grand bargain

More Fuel for Oregon Revenue Debate

Oregon public schools received a substantial boost in revenue this year, but not enough to avoid teacher cutbacks and larger class sizes in the shadow of rising pension payments, which will add more fuel to the already raging debate over raising corporate taxes and changing the Public Employees Retirement System.

Oregon public schools received a substantial boost in revenue this year, but not enough to avoid teacher cutbacks and larger class sizes in the shadow of rising pension payments, which will add more fuel to the already raging debate over raising corporate taxes and changing the Public Employees Retirement System.

Oregon public schools are receiving more state funding, but a significant chunk of the increase is going to pay for teacher pensions, not teachers in classrooms. The situation will add fuel to both sides of the debate over the need for additional tax revenue.

School advocates will say it is proof more revenue is needed to cover the costs of public education. Business leaders will say it underscores the need to make changes in the Public Employees Retirement System.

The Oregonians’ Gordon Friedman filed a story indicating Oregon’s public schools will receive $400 million more than in previous years. But the bump is not enough, school officials contend, to avoid teacher layoffs, larger class sizes and program cutbacks.

Friedman provides specific examples:

  • Portland Public Schools will receive a $29 million funding boost, but $18 million of that increase will go for pensions and higher salaries. The district will employ 55 fewer teachers in its 77 schools this fall.
  • Salem-Keizer School District will get $31 million more, but its pension costs will rise by $10 million, resulting in 67 teaching positions being axed.
  • Beaverton School District will see a $21 million increase, but its pension cost will balloon by $14 million. Its budget-balancing challenge is aggravated by the opening of a new high schools. The District has elected to trim library staff, professional development and classroom supplies.

School officials expect more of the same in the next school year, even though the legislatively approved $8.2 billion K-12 budget a represents an 11 percent increase over the previous biennium. Legislative fiscal analysts predicted the $8.2 billion budget, which included an estimate of pension costs rising by 45 percent, should have been adequate. School officials disagreed and said $8.4 billion was needed to maintain the status quo in their local district budgets.

Specific numbers aside, the specter of a larger budget for K-12 schools and continuing teacher and programmatic cutbacks is the stuff that will further animate the debate over corporate taxation and PERS spending reductions. You get the flavor of the debate by how school advocates refer to corporate tax reform and business groups demand PERS reform.

There isn’t going to be any respite from having that debate continue before the Oregon legislature convenes for a short session early next year. There are two huge drivers of the conversation:

  • The Oregon Education Association is pushing an initiative to raise corporate taxation – a so-called Measure 97 light. The teacher union was forced to withdraw its initial ballot measure because of a constitutional question, but it has pledged to refile a corrected version. If it qualifies for the ballot, Oregon voters would decide its fate in the November 2018 general election.
  • Rep. Julie Parrish, R-West Linn, is pursuing a referral of the legislatively approved Medicaid funding package, which she calls a sales tax on health care. Because of controversial legislation approved in the 2017 session, voters would decide on whether to toss the tax package in a special election next January, just before lawmakers return to Salem.

The OEA-backed initiative will cause combatants to return to their political trenches and prepare for another expensive campaign. The prospect of a Medicaid tax referral has already splintered the business community, especially in the health care sector.

There have been calls for a legislative special session this fall to work out a compromise. Some school officials say the school funding issue is serious enough to act now, not wait until 2019. Newly declared GOP gubernatorial candidate Knute Buehler urged a special session to ”improve” the state’s Medicaid program, most likely in the form of ensuring that ineligible enrollees are removed.

The stakes are obviously high. If voters strike down the Medicaid tax package, lawmakers will once again face a massive budget hole. The net effect would be to turn the K-12 school budget-corporate tax debate into a three-way slugfest.

Hope isn’t high for a grand bargain to resolve this festering issue. The operating assumption of the moment is that a work group needs to be formed, statewide listening sessions held and compromises considered on corporate tax changes – a model that worked to produce a major transportation funding package that won legislative approval and won’t face a referral, as previous measures have. This process wouldn’t fully unfold until the 2019 legislative session – and after the 2018 general election and potentially a vote on the OEA tax initiative.

Without leaderships and a clear focus on an alternative, Oregonians can expect a lot of shoving and pushing – and apparently more teacher layoffs.

In Each Other We Trust

Even though Oregon lawmakers are laboring to approve a grand bargain budget deal, legislative leaders such as House GOP Leader Mike McLane and House Speaker Tina Kotek are seeking common ground based on mutual trust, a sharp contrast to gridlock in the nation's capital that has shut down part of the federal government.With the federal government on furlough and Congress in dysfunction, the Oregon legislature is trying to enact a grand bargain in what some hoped would be a one-day special session. That one day came and went without any action, but legislative leaders were meeting to hold together a deal they reached last week.

What's happening in Salem is a sharp contrast to what's not happening in Washington, DC.

As erratic as Oregon’s political process can be from time to time, we are, by comparison, an exemplar of the political process done right. One of the key reasons for Oregon’s success is the ability of Oregon’s leaders to avoid sharing all of their thoughts with the press.

Sausage-Making in Full View

Watching a special legislative session is unavoidably like watching sausage being made, with all the ingredients spilled on the political table in full view.As the saying goes, it may be best not to see either laws or sausages being made. But that is hard to avoid when contemplating a legislative special session.

Governor Kitzhaber has hosted Oregon legislative leaders at Mahonia Hall this week to barter a deal to make deeper cuts in public employee retirement spending and raise taxes on large corporations and wealthier Oregonians to pump more money into K-12 education, higher education and mental health care. 

The so-called grand bargain Kitzhaber seeks isn't new. It was debated in the regular legislative session but never quite got enough political traction. 

Gaining political traction often requires introducing new components into the policy machinery. Senate Republicans, for example, want to include a tax cut for businesses that file as S corporations. The idea goes in the opposite direction of raising money, but at least it involves taxation.

Political Pot Continues to Boil

The September 15 deadline is creeping up for Governor Kitzhaber to decide whether to move forward with a legislative special session to consider further cuts to public employee pensions, business tax cuts and an Oregon-led approach to building a replacement I-5 Columbia River bridge.

The path to all three is littered with political obstacles. One thing is clear, however. If there is a special session, it will be by September 30, the date that Oregon's offer expires to share the state costs on the bridge with Washington.

The Kitzhaber camp isn't saying whether he has lined up the votes for the grand bargain or bridge funding. The pieces may not fall into place – or fall apart – until Treasurer Ted Wheeler releases his financial analysis of the risks involved in Oregon leading the way on replacing the Columbia River bridge. When the Oregon-in-the-lead strategy was unveiled last month, Wheeler questioned whether there was enough time for an analysis before a special session would be called. Now he has until September 15.

Bridge financing is not a new subject for Wheeler, the former Multnomah County chair who pieced together the bucks to replace the aging Sellwood Bridge, which is now under construction. But the timing of the Columbia River bridge financial analysis couldn't have occurred at a stickier time for Wheeler, who might be the odds-on favorite to succeed Kitzhaber as governor if he decides not to seek re-election.

As it turns out, Kitzhaber is fundraising, presumably for his yet-to-be-announced 2014 gubernatorial re-election campaign. The three-term governor also showed his political flag at a Labor Day union function, declaring firm opposition to an initiative that would ban mandatory payments by public employees to public unions. The Oregonian speculated his comments – which caused Oregon AFL-CIO President Tom Chamberlain to quip: 'Damn, Governor, you sounded like the president of the AFL-CIO" – were aimed at politically defusing political opposition caused by his continued support for deeper cuts in public employee pensions.

Middle Ground in 'Grand Bargain' Debate

Politics versus policy.

That age-old debate surfaced again earlier this month concerning the motivations of Democrats and Republicans as they assess  the so-called "Grand Bargain" pushed by Governor Kitzhaber to make deeper cuts in the Public Employee Retirement System (PERS) to boost school funding, while reducing some business taxes.

A proposal along those lines failed in the 2013 legislative session, but some supporters have not given up on the idea. The governor will decide by August 26 whether to call legislators back into special session to try to do what they failed to do in the regular session. The key to getting the necessary Republican votes in the House and Senate may revolve around some form of business tax cut.

Media coverage has suggested some Republicans who want to regain control of the House and Senate may take a pass at further PERS cuts, so they can campaign against Democrats in the next election for failing to control PERS.

Democrats appear open to supporting the Grand Bargain if it puts more money into K-12 schools and avoids teacher or school year cuts, which they view as a winning election theme in 2014. 

The political calculations over the Grand Bargain, while not surprising, do raise questions about whether there is middle ground in this debate.

In “The Mindsets of Political Compromise,” political science professors Amy Gutmann from the University of Pennsylvania and Dennis Thompson from Harvard University suggest that compromise is more difficult in the United States today because of "permanent campaigns."

"The increasing incursion of campaigning into governing in American democracy — the permanent campaign — encourages political attitudes and arguments that make compromise more difficult," they wrote. "The resistance to compromise is a problem for any democracy because it stands in the way of change that nearly everyone agrees is necessary, and thereby biases the political process in favor of the status quo."

5 Pitfalls to Avoid for Successful Special Session

Governor Kitzhaber is making headlines as he tries to put together a deal on PERS cuts and revenue enhancement for legislative consideration in a special session sometime this fall.

Trying to find a legislative path to increase revenue or change PERS is tough enough during a regular session. To assemble a deal on both — in the interim — and call legislators back into special session to pass it is a herculean task at best.  

Kitzhaber's track record of success on big ticket items, along with his depth of experience in Oregon policymaking, gives him a head start, but there are at least five key pitfalls he should avoid as he traverses this difficult path.

1. 45 to 36, 23 to 18 — Oregon law requires 36 votes in the House and 18 votes in the Senate to pass any measure that raises revenue. But the math is never that simple when it comes to finding enough votes to pass a revenue raiser. A good rule of thumb is it will take three-fourths of the body in favor of a measure to find the three-fifths necessary to pass it. Kitzhaber has a lot of votes to find to pass this conceptual package.

2.  Special sessions aren't short, regular sessions — A special session is not just a short version of a regular session; it's a horse of a completely different color. Unlike regular sessions, the only bill (or bills) at stake are the topics for which the session is convened. Rank-and-file legislators generally have little to do but vote and are prone to a particular version of grumpiness about a lack of shared information and/or decision-making about the bills in play. Most important, individual members do not have individual bills at stake, making negotiations on the central issue even more difficult. No one knows this better than Kitzhaber, who was part of five special sessions in 2002.