Cleaning up the GOP wreckage in Oregon

Russell Sadler

While American voters decided divided government was necessary to change course in Iraq and cauterize the hemorrhaging federal budget deficit, Oregon voters decided to give the government to one party to break the gridlock that has paralyzed policymaking in Salem for more than 15 years.

Democrats now control both houses of the Oregon Legislature for the first time in 16 years and a Democrat was reelected governor. You can ignore the Republicans campaign fears of a wave of “liberal programs” and massive tax increases. Republicans drank the Kool-Aid. They committed the unpardonable political sin of believing their own campaign rhetoric.

There will be no new programs, no wave of tax increases. The state is broke. It borrows money every session to meet its operating expenses. The interest payments on these borrowed billions consumes a larger portion of the budget each biennium, leaving less money available to pay for services that people actually receive. There will be new priorities for the money that is spent, however.

Here’s what you can expect a Democratic Legislature to do when it convenes in January:

Democrats will rearrange state spending to insure every child in Oregon not covered by federal or private insurance. This should actually lower medical costs in the long run, because these children will receive preventative care rather than spending more dollars to cure serious illness that might have been prevented.

The Democrats will do what the Republicans deliberately failed to do. They will increase the money per student appropriated for public schools in an effort to brake the rapid rise in class size. Yes, that rewards the teachers union that gave a lot of money to Democrats, but it also improves education substantially by creating smaller classes with less distractions so teachers can spend more time with students.

A Democratic plan to make prescriptions more affordable for those not covered by prescription drug plans was largely approved by voters who approved Ballot Measure 44 last Tuesday. The Democratic Legislature will see the details are implemented.

Democrats will reduce the risk of identity theft by letting consumers freeze their credit if they suspect their identity information has been compromised. Credit companies want to limit the ability to freeze and unfreeze credit because it costs money to do it and cuts into earnings.

Democrats promise to finance 100 new state troopers, primarily in rural areas where they augment county sheriff patrols and rural municipal police forces. For reasons that have never been clear, Oregon Republicans have been willing to let the Oregon State Police wither on the vine rather than raise taxes to keep patrols on the road.

Even these modest objectives cost money, of course, and the state is broke. It will be interesting to see where the Democrats cut the budget to finance these new priorities. But that’s what they were elected to do.

There are other ways to raise money without new taxes, but they are deliberately more difficult to do than in the past.

By far the largest source of revenue available to the Legislature comes from repeal of tax breaks and tax exemptions that no longer serve their purpose. In the 1960s, 70s and 80s, legislative interim committees reviewed these tax breaks and decided to extend them or end them. In the 1990s, Oregon Republicans began trading tax breaks for campaign contributions and ended the interim committees that systematically reviewed them. Once bought, the Republicans were expected to stay bought.

The fine print in 1990’s Ballot Measures 5 includes a provision that requires any “tax increase” to be approved by three-fifths of each house instead of a simple majority. The fine print goes on to define the repeal of a “tax exemption” as a “tax increase.”

Correction, 11/17/06: I incorrectly attributed those supermajorities to Measure 5. They were placed in the Oregon Constitution by Measure 25, championed by Sen. Gordon Smith.

This provision allows a minority of two-fifths plus one to frustrate the will of a majority of legislators when it comes to changing priorities in tax law. Oregon Democrats do not have the votes to overcome a minority of two-fifths plus one, so any tax reform will require a bipartisan effort. Given the Republican penchant for purging legislators who do not toe the party line, reforming Oregon’s lopsided, unbalanced tax system will be a major project and probably will begin with an interim committee with members of both parties after the 2007 session.

That is why any radical change in spending or taxes under a Democratically controlled Legislature is unlikely. Cleaning up the wreckage of 16 years of Republican borrow-and-spend fiscal recklessness while hobbled with these antidemocratic super majorities is going to be the Herculean task of a decade or more.

  • Marvin McConoughey (unverified)

    I agree with elimination of most tax expenditures. A few may a reasonable reaction to unhelpful federal laws. I also predict that the 376 pages of current tax expenditures will not be much reduced. Recall that past legislative tax expenditure reviews retained most of them and of those that were passed, Governor Kulongoski approved very few. What has changed? If tax expenditures are to begin, where to start? I suggest starting with me. I get a tax break for being over 65. Get rid of it.

  • (Show?)

    Russell, you wrote:

    The fine print in 1990’s Ballot Measures 5 includes a provision that requires any “tax increase” to be approved by three-fifths of each house instead of a simple majority. The fine print goes on to define the repeal of a “tax exemption” as a “tax increase.”

    The 3/5 requirement was NOT in Ballot Measure 5 - it was a Gordon Smith-led legislative referral, Measure 25 in 1996.

    Moreover, there is no fine print in Oregon's constitution defining the repeal of a tax loophole as a "bill for raising revenue" - the term in Measure 25.

  • Lynn Porter (unverified)

    Wouldn't rising state tax revenues, due to the improving state economy, give us some room to restore funding to damaged state programs such as education and the Oregon Health Plan?

    The corporate tax breaks have got to go. If the legislature can't do it then we have to do it by initiative.

    The state legislature must do something to cover ALL of the medically uninsured. Just covering all the children, while certainly a good thing to do, is not enough.

  • IndependentAndy (unverified)

    The fine print in 1990’s Ballot Measures 5 includes a provision that requires any “tax increase” to be approved by three-fifths of each house instead of a simple majority. The fine print goes on to define the repeal of a “tax exemption” as a “tax increase.”

    So...if the exemption isn't repealed...but say cut to $1....does that count as a tax increase?

  • verasoie (unverified)

    IndependentAndy, I like the way you think! I sure hope it's the case, I'm disgusted that we're stuck with these outdated tax exemptions that leave us hamstrung! Presumably legislative aides read this site, but otherwise, you'll be passing that thought along to your (Democratic) representative?

  • steven andresen (unverified)

    I do not agree that our tax code hobbles the state. Rather, I think it's the toleration of slavery that will undermine all our efforts to support schools, make affordable health care, improve infrastructure, build business, and so on.

    By slavery I mean the fact that it costs pennies to do in China, India, and elsewhere what it takes hundreds of dollars to do here. In order to compete with slave states, we will be asked to live like slaves.

    I see this process happening in Europe as well as here. Welfare, education, and social service programs will be cut or eliminated to reduce the cost of doing business.

    So, I don't see the dems thinking their long term success involves opposing our toleration of slavery. I strongly suspect they will go after smaller, more doable, less meaningful reforms.

  • Lynn Porter (unverified)


    1. Is the 3/5 vote requirement for bills "raising revenue," passed in Measure 25, in the state constitution or is it just a law?

    2. You say there is nothing in the state constitution "defining the repeal of a tax loophole as a 'bill for raising revenue'". Is there a law to that effect?

    3. If not, are you aware of any legal decisions or advice on the question of whether repealing a tax break would constitute "raising revenue"?

  • BlueNote (unverified)

    A good post and mostly good ideas, except that I wonder about the Oregon State Police proposals. I assume many of the readers of this blog ride bicycles exclusively, but for those of us who need to get back and forth between Portland and eastern Oregon regularly, I appreciate the fact that there are a lot fewer OSP's out there to hassle me. Maybe the new Dem majority could increase the I-84 speed limit to 75 at the same time as they add more officers? Then I could support the idea.

  • (Show?)
    Is the 3/5 vote requirement for bills "raising revenue," passed in Measure 25, in the state constitution or is it just a law? Posted by: Lynn Porter | Nov 12, 2006 11:59:45 PM

    Measure 25 was a Constitutional Amendment.

  • dddave (unverified)

    "There will be no new programs, no wave of tax increases."

    Uh, Russ, so what is this new beer tax proposal then?

    And if those tax breaks are all repealed as you would like, then what, we all dont notice the sudden "whoosh" from our collective wallets? Oh yeah, that money ALWAYS belonged to the state, so that doesn't count? You are playing a two faced semantic game, pathetic.

    You want money for schools, find it in PERS. No one deserves the retirement packages PERS gives, period. Now at least 20% of all districts costs, and still going up strong. At least Oregon leads that statisical column.

    Health insurance for kids? I thought they needed health care. Insurance is a funds delivery system.

    Prescriptions cheaper? Why dont we all just get to get on the PERS bennies bandwagon? Why cant we all take advantage of the states buying power for the whole package? It's just a matter of degree, right? I pay way more than PERS folks for my family and do not get even close to the coverage.

    Identity theft. Good one, you can freeze your ruined credit at the big three credit bureaus. Unless you can change the way they do biz, why waste our time?

    What is next, a bunch of State declarations on international issues??

    Push that measure 5 technicality issue, that one really has legs....

  • djk (unverified)

    Oregon Constition, Art. VIV, §25

    (1) Except as otherwise provided in subsection (2) of this section, a majority of all the members elected to each House shall be necessary to pass every bill or Joint resolution.

    (2) Three-fifths of all members elected to each House shall be necessary to pass bills for raising revenue.

    (3) All bills, and Joint resolutions passed, shall be signed by the presiding offices of the respective houses.

    The question is, what is a "bill for raising revenue" under section (2)? That seems a matter for the legislature to define or a court to interpret. Democrats have enough votes (a simple majority) to pass a legislative finding (interpretation? definition?) that repealing a tax expenditure is a spending decision, not a "bill for raising revenue" -- after which, they can go on a search and destroy mission to plug up all kinds of loopholes in the tax code.

  • RichLand (unverified)


    'Considering the wording of Article IV, section 18, its history, and the case law surrounding it, we conclude that the question whether a bill is a "bill for raising revenue" entails two issues. The first is whether the bill collects or brings money into the treasury. If it does not, that is the end of the inquiry. If a bill does bring money into the treasury, the remaining question is whether the bill possesses the essential features of a bill levying a tax. See Northern Counties Trust, 30 Or at 402 (stating test). As Northern Counties Trust makes clear, bills that assess a fee for a specific purpose are not "bills raising revenue" even though they collect or bring money into the treasury."

  • (Show?)

    Chuck Sheketoff is absolutely right -- the supermajority in question was in Measure 25. My bad.

  • Lynn Porter (unverified)

    I noticed this in the same Oregon Supreme Court decision referenced above:

    Section 3 of SB 963 does not collect or bring any money into the treasury; it does not impose a new tax, increase an existing one, or even impose a fee for a service. Rather, section 3 transfers funds already in hand from one program (a tax refund) to another set of programs (expenditures for health related purposes). A bill that allocates existing monies among different programs does not "raise" revenue within the meaning of Article IV, section 18, and did not have to originate in the House of Representatives.

    Since people keep referring to tax breaks as "tax expenditures," would the same logic apply, that the legislature, in abolishing a tax break and using the money for other purposes, would be simply reallocating the money? Thus requiring neither a 3/5ths vote or origination in the House.

    Is there a lawyer in the house?

  • RichLand (unverified)
    <h2>No attorney here, but it's my understanding that Legislative Counsel Office makes the determination as to whether a particular bill is a revenue raising measure requiring a 3/5ths vote. I'm sure the 2005 House leadership was not interested in pursuing the question of whether tax expenditure repeal bills actually were required to have 3/5ths. Perhaps Speaker Merkley et al. should pursue the question with Leg. Counsel before the 2007 session gets underway.</h2>

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