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Oregon’s non-partisan Legislative Revenue Office (LRO) provides the members of the Legislative Assembly with unbiased research and analysis on issues related to taxation and school finance. It issues a report regarding Oregon state finance in February of each odd-numbered year.
The report offers a plethora of information regarding how the state taxes its citizens and spends its revenue. This document is readily
available online so policymakers and taxpayers alike can learn what is being done with the billions of dollars that the state government annually collects and distributes.
Taken in its entirety, the report leads the reader to an inescapable conclusion: Your Legislative Assembly suffers from a prolonged addiction to spending other peoples’ money.
The most recent report provides comparisons of government revenue collection and spending since 2002. The rate of government spending growth during that 15 years is little short of phenomenal. During that period, our state population increased by about 16 percent while private sector inflation increased by over 35 percent, as measured by the Consumer Price Index.
Incredibly, state government spending increased by more than 90 percent!
This means that state government spending in Oregon has grown more than two and a half times faster than private sector inflation for the last 15 years. More implausibly, that rate of spending growth persisted even as the private sector struggled through two deep recessions.
So where does all that money come from?
According to the LRO Report, revenue from personal income taxes, corporate income taxes and property taxes all grew by more than 50 percent, during the ten years between 2004 and 2014.
• General fund revenue has grown a little more than 80 percent, expanding about five percent on average each year since 2002;
• Revenue from charges, licenses and fees more than doubled, increasing about seven and one half percent per year; and
• Money from the federal government also more than doubled, growing by about eight and a half percent each year.
The State of Oregon will spend a total of nearly $69 billion during the two-year budget cycle that began July 1 and ends June 30, 2017. That calculates to annual spending of about $8,600 for each man, woman and child living in Oregon, or around $35,000 of annual state government spending for each family of four.
To truly put that figure into proper perspective, the state’s per capita income in 2014 was just over $40,000.
Politicians and pundits would like voters to believe the growth in public-safety spending is the major budget-driver. That simply is not true! Spending on public safety comprised 6 percent of the state budgets in 2002. Today, the public safety share of the budgets is only 5.2 percent.
However, during the past 15 years, spending on human services entitlements has more than tripled. The increases throughout the past years have been driven, in part, by the ill-advised decision to create the Oregon Health Authority as a separate entity from the Department of Human Services.
Their combined budgets have ballooned from $11.9 billion to $28.8 billion in the eight budget years since that division. Unsustainable budgets for both agencies are now diverting resources from other essential state government functions and services, such as education and public safety.
The question of spending priority may be further answered by another statistic revealed in the LRO Report. In that same 15-year period, the cost of state administration has ballooned by nearly two and one half times. The 2015-17 budgets allocate $11.7 billion to Administration and only $12.5 billion to public education.
We frequently hear progressive liberal politicians talk about “sustainability” with regards to the environment and free-market capitalism. The same folks who voice those concerns are notably quiet when it comes to applying the same standard to state government.
A state must have a vibrant, thriving private sector economy in order to generate the tax revenue necessary to sustain that level of public sector spending. Oregon’s woeful 29th in the nation ranking for household income falls very short in that category. That is dismal news for our economic future.
The LRO Report compared Oregon to other states, after correcting for our lower median household income. It computed the percentage of our average personal income that is collected by state taxes, fees and charges.
According to the LRO Report, Oregon ranks second highest in the nation for income taxes, eighth highest for charges, licenses and fees and 18th highest for property taxes. In total, Oregonians pay the 10th highest percentage of our personal income to state government.
Our friends among the progressive liberal majority offer more of the same. During the recently concluded Legislative Assembly, their solution was to continue their diligent work to create a bigger and more intrusive government that mandates higher pay and greater benefits. The results speak for themselves.
Oregon’s non-partisan Legislative Fiscal Office (LFO) released its post-session Budget
Information Brief in late July.
According to that document, available state government revenue for the 2015-17 biennium from General Fund and Lottery Fund proceeds increased to nearly $19 billion, a 13 percent increase from the recently concluded 2013-15 biennium. The Democrat majority insisted on spending virtually all of the nearly $2 billion increase in money. In fact, they set aside less than two percent of that windfall of cash to insure against a downturn in the state economy.
Human health and services topped the frenzy of spending, at nearly $29 billion. That spending sector has increased 250 percent since 2007 and now comprises more than 42 percent of the state’s entire budget.
That spending is driven, in part, by the fact that more than 1.2 million Oregonians are now on Medicaid. The expansion of Oregonians’ participation in that federal program was one of the key components of the state’s efforts to be the first state in the nation to implement the federal Affordable Care Act through the disastrous Cover Oregon project.
Federal dollars have kept the program afloat so far. About $380 million of that support will end in 2016. Further federal support will begin to be incrementally reduced at the start of the 2017-19 biennium. That reduced federal participation will serve to nearly double Oregon’s share of the cost by 2020. In fact, the 2017-19 Human Services budgets will cost at least $1 billion more due to these and other factors.
Oregon’s high percentage of food stamp usage also contributes to the increased costs of the human health and services programs. Nearly one in five Oregonians feed their families with food stamps ranking us among the top three states in the nation.
Public education comes in a distant second in state spending, at about $12.5 billion, or 18 percent of the total budgets. It represents by far the largest K-12 budget in Oregon’s history, as well as nearly 30 percent increases in both university and community college spending.
State administration is the third-largest expenditure in the budget, at $11.7 billion, or around 16.7 percent. Oregon is spending almost as much on government organizations as it is on public education!
Economic development comprises $4.3 billion of the current biennium’s budget, or around 6 percent, and transportation spending comes in at $3.6 billion.
I’ve long held the belief that providing public safety is the state’s primary obligation to its citizens. That priority is not reflected in the state budgets. Public safety spending, at $3.4 billion, comes in a distance sixth at five percent of state revenue. So much for spending priorities!
About 31 percent of the State’s nearly $69 billion total budgets are provided in the form of grants from the federal government. Virtually every one of those grants has conditions attached that require the state to perform specific tasks or adopt certain policies to achieved outcomes desired by politicians and bureaucrats in Washington D.C. Through this process, the federal government is purchasing our freedoms and using our own tax money to pay the bill.
As you can imagine, I would chart a completely different course.
The primary cause of Oregon’s rapid fall in household income is the staggering escalation in state government spending. Not only does government spending take much-needed money out of taxpayers’ pockets, but it also funds the creation of myriad rules and regulations that further stifle job creation.
An obvious solution is to allow our people to keep a great deal more of their hard-earned money to spend and invest in the private sector economy.
More than $3 billion a year would be infused into our private sector economy through a 10 percent reduction in Oregon taxes, fees and charges. Our State’s median income would be immediately increased by nearly $2,000 per household. We can only imagine the economic stimulus that would result from an annual $3 billion “Oregon tax credit.”
Funding “shortfalls” would force Legislators to reduce spending on state regulatory agencies. The certain result would be a reduction in the number of funded positions for regulators and rule makers. Such a scenario could serve to curtail the promulgation of the nearly 11,000 new or amended administrative rules that are currently issued each year by Oregon regulators and rule makers that cause such uncertainty for small business owners, investors and job creators.
History clearly shows that cutting state revenue is the only effective way to reduce the out-of-control, unsustainable growth of government at all levels. In our system of representative government, only the people are empowered to change that reality.
In my opinion, government spending should be the primary focus in our next general elections. There is, fortunately, enough time for the citizens of Oregon to begin planning for them, and to choose a different path than what is currently being pursued in Salem and Washington D.C.
In the alternative, we risk going down the same road as Greece and other nations who pursued reckless spending in the name of giving things to their citizens “for free.” The bill for all that grandiosity eventually comes due, and someone has to pay it. That becomes much more difficult when the government runs out of other peoples’ money.
We can still avoid putting ourselves and our state in the same situation, but that will require vigilance and a commitment to the principles of free market capitalism and limited government that worked so well for this country for many generations. It’s up to all of us to do everything we can to put this state and country back on the right track and on firm financial footing.
Please remember--if we do not stand up for rural Oregon, no one will.
Best Regards,
Doug
Senate District 28
Email: Sen.DougWhitsett@state.or.us I Phone: 503-986-1728
Address: 900 Court St NE, S-311, Salem, OR, 97301
Website: http://www.oregonlegislature.gov/whitsett
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