on the governor's desk for a signature. And big campaign contributions don’t always mean success.

Lobbyists earn their pay by doing much more than drafting legislation, talking it up with the lawmakers on the committee where it will be sent and schmoozing in the lobby to round up enough votes. Lobbyists are worth their weight in gold when they anticipate what could go wrong on the legislative journey and take steps to avoid deadly detours.

To outsiders, lobbyists look like men and women who live the life – golfing, dining and hanging out with people with voting cards and the power to pass or kill a bill. If that’s all a lobbyist did, he or she might not be all that successful.

Anticipation starts before a bill is written or dropped. Lobbyists read the situation to see if the climate is right for a measure to make it. If, for example, Democrats control the legislature, right-to-work legislation has a slim to no chance of seeing the light of day, let alone getting adopted.

Assuming the climate is either conducive, or at least not problematic, the next thing to anticipate is the attitudes toward the bill of the chairs of the House and Senate committees where it would be referred. In the Oregon legislature, committee chairs have the power to “sit” on a bill and never give it a hearing or give it merely a perfunctory hearing.

A lobbyist will talk with committee chairs to see if they support or are at least okay with a bill and to find out what questions they have and background information they want. Some bills can be referred to more than one committee. This can be both a problem and an opportunity for a lobbyist. One way to get around a dissenting committee chair is to seek a referral to another committee with a more welcoming chair. Double committee referrals can be encouraged, which provides a lobbyist who opposes a bill twice the opportunity to erect roadblocks to stop it.

While committee chairs have the power over bills when they arrive in their possession, the presiding officers of the House and Senate are the ones with the power to decide where or where not to send bills. This is the next stop on the lobbyist's path to success to ensure the House Speaker or Senate President doesn’t send a bill to a committee where it will wind up stillborn.

All this activity occurs – or should occur – before a bill is introduced. Then the fun really begins.

Lobbyists need to prepare materials that explain the bill and its purpose. Complex bills require detailed explanations, which have to be clear and crisp or risk having the eyes of lawmakers glaze over.

Lobbyists will meet with legislators, especially the ones who sit on the committees where legislation would be considered. These meetings may involve bringing along a constituent to underscore the bill’s importance. In some cases, lobbyists will arrange tours to “see” the problem the bill seeks to solve. The same approach holds true if the lobbyist opposes a bill.

The preparation and meetings have another critical purpose – to ask for and confirm a legislator’s support for or opposition to the bill. Nailing down a “yes” or “no” may require more than a single meeting. Many legislators are reluctant to commit until they have heard the other side.

Eventually lobbyists develop a vote count, which becomes their real leverage. Even a reticent committee chair may yield to the wishes of his or her committee on a bill. A smart committee chair might use the opportunity to line up votes he or she wants on another, unrelated bill. Lobbyists have to keep track of this horse trading to avoid letting their legislation become manure tossed into the compost bin.

For most bills, lobbyists have to ask for a hearing. If they have the votes lined up in committee, they also ask for a work session, which allows the committee chair to call for a vote on the measure.

Once a hearing has been scheduled, lobbyists coordinate testimony. This can be as complicated as inviting a busload of people to testify or, at the request of a sympathetic chair, giving short-and-sweet testimony so the bill can be quickly moved along. Skilled lobbyists understand how to show the flag and fly under the radar.

An emerging trend is the need for coalitions of support, especially for bills that are contentious. It is not enough for a single lobbyist to tout a measure. Lawmakers want to know who else supports the bill, or at least who doesn’t oppose it.

When a bill makes it out of committee, it heads to the House or Senate floor, unless it has a fiscal impact, which means in most cases it then goes to the Joint Ways and Means Committee. In the Oregon legislative set-up, Ways and Means is an appropriations committee. It's also like a parole board. You have to show up and make a case for the release of your bill. Without approval, your legislation will rot in a fiscal jail.

A good chunk of bills that pass on the House and Senate floors draw minimal comment and debate. More often, even on non-controversial bills, legislators pose questions that the legislator carrying the bill attempts to answer. Lobbyists work with committee staff to anticipate questions and generate responsive, accurate answers. Under their code of ethics, Oregon lobbyists are obliged to correct any misinformation they provide, whether it's inadvertent or intentional.

Passing the House or Senate is just the start. Some House-Senate standoffs inevitably turn innocent bills into hapless hostages. Lobbyists have to use their political GPS to see an impediment coming and do what they can to skirt or manage the detour.

Even with reliable vote counts, nervous lobbyists typically pace outside the House and Senate chambers waiting for their bill to come up in debate and a vote. They also have to be available in case a lawmaker wanders out of the chamber to ask a random question about the bill.

If a bill is on its way through the legislative gauntlet, lobbyists must brief the governor’s staff. Unlike a committee chair who has the power of a pocket veto, the governor is required to sign or veto bills that reach his or her desk. If a bill faced serious opposition in the legislature, governors will usually scrutinize it carefully, seeking advice from their legal counsel and policy staffs. Bills with partisan overtones or ones that pass on largely party-line votes can present special lobbying challenges.

Of course, politics do play a role in legislation. Lobbyists court political relationships by contributing to legislative candidates, House and Senate leadership and Republican and Democratic caucuses, which can make a difference when a lobbyist calls for a meeting. But donating campaign cash doesn’t guarantee a legislative victory. That's why good lobbyists work to build trust by carefully validating their claims and by credibly and fairly telling their opponent’s story. Some lobbyists have even won the day by telling their opposition’s story better than their opponent. But all lobbyists are gauged on their propensity to tell the truth.

Some bills take more than a single session to make it all the way through the process to become law. That means repeating the drill – improving the bill and its support, perhaps with a stronger grassroots network, more powerful testimony or a more persuasive argument.

Bills that pass can be targets for amendments or even repeal in subsequent sessions. So the lobbyist’s job is seemingly never finished.

Lobbying involves hard, persistent and often monotonous work. The best lobbyists aren’t necessarily the ones with the most flash, but the ones with the creativity to see a path to success and the perseverance to follow that path. And it never hurts to have a really good vote count.

Oregon’s Pending Political Divorce

Measure 97, which would raise taxes on corporations with more than $25 million in annual sales in Oregon, faces an uncertain future in the general election. However, it does seem certain that it's causing a political divorce in Oregon that will fuel polarization and make compromise harder to find.

Measure 97, which would raise taxes on corporations with more than $25 million in annual sales in Oregon, faces an uncertain future in the general election. However, it does seem certain that it's causing a political divorce in Oregon that will fuel polarization and make compromise harder to find.

Oregon voters can expect political rhetoric to escalate over Measure 97, the initiative to impose a gross receipts tax on corporations with large sales in the state, as the November 8 general election approaches.

However, the more intriguing question may be what will or should happen after the election, regardless of whether Measure 97 passes or fails? Chances are whatever happens will feel like a divorce. Andrew Bulkily, writing for Oregon Business, summed up the situation as going from “gridlock to civil war."

No one disputes that the stakes are huge. Oregon officials estimate Measure 97 will generate $3 billion per year in new state tax revenue. Proponents say most of that tax will be shouldered by large out-of-state corporations that currently don’t pay their fair share of the tax burden in Oregon. Opponents insist that the tax measure will result in higher consumer prices.

Emily Powell, the third generation owner of Powell’s Books, says higher taxes resulting from the passage of Measure 97 could drive the iconic Portland-based independent bookstore out of business. Powell says profit margins in the book business are too small and competition is too stiff to allow the store to raise its prices.

Measure 97 revenues have been touted by supporters, including Governor Kate Brown, as a badly needed and long overdue revenue make-up for K-12 school funding, health care and senior services. Opponents argue that the initiative can’t guarantee how legislators will spend the added tax money and that a big chunk of it will go to cover huge Public Employees Retirement System shortfalls.

There are people on both sides of the initiative who wish a compromise could have been reached to avoid a ballot measure mash-up that could be the most expensive political campaign in state history. Proponents and opponents have each raised double-digit millions of dollars to trade televised jabs this fall. Measure 97 backers weren’t in the mood to compromise, feeling that 2016 could be a moment to push through a major tax change on the ballot.

Which brings us to what happens after the election. If Measure 97 passes, the state’s available discretionary revenue will sharply expand. That would probably erase the projected $1.3 billion state biennial budget hole, but it wouldn’t necessarily determine how the balance of money would be spent. You could expect fierce arguments among interest groups over how much should go to K-12 schools versus investments in health care and senior services – and in higher education. You also could expect some high-profile business response, such as a business like Powell’s Books shuttering.

If Measure 97 fails, the state budget hole will loom even larger, potentially threatening cuts to K-12 and higher education funding and threatening Medicaid expansion. Perhaps worse, many in the business community may refuse to enter into discussions about how to meet that budget shortfall, PERS underfunding or tax reform because of the fractious fight they had to wage to defeat Measure 97. Oregon lawmakers may see hearing rooms full of angry faces unwilling to sit together in work groups to explore solutions.

It’s likely that the political zombie of a state sales tax would re-emerge. The sales tax has been the default idea for how to reduce the volatility of Oregon’s existing income-tax-heavy revenue system. However, sales taxes face their own haunting challenges, such as Internet sales. In Oregon, the appetite for a sales tax by voters has the same taste notes as brussels sprout ice cream.

If Measure 97 passes and Brown wins election, it will give her an effective mandate to guide how the new tax revenue should be allocated. However, it could dampen enthusiasm for climbing the steep hill to craft, pass and avoid a referral on a major transportation funding measure.

If Brown wins, but Measure 97 fails, Brown will have the challenge of trying to patch together a balanced budget, with limited credibility to court business support for alternative tax-generating options.

Brown’s position also would be weakened because she must run for election again in 2018 for a full four-year term. As secretary of state, Brown succeeded John Kitzhaber as governor after he resigned in 2015 and is running this year to fill out the final two years of the former governor’s four-year term.

This is a fairly grim picture. Sort of like a family portrait after a divorce.

Over time, views will soften, the more contentious personalities will be pushed aside and a dialogue can resume. But as the 2016 presidential election has revealed, strong political undercurrents can be unleashed, deepening polarization and crippling efforts to find common ground – or even a table where everyone can sit around to talk.

A Crack in Public Pension Wall Emerges in California

Many Oregon political leaders believe reforms are needed to public employee pensions to trim costs and plug a swelling unfunded liability, but few think reforms can pass a court test. Now a crack may be emerging in that impenetrable legal wall.

Many Oregon political leaders believe reforms are needed to public employee pensions to trim costs and plug a swelling unfunded liability, but few think reforms can pass a court test. Now a crack may be emerging in that impenetrable legal wall.

A state appellate court ruling in California will be studied carefully for its implications on whether public employee pension benefits are immutable or can be modified.

While unlikely to generate any immediate political response, the court ruling, if upheld on further appeal, could entice state lawmakers in California and elsewhere to explore public employee pension changes in the face of ballooning unfunded liabilities. Oregon’s Public Employees Retirement System unfunded liability has swelled to $21 billion.

The need to allocate more money for state and local public employee pensions has been one of the hardest fought issues in state legislatures around the country. Pension bills that have passed, including in Oregon, have mostly been struck down by courts as unconstitutional.

The Sacramento Bee reported the unanimous ruling by a California state appellate court says there is no absolute bar to modifying public employee pensions. The vested right to a pension “is only to a reasonable pension, not an immutable entitlement to the most optimal formula of calculating the pension,” the court ruling said. “The Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pensions…so long as the …modifications do not deprive the employee of a reasonable pension.”

The effective prohibition of any change to an existing public employee pension provision, called the California Rule, stems from a series of court decisions beating back efforts to trim benefits and reduce costs. You could say there is an Oregon Rule, too.

Oregon’s latest attempt at what legislators called public pension reform was largely thrown out by the state Supreme Court. That’s what makes the new ruling in California intriguing. Does it reflect a crack in the California Rule? If so, how wide is the crack? And, most important, will the crack stand up when appealed to the California Supreme Court?

The genesis of the crack began in the judicial bankruptcy proceedings for the City of Stockton. Federal Judge Christopher Klein said "pension benefits could be reduced  in a bankruptcy action because bankruptcy is nothing by the impairment of contracts,” according to the Sacramento Bee’s reporting.

California’s Public Employees Retirement System (CalPERS) argued reducing state employee pensions couldn’t be ordered by a federal judge. Klein rejected CalPERS’ claim. However, Stockton never tested Klein’s opinion and emerged from bankruptcy without touching public employee pensions.

The appellate court opinion involved Marin County’s implementation of one of the public employee pension reforms included in the 2012 pension reform legislation enacted by the California Assembly and signed into law by Governor Jerry Brown. The provision that Marin County adopted prohibits using unused sick leave to “spike” pension benefit calculations.

There is a long road ahead before anyone will know whether the crack in the California Rule is real and just what it might permit in terms of modified pension benefits. That’s little consolation to lawmakers who will face budget holes and rising pension costs when they return to their state capitals early next year. But it does give them something to watch that could open a new conversation down the line.

A Fond Farewell to Doc Bates

Senator Alan Bates, who died August 5, is being fondly remembered for his contributions to Oregon health policy, his respectful conduct as an Oregon legislator and his dedication to his patients, even during long, draining legislative sessions.

Senator Alan Bates, who died August 5, is being fondly remembered for his contributions to Oregon health policy, his respectful conduct as an Oregon legislator and his dedication to his patients, even during long, draining legislative sessions.

The sudden passing of Senator Alan Bates on August 5 inspired an outpouring of compliments from his colleagues and friends. Through CFM’s work on behalf of clients, we had the privilege of working with Bates and wanted to share our appreciation for his devoted public service.

As a senator and a doctor, Bates is worthy of the praise he has received. He was a statesman who pushed for health care reform and had no hesitation working across the political aisle. He was literally a life saver. A practicing doctor of osteopathic medicine, Doc Bates frequently broke out his doctor’s bag to care for someone at the Capitol who fainted or experienced other health complications. During the 2016 session, Bates once came to the aid of Senator Alan Olsen who suffered a heart attack. Without Bates’ quick action, Olsen might not have survived.

Bates earned his health care policy spurs as a member of the Oregon Health Services Commission, which drafted the first-in-the-country list of treatments in priority order for Medicaid services in Oregon. If the federal government would have allowed the treatment list to be implemented, it would have stood as a landmark health care policy achievement. Even though the federal government said no, the list was used as a guide for priority decisions on health care treatments for low-income Oregonians.

His contributions to the Oregon Health Plan, plus his commitment to public health in his own Southern Oregon community, propelled him to election to the Oregon House in 2000. He was elected to the Oregon Senate in 2004 and served there until his death from a heart attack while fly fishing with his son on the Rogue River. Bates was 71.

In the legislature, Bates was one of the go-to members on health care issues. He was a member of the Senate Health Care Committee and served on the Joint Ways and Means Committee where he played a major role in developing health care and human services budgets. Senator Mark Hass tells a story of how Bates was able to calm the anxieties of a roomful of industry and health care lobbyists with his explanation of a bill to provide specialized services to autistic children and his respectful answer to their questions. Hass said the bill easily passed with bipartisan and industry support.

While Bates focuses on healthcare policy, he drove to Medford every weekend during legislative sessions to see his patients and took time to listen to constituent concerns. His inventive 2011 bill, called Strengthening, Preserving and Reunifying Families (SPRF), allowed communities to decide on what programs to support families in need. SPRF community-based programs are now funded and operating in all 36 Oregon counties, with the mission to help keep families together and children out of the foster care system.

Bates’ death leaves a big hole in the legislature, but his good work will carry on as a testament to his brilliance and compassion.

Here are some memories of personal experiences with Bates from the CFM team:

Tess Milio – “Working with the late senator, I saw firsthand that he was a doer. He acted on information. He made phone calls in the middle of a meeting to get something done or get the information he needed. He and his staff worked long hours during sessions. They did four-tens, instead of the usual eight-hour days, so Bates could travel back to home and practice medicine in Medford Friday through Sunday. Session alone is draining enough, to make that long drive and work over the weekends showed real strength and commitment to the people of Oregon and his patients. “

Dale Penn – “In my career, I’ve had the pleasure and honor of working with Dr. Alan Bates for several years.  During that time, I have represented issues the good Senator both supported and opposed. While Dr. Bates and I have discussed topics critical to Oregonians, like health care, child welfare and human service budgets, my favorite subject matter has always been fly fishing. Both Dr. Bates and I were avid fly fishermen. I remember conversations concerning fly choices, locations of the best fishing holes and the goal of spending more time fishing Oregon’s beautiful waterways…just as soon as this last policy crisis was addressed or legislative session was finished. This fall, when I’m fishing the same waterways of the Rogue River near Shady Cove, I’ll be thinking of Dr. Bates and wishing he was there to see that silver flash.”

Gary Conkling – “Senator Bates was an old-school legislator who had little patience for half-truths or superficial lobbying. He expected advocates to know their stuff and be able to make their case, as well as the best case for their opponents. On health care, he saw issues through the lens of a medical doctor, which gave him a strong foundation for his questions and his votes. But it also occasionally limited his ability to accept or fully appreciate the arguments made by others in the health care field. Bates was never a partisan and always treated people with the utmost respect, whether he agreed with them or not. Bates left his policy marks and will be remembered as as an example of what an Oregon legislator should be like."

Ellen Miller – “Senator Bates always made time for constituents. Despite his busy schedule and various commitments, he made sure to listen when someone from his district came to Salem. One year, on the second-to-last day of the legislative session – when the Senate was on the Senate Floor for an indeterminate amount of time – he had a member of his staff come get him when we arrived with a constituent. Even with all the chaos and the fighting between the parties that was happening that day, he was present, thoughtful and kind.”

Tess Milio, state affairs and development associate, is an integral part of CFM's state lobbying team. Tess has worked in politics for nearly a decade in Oregon and San Francisco. In her free time, Tess loves to camp, surf, shop and watch the The Blazers. You can reach her at tessm@cfmpdx.com

John Oliver Makes a Case for Cash-Strapped Local Newspapers

Last Week Tonight host John Oliver has stirred up a national conversation about the importance of the declining local newspaper industry in food chain of journalism. Much of his segment focused on major changes at The Oregonian.

Last Week Tonight host John Oliver has stirred up a national conversation about the importance of the declining local newspaper industry in food chain of journalism. Much of his segment focused on major changes at The Oregonian.

Late night comedy star John Oliver delved into the decline of local newspapers in his latest episode of HBO’s Last Week Tonight, bringing the struggles of Oregon’s largest publication under an enormous microscope.

For anyone familiar with the stories of The Oregonian’s shrinking staff and scaled-down delivery amid its painful transition to a digital-first model over the past few years, Oliver’s 19-minute segment was nothing particularly new. Nonetheless, he used the example (along with several other stories of an industry stuck in an existential crisis) to make a bold statement about the importance of local newspapers.  

“It’s pretty obvious without newspapers around to cite, TV news would just be Wolf Blitzer endlessly batting a ball of yarn around,” Oliver said. “The media is a food chain which would fall apart without local newspapers.”

Oliver went on to detail a story his show ran two years ago that heavily drew upon former Oregonian political reporter Harry Esteve’s coverage of the Oregon Lottery. Later, Oliver flashed back to a clip from 20 years earlier of former Oregonian editor Bill Hilliard speaking to the City Club about a steady stream of growth in staffing and salaries at the paper every year he’d been there. That kind of confidence was almost tempting fate, Oliver said.

In 2013, Harry Esteve was at The Oregonian during a round of cuts that wiped out about 22 percent of the staff. Then, a few months down the road in early 2014, Willamette Week broke the news that Oregonian reporters would be required to meet a new quota to publish at least three blog posts a day. The rule has loosened up since, but the general pressure to produce more snippets of content stands. Esteve is also no longer with the paper. He resigned after taking a job with Portland State University, where he works today.

“If journalists are constantly required to write, edit, shoot videos and tweet, mistakes are going to get made,” he said, lamenting the decline in standards and depth that tends to come with shrinking staffs.

Of course, Oliver is right. If you watch TV news, stop and consider how often anchors and reporters attribute facts or even their entire stories to the local newspapers that broke that news to begin with? Happens all the time.

Takeaways from the Pew Research Center's 2016 Newspaper Fact Sheet

  • Weekday circulation fell 7 percent, and Sunday circulation dropped 4 percent in 2015.
  • The cash flow for digital advertising fell about 2 percent last year.
  • In 2015, newspapers saw their biggest drop in advertising since 2009. 

Now consider the financial picture at the macro level. Between 2004 and 2014, newspapers gained $2 billion in online advertising revenue. But in that same time frame, the industry also lost $30 billion in print ad revenue, Oliver highlighted.

“No one seems to have a perfect plan to keep newspapers afloat,” Oliver said. “And the truth is a big part of the blame for this industry’s dire straights is on us and our unwillingness to pay for the work journalists produce. We’ve just grown accustomed to getting our news for free.”

And Oliver may also be right about that last bleak point. Unless print journalism establishes a stable revenue stream, we could be entering an unprecedented era of growth in government corruption as media watchdogs become harder and harder to find, he said.

Newspapers have been closing and laying off staff for years now. Sometimes the Harry Esteves of local newsrooms are replaced, but not often enough to fill in the most critical coverage gaps.

For instance, the number of full time statehouse reporters at more than 200 papers across the nation declined by 35 percent from 2003 to 2014, according to Pew Research Center study cited in Oliver’s segment.

Some major online startup publications, like BuzzFeed, Vox and The Huffington Post, have expanded their national political coverage over the past several years. Even so, today’s online media market still fails to fill the gaps left by the shrinking print journalism industry.

“Those places are often just repackaging the work of newspapers,” Oliver said. “And it is not just news outlets. Stupid shows like ours lean heavily on local newspapers.”

Time will tell whether Oliver’s plea for people to buy print ads and subscribe to newspapers will resonate deep enough to spur any change for the industry. He may be a rockstar on social media, but perhaps the problems of the news business are too far gone to solve at this point. Maybe that’s not the solution anyway, though. But in any case, Oliver’s segment is getting people talking, and it’s big picture conversations like this that often later prove to be the spark for game-changing ideas. 

Justin Runquist is CFM’s communications counsel. He is a former reporter for The Oregonian, The Columbian and The Spokesman-Review. Away from the office, he’s a baseball fanatic with foolhardy hopes that the Mariners will go to the World Series someday. You can reach Justin at justinr@cfmpdx.com and you can follow him on Twitter at @_JustinRunquist

PERS Costs To Deal a Heavy Blow to Oregonians

Senate Minority Leader Ted Ferrioli, R-John Day, left, says he and a handful of other lawmakers have proposals in mind to address the climbing cost of unfunded liabilities in Oregon's public employee pension system. (Denis C. Theriault/The Oreognian/OregonLive)

Senate Minority Leader Ted Ferrioli, R-John Day, left, says he and a handful of other lawmakers have proposals in mind to address the climbing cost of unfunded liabilities in Oregon's public employee pension system. (Denis C. Theriault/The Oreognian/OregonLive)

Oregon’s public worker pension system is in the news again, and this time it’s going to cost us all quite a bit more money.

Lost amid the national hullaballoo over the presidential campaign, we learned that the cost of Oregon’s Public Employee Retirement System (PERS) will climb an extra $885 million in the next biennium. That increase will elevate Oregon’s sum of unfunded liabilities to $22 billion for the next year, leaving lawmakers in an overwhelming bind: Find new revenue to fill the gap or start scaling back public services.

Unfunded PERS liabilities rose to $18 billion last year, and projections from four months ago placed the figure closer to $21 billion. They’ve increased again, largely from a combination of declining pension investment returns, a 2015 Oregon Supreme Court decision restricting pension benefit reductions and the simple fact that pensioners are living longer.

The full gravity of the update began to sink in last Friday when actuaries released new financial projections to the PERS Board.

The situation begs all kinds of big questions: Why isn’t this dilemma a central topic in statewide campaigns this election season? And will political leaders once again try to find PERS reforms in the next session or have they just given up in light of Oregon Supreme Court rulings? 

The biggest problem, though, is that state leaders don’t seem to know how to stop this giant snowball from bounding down the mountain. A spokesman for Governor Kate Brown told The Oregonian editorial board that despite casting a wide net for reforms, state leaders so far have found no solutions that would survive a court challenge. Furthermore, Oregonians cannot afford another year of failed PERS reform attempts, the spokesman said.

“There's no end in sight,” The Oregonian editorial board wrote Tuesday in response to the news. “Contributions by employers – they are required to cover the difference between PERS investment earnings and benefit promises – are expected to go up by 4 percent of payroll in 2017, 2019 and 2021. That puts the employer contribution to the system at $4.5 billion for the 2021-23 biennium, more than twice what it is now, reported Ted Sickinger of The Oregonian/OregonLive.”

With the latest projections, school districts are taking the biggest hit, facing an anticipated $335 million increase in PERS costs. Meanwhile, public agencies will have to carve out $260 million of their own funding to cover the shortfall in PERS payments. Ultimately, the pain will trickle down more directly to taxpayers.

“Oregonians, along with the children they send to school, rightfully expect tax and employer dollars to bear fruit, not burden, and throwing money into an expanding fire is useless,” The Oregonian editorial board wrote. “Unless lawmakers prepare to act in the next legislative session, PERS threatens to undermine the capacity of the state to meet its basic obligations. Fewer school teachers, larger class sizes and the diminution of other critical government services loom.”

Potential revenue for the shortage is quietly tied up with the IP 28/Measure 97 effort to generate a cash influx for Oregon. But of course, the fate of those measures remains up in the air.

Senate Minority Leader Ted Ferrioli, R-John Day, said he and a handful of lawmakers have a list of reform proposals in mind, but Democratic leaders need to be prepared to make difficult cuts. 

“If you want PERS to remain solid, and we do, then you have to trim expectations,” Ferrioli told the editorial board. “We're not messing with anybody's retirement. We need to be prospective about this, look ahead. We can use the court's decision as a template. All it will take is a modicum of interest from the House speaker, the Senate president and the governor."

Unfortunately, no matter where you stand on the issue, the one thing everyone can agree on is that the problem seems to have reached a point where it can no longer go ignored.

Justin Runquist is CFM’s communications counsel. He is a former reporter for The Oregonian, The Columbian and The Spokesman-Review. Away from the office, he’s a baseball fanatic with foolhardy hopes that the Mariners will go to the World Series someday. You can reach Justin at justinr@cfmpdx.com and you can follow him on Twitter at @_JustinRunquist

 

The Ghost of Willis Hawley, Good Intentions and Trade Tariffs

Donald Trump said he would tear up trade deals and negotiate new ones that put America first. He might revisit what happened when an Oregon congressman had the same good intention, but not so great an outcome.

Donald Trump said he would tear up trade deals and negotiate new ones that put America first. He might revisit what happened when an Oregon congressman had the same good intention, but not so great an outcome.

House Speaker Tina Kotek will have a featured place at this week’s Democratic National Convention. Former Oregon Congressman Willis Hawley played a key role at the Republican National Convention.

Kotek, a Democrat, can be expected to talk about inclusion, a higher minimum wage, family leave and free college education. Hawley, a Republican, provided the RNC with an example of what can happen when America erects trade walls.

Of course, Hawley wasn’t actually in Cleveland for the convention. He represented Oregon in Congress from 1907 to 1933 and died in 1941. But his ghost was there.

Former Oregon Congressman Willis Hawley lost his bid for re-election in 1932 after the bill he passed quadrupling U.S. trade tariffs deepened the Great Depression.

Former Oregon Congressman Willis Hawley lost his bid for re-election in 1932 after the bill he passed quadrupling U.S. trade tariffs deepened the Great Depression.

Hawley’s legacy is the Smoot-Hawley Tariff Act, which was passed in 1930 and triggered a trade war that most economists credit for deepening the Great Depression and Henry Ford called “economic stupidity." 

Senator Reed Smoot was a Republican senator from Utah and chaired the Senate Finance Committee. Hawley, who had been president of Willamette University where he taught history and economics, was chairman of the House Ways and Means Committee. The first signs of a global depression had emerged in 1929 as countries trying to rebound from the devastation of World War I lacked currency reserves and gold, so relied heavily on trade to pay their bills. Farmers and workers felt threatened.

The United States had passed a tariff bill in 1922. The League of Nations attempted as late as 1928 to persuade nations to end tariffs, to no avail. Smoot and Hawley pressed their tariff bill in the name of protecting U.S. farmers and workers from unfair foreign trade.

President Herbert Hoover agreed with higher tariffs on farm commodities, but wanted lower tariffs for manufactured goods. Hoover called the Smoot-Hawley Tariff Act, which raised tariffs on farm and manufactured goods, “vicious, extortionate and obnoxious.” But he declined to veto it, despite desperate pleas from 1,028 economists who signed a petition and many industrial leaders.

Oregon House Speaker Tina Kotek will speak at the Democratic National Convention about how to move a liberal agenda at the state level.

Oregon House Speaker Tina Kotek will speak at the Democratic National Convention about how to move a liberal agenda at the state level.

The first country to retaliate was America’s most loyal trading partner at the time, Canada, which directed more of its commercial attention to Great Britain. European nations looked to each other to bolster trading relationships as tariffs on more than 3,200 U.S. products quadrupled.

The result: U.S imports dropped 66 percent and exports declined 61 percent. Unemployment rose from 8 percent when the tariffs were imposed to 16 percent by 1931.

By 1932, the Depression was in full swing. Workers were thrown out of jobs. Farmers struggled and many lost their farms. Meanwhile, Smoot and Hawley were defeated in their re-election bids.

This chart shows the strong relationship to Gross Domestic Product and international trade. When trade drops, so does GDP, forcing job reductions, business closures and consumer belt-tightening.

This chart shows the strong relationship to Gross Domestic Product and international trade. When trade drops, so does GDP, forcing job reductions, business closures and consumer belt-tightening.

Generally speaking, people think of globalization rising in the late 20th century. The Smoot-Hawley Tariff Act is evidence that globalization was a significant economic factor much earlier.

Trump and Democrat Bernie Sanders didn’t exactly call for trade walls in their presidential primary campaigns, but they argued that existing multi-national trade deals are bad for American workers. Sanders focused his attention on not allowing the Trans-Pacific Partnership go into effect. Trump went further and said he would tear up previous trade deals such as the North American Free Trade Act (NAFTA) and renegotiate them, putting American interests first. While possibly unintended, those actions could trigger the eruption of a trade war, adding to the people and regions of the country suffering most from economic dislocation.

Oregon and other West Coast states have benefitted economically from international trade. The Port of Portland is known as an “export” port, with much of its outgoing cargo in the form of bulk agricultural commodities. Oregon manufacturing has declined, but not disappeared because of productivity advances by basic industries and diversification into high tech manufacturing. Consequently, Oregon’s political landscape is more favorable to international trade and trade deals, such as the TPP.

No one from the Oregon delegation to the RNC was likely to hold up a sign saying “Willis Hawley was our hero.” Maybe no one in the delegation ever heard of Willis Hawley. It’s likely Trump doesn’t know who Hawley is.

Too bad, though, because Hawley was a politician who thought he was helping everyday Oregonians and Americans, but wound up compounding their already bad situation so much that he lost his job and slipped into historical obscurity. He might have been a useful delegate at the convention to remind his colleagues that good intentions don’t always equate to great outcomes.

Gary Conkling is president and co-founder of CFM Strategic Communications, and he leads the firm's PR practice, specializing in crisis communications. He is a former journalist, who later worked on Capitol Hill and represented a major Oregon company. But most importantly, he’s a die-hard Ducks fan. You can reach Gary at garyc@cfmpdx.com and you can follow him on Twitter at @GaryConkling.

Trump Tackling the Left Coast

As Republicans open their national convention in Cleveland, Donald Trump has pledged to put some surprising states in play in November, including Oregon and Washington. What does Trump know that most political observers in the Pacific Northwest fail to see? (Photo Credit: Christopher Dolan/The Times & Tribune via AP) 

As Republicans open their national convention in Cleveland, Donald Trump has pledged to put some surprising states in play in November, including Oregon and Washington. What does Trump know that most political observers in the Pacific Northwest fail to see? (Photo Credit: Christopher Dolan/The Times & Tribune via AP) 

Presumptive GOP presidential nominee Donald Trump raised eyebrows when he told Republican congressmen that he expects to run competitively in November on the Left Coast, especially in Oregon and Washington.

Trump didn’t give away his secret formula for turning dark blue states into electoral votes for him, but it is interesting to speculate on what is behind his audacious claim.

The Statesman Journal reported what it called a “surprise result” from the latest batch of party affiliation sign-ups from motorists automatically registered to vote under Oregon’s new Motor Voter law – more people registered as Republicans than Democrats. Some 3,455 new voters aligned with the GOP compared to only 3.023 with the Democrats.

Before you get too excited over that news, note that 124,912 Oregonians have been registered to vote under the new law, but only about 8,500 declared a party preference, according to the secretary of state’s elections division. The small gain in voter registration by Republicans hardly makes a dent in the overwhelming Democratic majority in Oregon. Trump carried Oregon with 252,748 votes in the Republican primary, which was fewer votes than Hillary Clinton received (269,846) in soundly losing to Bernie Sanders (360,829).

But primary results and new voter registrations may not be what Trump and his lieutenants are pondering. They see a whole lot of people, including a vast majority of new voters, who don’t align with either party. There are more non-affiliated voters in Oregon than registered Republicans and almost as many as registered Democrats. This pool of voters could represent just the kind of uncharted electoral waters Trump plans to ply this fall.

Trump also may be planning to appeal to Democratic and independent voters in Oregon and Washington who voted for Bernie Sanders and are disenchanted with Hillary Clinton. Despite national polls showing nearly three-quarters of Sanders Democratic primary voters plan to vote for Clinton, that still leaves the other 25 percent for Trump to court.

Sanders did well in more than just Portland, so Trump’s campaign may try to pry away voters who oppose trade deals and still harbor ill feelings toward the Clintons on timber policies that reduced cuts on public forests and forced mills to close. He might even reach out to “Rust Belt” manufacturing workers in Portland and Seattle who feel left behind.

An active Trump campaign in Oregon and Washington, whatever that turns out to be from this unconventional politician, could give a boost to down-ballot Republican candidates. GOP gubernatorial candidate Bud Pierce seems disinclined to hook his hope to Trump, but Dennis Richardson, who is running for secretary of state, might find some common cause with the Trumpster.

Even if Pacific Northwest Republicans don’t enthusiastically embrace Trump and his message, they might still be willing to collaborate on campaign basics such as get-out-the-vote efforts, aiming to turn out voters who aren’t exactly in the political mainstream.

Win or lose in November, Trump has given the Republican Party a jolt and potentially set the stage for a larger, longer-term political realignment affecting both major parties. His unpredictability as a candidate has allowed doubt to creep in about the reliability of old political maxims, like red states and blue states.

Voter turnout, and to some degree voter mood, can be influenced in Oregon and Washington by ballot measures. Oregonians will be voting on a major tax increase on large corporations, which Republicans generally oppose, but also may fetch opposition from lower-income voters who fear the tax increase will be passed along to them in higher prices for groceries and gas.

Portland-area voters will be asked to approve a major a $750 million bond for Portland Public School renovations, a City of Portland gas tax increase and renewal of a Metro levy to fund regional natural areas. The cumulative impact of tax measures on the ballot could make Portland voters poutier than usual and more open to the kind of messages Trump traffics in.

Washington voters will decide on measures that would impose a carbon emission tax and urge a constitutional amendment that limits constitutional rights to people, not corporations. A gun control measure also may qualify for the fall ballot.

A Republican hasn’t won the governorship of Washington since the 1980s, but the last three elections have been tight. Governor Jay Inslee is seeking re-election, but with sagging approval ratings. He only won in 2012 by a whisker over his Republican rival, former state attorney general Rob McKenna. Pundits predict a vigorous battle for legislative control in the House, where Democrats hold a thin two-seat majority, and the Senate, where Republicans cling to an even thinner one-seat advantage.

If you were betting, you would be smart to keep your chips on blue in Oregon and Washington. But you might not want to lift your finger off the chips just quite yet.

Summer IP 28 Polls May Not Mean Much

IP 28 would substantially raise taxes on corporations with large sales in Oregon to fund schools and other public services. Polling so far shows the high-profile, big-stakes initiative winning easily and losing miserably. Stay tuned because summer polls aren’t very telling.

IP 28 would substantially raise taxes on corporations with large sales in Oregon to fund schools and other public services. Polling so far shows the high-profile, big-stakes initiative winning easily and losing miserably. Stay tuned because summer polls aren’t very telling.

According to the polls, IP 28, which would raise taxes for large corporations with more than $25 million in annual sales in Oregon, either has strong support, withering support or a large bunch of undecided voters. Who knows at this point?

So it is with high-profile, big-stakes initiatives in mid-summer. Voters may be vaguely aware of them, but a good chunk of the electorate has postponed thinking too much about them until closer to the November election. They have vacations to take and lawns to mow.

Reading too much into summer poll results on initiatives is like depending on the Farmer’s Almanac to tell you whether it will rain next weekend. The polls regarding IP 28 hardly tell any story at all.

The latest public poll, conducted online in late June by iCitizen, shows 65 percent of Oregonians favor IP 28, while 19 percent oppose and 16 percent are undecided.

A poll done by DHM Research in May found 51 percent in favor, 32 percent opposed and 18 percent undecided. Action Solutions released a poll early in June showing only 41 percent support IP 28, while 32 percent oppose and 35 percent are undecided.

Differing questions and polling techniques can account for some of the variation among the polls, but the differences are pretty stark and most likely reflect that a lot of people really haven’t made up their minds yet.

In addition, the campaigns for and against IP 28 are just ramping up. Most competent opposition campaigns erode initial initiative support, sometimes dramatically