IP 28

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

 

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.

The battle lines on IP 28 are pretty clear, however. Proponents argue big corporations pay too little tax in Oregon, which results in inadequate funding for schools and other public services. Opponents will contend IP 28 is really a gigantic sales tax that will raise consumer prices and cost Oregonians jobs. Both arguments have relatively broad appeal in Oregon, which also may account for some lingering voter indecision.

The iCitizen poll showed support for IP 28 drops, especially among Republican voters, when the the “sales tax” label is applied to it. But DHM Research found strong residual support, even among Republicans, with the claim that corporations pay too little in taxes in Oregon.

Pollsters agreed that views on the controversial measure are fluid. They may fluctuate in the course of the next few months as campaigns mount their best arguments in the most places. The 2016 election has already revealed itself as out of the ordinary, with populist surges on both the political left and right.

The IP 28 campaign will be worth watching. But don’t count on the polls, at least quite yet, as much of a guide for what the eventual outcome.

Trump’s Bad News is Every Republican’s Bad News

Former Oregon Senator Gordon Smith lost his seat in 2008 in part because GOP presidential candidate John McCain pulled out of the state while Barack Obama pursued a vigorous grassroots campaign that boosted Democratic voter turnout. Similarly, the absence of a national campaign structure in Oregon this year will be a huge loss for the state's Republicans.

Former Oregon Senator Gordon Smith lost his seat in 2008 in part because GOP presidential candidate John McCain pulled out of the state while Barack Obama pursued a vigorous grassroots campaign that boosted Democratic voter turnout. Similarly, the absence of a national campaign structure in Oregon this year will be a huge loss for the state's Republicans.

News this week that Donald Trump’s presidential campaign war chest is down to $1.3 million is sounding alarms for Oregon Republicans.

In stark contrast, Hillary Clinton raised nearly nine times more money than Trump in May, and she entered June with about $42 million to spend. Corey Lewandowski, Trump’s campaign manager through the primaries who was fired on Monday, has called Trump’s campaign lean, with only 30 paid staffers. What cash and manpower there is will likely go to swing states, but Oregon isn’t viewed as one of those.

Donald Trump's decision to fire embattled campaign manager Corey Lewandowski is one of many signs of trouble for the presumptive Republican nominee's campaign leading into the November general election. 

Donald Trump's decision to fire embattled campaign manager Corey Lewandowski is one of many signs of trouble for the presumptive Republican nominee's campaign leading into the November general election. 

The bad news for Oregon Republicans is they won’t get much if any help from Trump to bolster their own campaigns. The absence of a national campaign structure is a huge loss. Just ask former two-term Oregon Senator Gordon Smith, who lost in 2008 to Jeff Merkley.

Smith became the first incumbent Oregon senator to lose re-election in 40 years. A key reason for his loss was the near absence of a campaign in Oregon by GOP presidential nominee John McCain compared to a vigorous grassroots effort by Barack Obama. What Republican apparatus there was got pulled in the latter stages of the campaign when McCain, strapped for money, concentrated on other states instead.

There is virtually no chance Trump will even try to score an upset victory in Oregon, which casts an even darker shadow over the nearly invisible campaigns of Republicans running for statewide office this year.

Donald Trump has less cash on hand than Ben Carson and Ted Cruz, whose campaigns have been suspended.  (Source:  NPR )

Donald Trump has less cash on hand than Ben Carson and Ted Cruz, whose campaigns have been suspended. (Source: NPR)

What seemed not that long ago to be a blockbuster election year in Oregon has turned into a bust. There are little known challengers trying to unseat Senator Ron Wyden and Governor Kate Brown. Dennis Richardson, the best known Republican running for statewide office after a better-than-expected challenge in 2014 to John Kitzhaber’s re-election, has so far run a low-profile campaign for secretary of state.

Figures from the FEC show Hillary Clinton with a robust campaign war chest approaching the general election. (Source:  NPR )

Figures from the FEC show Hillary Clinton with a robust campaign war chest approaching the general election. (Source: NPR)

Without the oomph of a national campaign, these GOP candidates may be left further in the fumes to their Democratic counterparts who will have the benefit of added fuel from an expected Hillary Clinton campaign team in Oregon.

The other political sparks that can incite higher voter turnout are ballot measures. Those don’t look too good for Republicans either. So far, only two measures have been certified for the November general election ballot in Oregon – one to repeal the mandatory 75-year-old retirement age for judges and the other to slap a major tax increase on corporations with $25 million or more in annual sales in the state. IP 28 is more likely to generate voter enthusiasm on the political left than the political right, even if it winds up losing.

A number of other measures, such as ones dealing with a higher minimum wage that might have bumped up turnout, have been scrapped because of the anticipated electoral brawl over IP 28. It's expected to suck up a lot of campaign cash.

Many of Trump’s most ardent supporters are voters who have hung out in the fringes of politics, many without casting ballots. Fundraising, campaign organizations and message discipline aren’t important to them and may even be antithetical to their vision of an ideal “tell-it-like-it-is" candidate. For political insiders who know through experience what it takes to win big-time races, Trump is a nightmare unfolding in slow motion.

Trump’s puny fundraising, his tiny staff and his ubiquitous media appearances in lieu of political advertising will affect more than his own poll numbers. They will affect many down-ballot candidates seeking re-election or, in Oregon’s case, trying to get noticed. Just ask Trump's 16 frustrated and defeated primary opponents.

IP 28 Would Boost Taxes and May Dampen Economy

The Legislative Revenue Office released its long-awaited analysis of an initiative to impose a gross receipts tax on large corporations selling in Oregon. It says taxes would definitely go up and the overall economy might take a hit.

The Legislative Revenue Office released its long-awaited analysis of an initiative to impose a gross receipts tax on large corporations selling in Oregon. It says taxes would definitely go up and the overall economy might take a hit.

The initiative to impose a gross receipts tax on larger corporations selling in Oregon would raise $6.1 billion in revenue in the next biennium, while pushing up consumer prices and dampening income, employment and population growth in the next five years.

The Legislative Revenue Office (LRO) shared its findings today on IP 28, which will simultaneously cheer its public sector supporters and send shudders down the backs of its business opponents. Lawmakers and others have been clamoring for weeks for the findings, which will confirm fears and hopes, depending on your point of view.

The $6 billion in new tax revenue would fortify the state’s ability to boost funding for education, health care and senior services and make Oregon’s corporate tax system less volatile in down economic cycles, according to LRO.

Because the tax change falls heaviest on as few as 274 larger corporations with more than $25 million in annual sales in Oregon, LRO says they may find it worthwhile to restructure their businesses here to avoid high taxes. The retail and wholesale trade sectors would be hit the hardest by the tax increase, which could put upward pressure on consumer prices, shrink job creation and possibly even discourage some people from moving here, LRO projects.

There are other variables that complicate the analysis. One is the definition of a sale in Oregon. Another is the exemption of S-corporations, partnerships, proprietorships and benefit corporations, known as B-corps.

Then there are anomalies that arise in the interaction between existing corporate income tax rates and a corporate minimum tax in the form of a gross receipts tax. LRO provides an example of two hypothetical companies, each with $60 million in Oregon sales. For Corporation A with only $3 million of net income apportioned to Oregon, its tax would rise from $218,000 to $905,001 under IP 28. For Corporation B with $18 million of net income apportioned to Oregon, its current tax of $1.358 million would be the same under IP 28. 

It appears certain Oregonians will vote on IP 28 this fall after backers submitted far more signatures to the Secretary of State than required to qualify for the general election ballot. The specter of IP 28 and a boisterous political showdown between labor and business has caused others to back off potential initiatives, citing a lack of support and campaign cash, which is being sucked into the IP 28 vortex.

The LRO report doesn’t contain a smoking gun data point. Oregon tax revenue would rise as a result of IP 28, moving up the state’s per capita rate of taxation from 28th to 20th nationwide. The ratio of taxes to income would climb from 10.1 percent to 11.6 percent, with Oregon jumping from 26th to 9th nationally in that category.

LRO predicts the marginal impact of IP 28 will be to make Oregon’s tax system more regressive, but not by that much. Income, employment and population growth would be dampened, but only slightly. Larger negative impacts would be offset by higher public sector expenditures that tend to circulate in local economies.

LRO projects a net loss of 20,000 Oregon jobs – 37,000 in the private sector and reduced by a gain of 17,000 public sector jobs. Employment would decrease most sharply in the retail and wholesale sectors. Income would decrease $430 million, with income dropping 0.8 percent for households earning less than $100,000 annually.

The biggest “if” in the LRO report is now affected corporations will respond. “Both the large size of IP 28’s revenue impact and its concentrated impact on a small group of large corporations adds considerable uncertainty to the estimates,” LRO concludes.