Governor Kitzhaber

Governor Rolls Out "Education Budget"

Governor Kitzhaber unveiled a budget proposal today that he called "first and foremost an education budget."  He said his budget "creates space for front-end investments in education and early learning by cutting back-end spending on health care and corrections." 

His 2013-15 budget, which was previewed by The Oregonian and Salem Statesman Journal today, puts controversial changes to the Public Employees Retirement System (PERS) squarely in the center of an effort to carve out more money for schools. And that could bump into political resistance from the newly Democratically controlled House.

Despite that, the atmosphere in the state Capitol was markedly different than in Washington, DC, where partisan wrangling continues over how to avoid plunging over the so-called fiscal cliff. While there is no looming fiscal cliff here, the governor's budget will only serve as the framework for the 2013 legislature to hash out a final budget with Democrats at the controls in both the House and Senate.

Senator Richard Devlin, D-Tualatin, already named to be Senate co-chair of the Joint Ways and Means Committee, was charitable toward the governor, as quoted in the Salem Statesman-Journal.  "I appreciate the governor's candor about the specific challenges we face in funding education and the Oregon Health Plan in the next biennium," Devlin said.  "With his recommended budget, Governor Kitzhaber has provided a good starting point for the budget negotiations ahead of us."

New House Republican Leader Mike McLane, R-Powell Butte, praised Kitzhaber for addressing PERS, but questioned the rosiness of revenue projections and the lack of any fund reserves to cushion the budget in case the economy falters in the next two years.

The governor's plan for more money for K-12 schools rests on the premise that the legislature will accept his recommendations to reform PERS in two ways:

• By limiting cost-of-living increases to the first $24,000 in retirement income; and

• By closing a benefit loophole for out-of-state retirees. 

Kitzhaber Brings Home Bacon

The big news last week revolved around Governor Kitzhaber's successful, last-minute trip to Washington, D.C. where he negotiated final terms of a deal that will bring Oregon almost $2 billion in federal money over the next four years to finance health care reform. The first installment — $620 million — is expected to arrive in Oregon by July 1.

As The Oregonian put it in its lead story on the successful trip: "Kitzhaber saves Oregon budget and his reputation in health care deal with Obama Administration." Both points are true. Oregon needs the money to fund reform. And, Kitzhaber, a former emergency room doctor who thinks, lives and breaths health care policy, had almost no choice but to succeed in D.C.

What remains is a question about whether the new federal money can be used to fill budget holes or must be devoted to new health care reforms. But that question, as important as it may be to budget analysts, ignores the basic policy point — the money will go to reform and that will mean that the reforms have a better chance for success here.

Making State Jobs Programs Do the Job

Legislators of both political parties and from all parts of Oregon agreed the state can play a more significant role in job creation by making its far-flung economic development efforts more agile and coordinated.

With nearly unanimous support in their short 2012 session, lawmakers approved House 4040, which the Eugene Register-Guard said "could prove to be the most far-reaching jobs bill that emerged from the legislative session."

The genesis of the Oregon Investment Act stands in stark contrast to the bickering and posturing in Congress as it debates how to stimulate the still-sluggish U.S. economy.  The act also provided a way for legislators here to surmount their usual differences over the appropriate government role in economic development.

To get behind the scenes, I asked Rep. Tobias Read to recount how the measure came about. Here's what he said:

"After he was elected, Governor Kitzhaber and his team asked Treasurer Ted Wheeler, Business Development Commission Chair Wally Van Valkenburg and me to serve as something of an economic development transition team. We had a lot of help from Scott Nelson (Governor's office), Tim McCabe (Business Oregon director), Paul Grove (Business Oregon legislative coordinator) and others as we worked quickly to put together some recommendations. We also recognized that there was far more work than could be done in the short time between his election and his inauguration, so, as we delivered our recommendations, we asked for the opportunity to continue working.  

"We got permission, and spent some time learning about strategies from other states and countries, and then went on the road to talk with people about what businesses in Oregon needed to expand and hire.

"We heard different versions of the same story around the state. The consistent theme was that businesses couldn't get access to the capital they needed to expand.  Furthermore, people felt that Oregon's programs are scattered across agencies, difficult to find, and too rigid.

"We recognized that we couldn't solve all these problems in the short session, or in the time that led up to it, so the Investment Act (House Bill 4040) is really enabling legislation that creates the Growth Board to build a plan to address all these issues — and to make policy recommendations to set the stage for substantive changes next session.  We made clear that we were interested in establishing priorities, promoting flexibility, achieving coordination, and gaining the leverage that comes from attracting new private-sector dollars into the Oregon economy.  

Energy for an Energy Plan

Governor Kitzhaber has prevailed in persuading lawmakers to approve high-profile initiatives in education, early childhood learning and health care. Now he wants to tackle energy, which could prove a more elusive and tougher sell.

Earlier this year, Kitzhaber handpicked three dozen industry insiders to recommend innovative policy ideas and create a 10-year energy plan. Teams worked for four months, focusing on: 1) consumption/energy efficiency, 2) supply side/resource mix, 3) siting, 4) transportation, and 5) governance.

The group sent its recommendations to Kitzhaber, which now have been made public. Their major theme is reducing carbon dioxide emissions through energy source conversion, more reliance on renewables, and ditching power generation based on high-carbon fossil fuels. Most Oregonians may not know that more than half of the state’s electricity comes from coal-burning power plants.

One big hurdle in accomplishing carbon reduction is already surmounted as PGE has agreed to close down its Boardman coal-fired plant. But even that decision raises thorny questions as the utility looks for a way to replace a source of reliable energy to serve its base load.

Legislators had a previous taste of energy politics when they considered, but didn't act, in the 2009 session on a cap-and-trade proposal, intended to use market forces to encourage businesses with options to switch to energy sources with lower carbon emissions.

Since then, interest has grown in the merits of a carbon tax, which is a more direct disincentive for using fossil fuels. It also is a tax, which raises political flags.

Huge Issues Loom in 2013 Session

The short 2012 session just ended and there are nine months until the 2013 legislature convenes, but it is still timely to look ahead at the issues that need resolution or are just ripening for action.

At the top of the list is how Governor Kitzhaber's health care transformation strategy will work and whether newly forming coordinated care organizations can squeeze out cost savings in serving Oregon's Medicaid population. The health insurance exchange will get up and running, just as the federal health care reform measure lands in the U.S. Supreme Court, which could toss some or all of the controversial reform legislation.

Despite a slow economic recovery, many parts of Oregon still feel the after-effects of recession and could benefit from state efforts to boost employment. Strong differences exist between Republicans and Democrats on how to stimulate job growth, especially in rural Oregon.

As a result of education reform measures pushed by Kitzhaber, K-12 school districts are signing achievement compacts to promote improved student learning. A question remains whether this reform will under-perform or have unintended consequences as have previous reforms such as No Child Left Behind and Race to the Top.

Lawmakers in February approved a measure that deals with home foreclosures. However, consumer advocates felt it didn't go far enough, while bank and title company officials said it might not work as expected.

Kitzhaber, who will be entering the last two years of his third term, has vowed to give tax reform another shot. This has proven to be as elusive as the pot of gold under the rainbow. While a majority of Oregonians feel the state's current tax system isn't sustainable, there is no clear consensus on how to refine or replace it. A state sales tax is certain to make another stage appearance, with a few clapping and others throwing big red tomatoes. 

Local governments are pressing for expanded access to property tax revenues. They are looking for authority to exceed property tax rate limitations for voter-approved levies. The temporary state hospital tax expires and hospital interests may be less willing to go along with an extension after proceeds were diverted from their original purpose.

Contrasting Views on Jobs Legislation

The Oregonian headline tells the story: "Congratulations and complaints."  Congratulations for handling the big issues of health, education and early learning reform. Complaints about the failure of a number of jobs bills.

Issues directly related to Oregon's economy tended to take a back seat during the short session in Salem, notwithstanding claims to the contrary in various post-session communications by legislators to their constituents.

In floor speeches on the Health Insurance Exchange (House Bill 4164), achievement compacts for school districts (Senate Bill 1581) and health care transformation (Senate Bill 1580), Democrats painted a picture of those major reforms mattering to small businesses in Oregon. Major business associations supported all of the reforms, but it is not clear that any of the bills will create jobs on their own. 

Democratic leaders said as health care costs go down, businesses will have more money to invest in creating jobs. Legislators on both sides of the political aisle and Governor Kitzhaber deserve credit for taking on big issues such as health and education reform.  

House Democratic Leader Tina Kotek, D-Portland, continued that theme in a piece in the Statesman-Journal, "We promised to give businesses the tools they need to grow and hire, stand up for middle-class Oregonians and prioritize the essential services Oregonians need most. Now that the dust has settled after last week's adjournment, I am happy to report that we delivered on those promises."

Republicans pointed out what was left on the cutting room floor during the legislative session and pointed the finger at Democratic opposition.

“With 190,000 unemployed Oregonians, the legislature’s inaction on jobs and the economy is inexcusable,” said House Republican Leader Kevin Cameron, R-Salem. “Nonetheless, House Republicans continued to work with the Governor and legislative Democrats to find common ground on other issues. We’ll continue to provide lea

Judging Oregon's First Annual Session

Wolves.  Guns.  Trees.  Bar pilots.  Teen dating.

Before the recently completed legislative session in Salem, you would not have expected those subjects to make the short list of issues to be considered during the four-week sojourn at the Capitol. But they all came up.

To many observers, the list of not-so-important, complicated and controversial issues made for a confusing session. Every legislator had the freedom to introduce two bills each and almost all used it, meaning there were 180 bills in the hopper at the start of the session. Each interim committee had authority to introduce five bills each, which is how you get to nearly 300 bills.

Governor Kitzhaber, for his first official experience with a short, regular legislative session, came to the Capitol with the next steps on four ambitious reform proposals — health care transformation, education, early learning and health care exchange. Those four measures would tax any legislative session, regardless of length

Officials who pushed for the annual session would have called out three issues that should occupy legislators for those four weeks — rebalancing the sometimes-volatile state budget, handling emergencies (fires, floods, other natural disasters) and fixing unintended problems in bills passed the previous session.

To veteran Salem observers, those issue priorities made sense, especially adjusting the budget at a time when tax revenues dipped more than expected, caseloads for some state agencies grew and federal revenue vaporized.  

Politics and Health Care Reform

Politics is never a stranger in legislative proceedings, as reflected this week by moves in both the Oregon House and Senate to slow down or hijack elements of Governor Kitzhaber's health care reform package.

The governor's provisions dealing with coordinated care organizations and a health care insurance exchange are likely to survive the short Oregon legislative session, now in its third week, but it may cause lawmakers to hang around Salem a few more days than expected.

At issue is whether the health care reform package will include tort reform to shield coordinated care organizations from expensive malpractice lawsuits. Republicans want it in while Democrats, including Kitzhaber, want to wait to consider it until the 2013 legislative session.

The first political twist occurred early in the weekend when House Republicans convinced Democratic Rep. Mike Schauffler to join them in voting to send the health care insurance exchange measure (House Bill 3164) back to committee. Observers watching health care legislation interpreted the unexpected move as a way to create trading stock with the Governor over tort reform.

Later in the week, Senate Republicans tried the unusual — and usually unsuccessful — tactic of trying to amend the health transformation measure (Senate Bill 1580) on the Senate floor. It failed. So did a subsequent effort to send SB 1580 back to committee, largely because Senator Betsy Johnson, D-Scappoose, stuck with her Democratic caucus in voting for the bill, despite earlier pledges to vote for tort reform

Imagery Takes Center Stage

Governor Kitzhaber won plaudits for his rhetorical eloquence last week when describing his Early Learning Council initiative (House Bill 4165) using analogies.

At one point, a legislator on the House Human Services Committee, Rep. Mitch Greenlick, D-Portland, responded to the governor with the analogy of a wing walker.  For Early Learning Council reform to go forward, Greenlick said, those involved should think of the wing walker, who always had the instruction to not let go with one hand without having a good grip with the other.

Greenlick's point? Before the state goes all the way down the road of Early Learning Council reform, it should not lose a grip on the good programs operated by the longstanding Children and Families Commission system.

Kitzhaber, never short on words to describe his vision, quickly responded with another image. What he is asking groups to do in adopting a new system for early learners, the governor said, is like a rope-climbing experience for someone working out. Sometimes, he said, you have to let go of one rope before grabbing another.

Two more legislators — Senators Al Bates, D-Ashland, and Jackie Winters, R-Salem — continued the use of analogies when the health care transformation bill, Senate Bill 1580, came up Friday.  

Bates said it was important for legislators "to stay on the path" toward reform. Winters, in supporting a medical malpractice reform proposal, which wasn't added to the legislation, said, "it's not like we are blazing a trail here; many other states have taken the initiative we are proposing to take."

Those who are good at public podiums often use analogies to drive home a point with a word picture.

Promise of Cash Makes Reform Vote Likely

Governor Kitzhaber and one of his health care gurus — Dr. Bruce Goldberg, head of the Oregon Health Authority — returned from Washington, D.C. a couple weeks ago with a load of cash. They reported the Obama Administration promised to help Oregon continue reforming its health care system with $2.5 billion over five years.

As always with such pledges, some observers will say "show me the money."  But the Kitzhaber/Goldberg report made headlines just as legislative committees met at the Capitol to prepare in earnest for the February legislative session, at which health care reform will be one of the big topics.

Embodied in Legislative Counsel bill draft #97, the details of a key reform — Coordinated Care Organizations (CCOs) — made its debut. The idea is to focus care, especially for low-income Medicaid recipients, closer to where they live around the state.

News of the prospective $2.5 billion to finance reform probably came close to assuring that the legislature will pass reform legislation in February. It will be almost impossible to say no.

Here are other developments from last week's legislative committee meeting days:

       *  Three officials — Goldberg; Eric Parsons, chair of the Oregon Health Policy Board; and Mike Bonetto, the governor's health care policy assistant — gave House and Senate committees a report on reform progress and received a respectful reception.

       *  A group of health care policy leaders from the Portland metropolitan area, led by Greg Van Pelt, CEO of Providence Health & Services, and George Brown, CEO of Legacy Health System, updated lawmakers on progress to form a CCO that would organize care for citizens in the tri-county area.  The group, which has been meeting for three weeks and intends to keep working, calls itself the "Tri-County Medicaid Collaborative." It was viewed as a significant development because so many organizations – about 30, including health systems, insurers, counties and MCOs – have taken the initiative to follow-up on the governor's health care transformation vision. Similar, though smaller efforts are under way in other parts of the state.

Murky Jargon Blurs Budget Clarity

A headline in The Oregonian several weeks ago made the point that murky words get in the way of public understanding of health care reform issues. An Oregonian editorial last weekend urged Governor Kitzhaber to do a better job of sketching the details of his vision of education and health care reform. 

Murkiness also exists when it comes to general budget issues as legislators head to their first official annual session two weeks from now.

Consider these facts/perceptions about the budget:

         *  The state economist says the general fund is down by $305 million from the close of the 2011 legislative session. On a total general fund budget of more than $14 billion for a biennium, that is a rounding factor. Still, perceptions exist that cuts to K-12, higher education, cops and prisons and social services will be in the offing during the February session.

         *  One key legislator on the Joint Ways and Means Human Services Subcommittee was spending time in his office several weeks ago preparing a cut list of about $500 million. Those cuts, if enacted, would exceed the total $305 million revenue drop projected so far. 

         *  Rep. Dennis Richardson, R-Central Point, House co-chair of the Joint Ways and Means Committee, took credit earlier this fall for holding back a "reasonable ending balance of $460 million when the committee he co-chairs approved the 2011-13 budget." In his on-line newsletter, he added this noteworthy quote:  "...the good news is that having withstood the political pressure to spend every dollar and by retaining the $460 million ending balance, none of the $305 million of reduced revenue will be taken from the budgets for public safety, human services or education."

Knowing What You Buy in State Government

There were a couple of interesting developments in state budgeting last week.

First, Governor Kitzhaber ordered a hiring freeze in state government, a step many observers thought had already been taken in response to the continuing downturn in state revenue. His order followed a request from the three co-chairs of the Joint Ways and Means Committee who are preparing for a budget-dominated legislative session in February.

Second, Kitzhaber's chief operating officer for state government, Michael Jordan, appeared before the annual Business Summit in Portland to summarize a new bare-bones approach to the state government budget for the 2013-15 biennium. According to observers who heard the Jordan presentation, it will depart from the time-honored approach of building one biennial budget on top of another without taking a zero-based look at programs.

But the headline of this blog states another key premise that should exist in state government.

If you, as a state agency manager, are buying something from a private sector contractor, you should know what you are buying. If you, as a state legislator, are reviewing or voting on an agency budget, you should know what you are buying.

Planning for the February Legislative Session

While Oregon legislators are planning for their Christmas and New Year holiday celebrations, they also have February on their calendars.

That's when they will return to Salem for the first official "annual legislative session," which voters enabled when they changed the Oregon Constitution at the November 2010 general election.

Legislators experimented with annual sessions in 2008 and 2010 in an approach that some observers thought violated the Constitution.

Lawmakers arrive in Salem February 1 and probably will finish the session by March 5 or thereabouts — if, for other reason, than that the 2012 election filing day deadline is March 6, an event usually held in the House chamber.

At the moment, several major issues are on the February legislative agenda:

  • The next steps in Governor Kitzhaber's plan for education reform, which revolves around creating an Education Investment Board to oversee all of education from kindergarten through graduate school. The governor also envisions hiring an "education czar." The proposals remain controversial, especially in light of the recent dust-up between the State Board of Higher Education (which would go away with creation of the Education Investment Board) and supporters of now-fired University of Oregon President Richard Lariviere. In addition, many observers wonder how the governor will pull off the huge organizational changes, which include diminishing the role of the elected superintendent of public instruction, at a time when state money is drying up.