Solid Recovery with No Momentum

State revenues were up slightly, but the latest quarterly economic forecast released today in Salem shows Oregon's economy is headed upward at a frustratingly slow pace. The state economist said Oregon's recovery is on solid footing, but lacks momentum.

Increased revenues of $116 million were welcome news to nervous legislators meeting at the Capitol, but most of the increase came from a legal settlement, not economic growth. Personal income tax collections were actually down $22 million, while corporate tax receipts grew a slim $.2 million from the previous quarterly forecast. Lottery proceeds also registered a gain.

Those meager results were framed by news that the Kitzhaber administration is lopping off 190 positions in various state agencies. Many of the eliminated positions are vacant, but there will be some layoffs. In their February session, lawmakers directed the governor to identify $28 million in savings by reducing the number of managers, consultants and public relations positions.

While no one is happy with the rate of growth, the state's economy at least isn't going in reverse. Oregon's unemployment stands at 8.6 percent, higher than the national average of 8.2 percent, but a significant drop from the 9.6 percent rate a year ago. Portland's jobless rate has continued to inch down to 7.9 percent.

One bright spot in the economic forecast was the continued rise in exports from Oregon, but even that good news cast a shadow. Exports grew in 2011 by 3.5 percent, just a fraction of the 18.6 percent growth rate seen in 2010.

The not-much-changed revenue forecast probably means lawmakers are off the hook, at least for now, to make deeper spending cuts. However, legislative budget-writers are bracing for more cuts down the line as costs continue to rise while revenues remain stagnant. Rep. Dennis Richardson, R-Central Point, said the forecast is another reminder state spending needs to be reduced to fit within anticipated revenues.

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Retired Law School Dean Reflects on Ruling

Symeon Symeonides pondered a moment, then said he had no idea how the U.S. Supreme Court would rule on the constitutionality of the Obama health care law, especially the individual mandate requiring every citizen to have health insurance. The high court will hear arguments in the case next week.

An internationally renowned constitutional law scholar, as well as one of Salem's best-kept secrets, Symeonides said it might be easier for states like Oregon to impose a health insurance buying mandate than for the federal government to do so. After all, he said, Massachusetts passed a mandate a few years ago and it appears to be working — though Republican presidential candidate and former Massachusetts governor Mitt Romney would rather kick the issue to the background. 

Symeonides and I, along with Willamette Law School's development director, Mike Bennett, sat down for a drink last week to reflect on the Supreme Court case, which stands to be one of the most significant in years, perhaps even rivaling the abortion or desegregation decisions. It was only about a week before Symeonides headed off to Brussels, where he will be working for several months to advise the European Union on how to draft a new constitution.

If states found the political wherewithal to impose an individual mandate — and Symeonides, ever an astute observer of political winds, thinks that could be a tall order — it might be easier legally because it wouldn't run up against the U.S. Constitution's commerce clause. Under Article 1, the clause gives Congress "the power to regulate commerce with foreign nations and among the several states, as well as Indian tribes."  The outcome of the court case rests, at least in part, on how current justices interpret the commerce clause and whether regulating commerce "among the several states" allows for an individual health insurance mandate.

The New York Times published an article last week, with the headline,  "At Heart of Health Law Clash, a 1942 Case of a Farmer's Wheat."

"If the Obama Administration persuades the Supreme Court to uphold its health care overhaul law, it will be in large part thanks to a 70-year-old precedent involving an Ohio farmer named Roscoe C. Filburn."

Seems that Mr. Filburn sued to overturn a 1938 law that told him how much wheat he could grow on his property and imposed a penalty on him if he grew too much. The Court ruled against Mr. Filburn, and that ruling serves as the pivot for what the justices will begin considering next week. The Times says interpretations of the Filburn case may form the basis for decisions by the two current-day justices who are considered the swing votes in this case, Anthony Kennedy and Antonin Scalia.

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Legislative Control Center of Political Battles

Candidate filing day produced one clear conclusion — the political battles in Oregon this year will center on House and Senate races key to determining which party is in control when the 2013 legislature convenes. The House is split 30-30 and Democrats narrowly control the Senate 16-14.

Republicans failed to field a candidate for state treasurer or attorney general, even though the latter will be an open seat. Republican Bruce Starr is challenging Labor Commissioner Brad Avakian, a Democrat, but it is a non-partisan post.

Republicans and Democrats see the battle for control of the House through different lenses. Rep. Kevin Cameron, R-Salem, told The Oregonian, "I want to avoid the one-party situation in the future so at least there's a healthy balance in the policy coming out of this building."

Rep. Tina Kotek, D-Portland, said, "Democrats were blocked from passing stronger consumer legislation and from more closely scrutinizing tax breaks that take away money for services. We are going to get a lot of national attention... Oregon is one of the most likely legislative chambers in the country to shift to Democratic control."

Retirements could play a significant role in tipping the partisan balance in both the House and Senate. Two GOP senators are calling it quits — Jason Atkinson, R-Central Point, and Dave Nelson, R-Pendleton. Both seats tilt heavily Republican. However, the Senate seat held by retiring Joanne Verger, D-Coos Bay, could prove pivotal. 

House Co-Speaker Arnie Roblan, D-Coos Bay, is running for the seat against Scott Roberts, a Coos Bay physician. Roblan beat Roberts in 2010 in a House race. If Roblan wins again, the seat will remain in the Democratic column and it may be difficult for Republicans to control, or even earn a 15-15 split.

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Accurate Expectations for Short Session

Many Oregon legislators have lived through the different pace of the "experiments" with two short legislative sessions – one in 2008 and one in 2010. A number of new legislators and — perhaps more important — Governor Kitzhaber have not had the special experience.

That raises questions about proper expectations for the short session, which comes amid a lingering recession that has resulted in declining state tax revenue projections and just before the campaign season formally launches that will determine which party controls the House and Senate. The special session is scheduled to end no later than March 5, the day before the filing deadline for the May primary and November general elections.  

There are at least five major issues on the special session platter. Four of them are there because of initiatives by the governor as he seeks to re-make state government. The issues are:

         *  The need to balance the state budget in the face of a continuing recession that is sapping general fund resources for K-12, higher education, law enforcement, prisons and social services. The prospect of spending cuts is viewed as so dire that SEIU and AARP have bought advertising to decry further reductions in home, health and long-term care.

         *  Taking the next steps in the governor's education investment strategy, which will consolidate education management and funding priorities from kindergarten through graduate school under his leadership and an appointed education czar.

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Recycled Good Old Idea

There has been some publicity lately about the role Michael Jordan is playing in state government. Not the Michael Jordan who can dunk a basketball. The Michael Jordan who is director of the Oregon Department of Administrative Services, but functions like the chief operating officer (COO) of state government.

News about Jordan suggests he is the first person in Oregon's history to function as the COO.  He may function with that authority, but he is not the first manager to do so.

In former Governor Neil Goldschmidt's administration, Fred Miller held the position of director of what was then called the State Executive Department. He functioned exactly like a COO.

Here are some aspects of the role Miller played:

       *  State agency heads reported on a daily basis to Miller, even though — then as now — state statutes specify that an agency director is named by and reports to the governor.

       *  Miller held twice-weekly cabinet meetings for the heads of major agencies and monthly cabinet meetings for smaller agencies.

       *  In addition to the functions of the Executive Department (overall budget, auditing and personnel management — including labor relations), Miller also met on a routine basis with agency heads to check on their progress.

       *  For his part, the governor would attend cabinet meetings on occasion, but left the daily management function up to Miller.

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Jobs Policy and Ivory Towers

Prominent Oregonians offered sharply different — and somewhat ironic — views last week on whether state government can affect the economy. A well known economist said the state is merely along for the ride, while the Senate's top Republican insisted state actions can dampen job growth or propel creation of small business.

Joe Cortright, a private economist known for popularizing the idea of traded-sector jobs, told a legislative committee the state is along for the ride and cannot affect the future.

Senate Republican Leader Ted Ferrioli disagreed with Cortright in an op-ed piece published by The Oregonian: "I'd like to advise these economists to install some windows into their ivory towers. I am afraid they are ignoring the living testimony of Oregon's thousands of small businesses if they help perpetuate that overregulation and excessive tax burden have nothing to do with the economic distress of businesses or our ability to recruit new employers to Oregon. A cursory look at the state's excessive minimum wage, top tax rate and regulatory creep all reveal these factors to be significant forces affecting Oregon's economic future."

Senate and House Republicans have charged there were too few job-creation proposals considered in the 2011 session. This debate is bound to continue between now and the February legislative session, as well as into the political campaign season.

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Union Settlements: Pro or Con for Kitzhaber?

As rank and file members of state employee unions consider proposed contract settlements, the jury is out on whether the process reflects political credit or debit for Governor John Kitzhaber.

A state employee and SEIU member rallies on the Capitol steps.The public employee collective bargaining process was one of the early tests of the strength of the governor's administration near the start of his third term in office. He campaigned, at least in part, on his ability to deal with public employee unions during collective bargaining negotiations. But critics of public employee collective bargaining contend that, when a Democrat governor's representatives sit across the table from union negotiators, it is like two friends deciding how to spend someone else's money.
    
It is not clear whether the rank-and-file will support the tentative agreements reached by their negotiators. According to The Oregonian and the Statesman-Journal, some members don't like the agreement and are urging other workers to reject it.  Beyond normal reporting, how do the newspapers know?

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Cool Schools Bill Passed – Now What?

Public schools around Oregon this summer are getting energy-efficient upgrades such as new windows and boilers, thanks to the so-called "Cool Schools" bill (House Bill 2960) the legislature passed this session. Governor Kitzhaber touted the program as a job-creation plan during his campaign, saying it would put to work hundreds of contractors who would install locally made, energy-efficient products in schools.

Governor Kitzhaber outlines Cool Schools projects that were "shovel ready" when he signed the bill in June.The politics behind the Cool Schools bill were remarkable. The bill was labeled as Governor Kitzhaber's initiative and championed by two young, progressive House Democrats from Portland, Reps. Jules Bailey and Jefferson Smith. By all accounts, Republicans had every right to be skeptical. But the bill sailed through the legislature, gaining unanimous votes in both chambers. By the time the bill passed the Senate, Republicans such as Rep. Tim Freeman of Roseburg had signed on as co-sponsors.

The bill directs the Oregon Department of Energy (ODOE) to issue low- or zero-interest loans to schools. School districts submit an application to ODOE outlining schools' needs, and ODOE issues the funds. The money schools save on lower energy bills should be more than enough to pay back the loans over time.

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The Post-Session Shuffle

Do you hear that sound? That pitter-patter of feet is what's known as the post-session shuffle, where legislators and staff leave their posts to run for office and work for other organizations, or replace those who left. Here's the list of confirmed and rumored switcheroos:

Reps. Mary Nolan, D-Portland (left), and Brad Witt, D-Clatskanie, are leaving the Oregon House to pursue other elected positions.Oregon House

Rep. Mary Nolan, D-Portland, is running for Portland City Council against Amanda Fritz. Sharon Meieran, a lawyer-turned-emergency room doctor, is thinking about running as a Democrat to replace Nolan.

Rep. Jeff Barker, D-Aloha, says he'll likely retire at the end of his term. No word yet on serious candidates looking to replace him.

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Mini-Dust Up Between Legislators and the Governor's Office

Senator Doug Whitsett, R-Klamath Falls, accused the governor's office last week of muzzling agency directors who are asked to appear before legislative committees to discuss pending bills.

The impetus for his charge?

The governor's chief of staff, Curtis Robinhold, sent a memorandum to agency directors in early February that said:

"There should be no surprises to the Governor's Office on the input agencies provide in formal committee testimony or otherwise regarding pending legislation. As such, even if expressing a 'neutral' position and providing factual information, agencies must provide a heads up to the Governor's Legislative Director and assigned Policy Advisor in advance. Agencies must obtain authorization from the Governor's Legislative Director or their assigned Policy Advisor before supporting or opposing bills, whether at their own initiative or when asked for input from stakeholders or legislators."

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