Oregon’s December Forecast & Charting A New Course

I am State Representative Dennis Richardson and I write this newsletter for Oregonians interested in what can be done to make Oregon a better place to live and work. This edition focuses on two subjects, the breaking news on Oregon’s revenue, and the message Oregon voters recently sent to the Legislators.

Oregon Economic Forecast. Today, the Oregon’s State Economist released the Quarterly Revenue Forecast that showed a “smoke and mirrors” increase in 2009-11 revenue. In reality, a reduction of $40 Million would normally have been disclosed for the remaining seven months of this biennium.

Unknown to most of us, the Oregon Dept. of Revenue recently announced an increase in the percentage of State payroll withholdings beginning Jan. 1, 2011.  Although the increase in payroll deductions apply to the 2011 tax year, the withholdings from January 1 – June 30, 2010, will appear on the State’s balance sheet as current budget revenue, even though much of it will be returned to the wage-earners after their 2011 tax returns are filed.  In other words, today’s forecast artificially shows an increase in 2009-11 State revenue of $61.9 million, when the actual revenue expectations, without the artificial bump-up in withholding, would have shown a $40 million decrease in 2009-11 revenue since the Sept. 2010 Forecast.  The graph below depicts the actual reduction, not the artificial increase resulting from the increase in 2011 tax year withholding rates.

The actual $40 million decrease in State revenue is the tenth consecutive reduction in revenue estimates. Since the close the 2009 Legislative Session, Oregon’s anticipated revenue has fallen by 1.3 billion.

Despite federal and state efforts, Oregon continues to be mired in a serious recession with little hope for immediate improvement. Our new legislators ran on campaign platforms promising to restore fiscal responsibility and common sense, and it will be critical for Democrats and Republicans alike to avoid partisan fights and quickly set about changing Oregon’s business environment to one that promotes economic recovery.

Economic recovery does not come from expanding the size of government. When the government creates a job by hiring an additional public employee, it pays with tax dollars—which essentially takes money from one taxpayer to give to another, and no wealth is created.

It is time for government to get out of the way of free enterprise and enable an economic environment where private businesses are free to innovate, compete and grow. Such growth creates a demand for more employees and therefore, more jobs. Thus, when the economy is expanding, jobs are created to produce the goods and services that result. In short, jobs come from new and expanding businesses, not from expanding government.

The size, duration and extent of Oregon’s economic recession have placed all Oregonians in a precarious financial situation. To balance the current 2009-11 State Budget required cobbling together $1.6 billion in one-time money—primarily composed of federal stimulus money, state savings accounts and agencies’ ending fund balances. In addition to replacing the $1.6 billion needed to balance the current budget, in 2011-13 an additional $2.2 billion will be needed to maintain Oregon’s current service level “CSL” for the next two-years. Thus, assuming Oregon’s revenue remains constant, $3.8 billion in additional revenue would be needed to balance the next budget.

Unfortunately, Oregon’s revenues have not remained constant. In fact, Oregon’s revenues remain in free-fall. In a previous newsletter I explained the August 2010 Revenue Forecast disclosed that Oregon’s expected revenues had dropped more than $1.3 Billion since the 2009 legislative session ended. Today’s news confirmed that assessment.

The significance of a $1.3 billion decrease in State revenue is stunning. In addition to the $3.8 billion discussed above, that would have been needed if revenues had been stable, an additional $1.3 billion will be needed to compensate for recent losses in anticipated state revenues. Thus, Oregon now faces a $5.1 billion shortfall going into the 2011 legislative session, unless there is a dramatic and immediate economic recovery.

Spending freezes and across-the-board cuts will not fill a $5 billion hole. The state simply cannot resolve a $5 billion shortfall without major structural reforms in both what services are provided and how they are provided. Determining the nature, size and consequences of such systemic reforms is serious business.  A select group of experienced, credible and thoughtful people are working on this project.  I will report in a future newsletter on the suggested reforms and ask for your advice on them as soon as the research and analysis are completed.

Charting Oregon’s Course – The Voters Have Spoken.  Oregon’s 2010 General Election was a wake-up call for the legislature. Oregonians voted against continuing down a path of high taxes, high debt, and high regulation—a path that has contributed to historically high unemployment and low state income. Instead, Oregon voters demanded a course correction for Oregon’s political and economic future.

Although late-counted Multnomah County ballots once again ran nearly 3 to 1 in favor of the Democrat, handing John Kitzhaber a Wednesday win, it was a different story in Oregon’s legislative races statewide. After the ballots were all counted, there were eight new Republican legislators—six in the House of Representatives and two in the State Senate. (For those who like sports analogies, the final score in the contest for new legislators was 8 to 0.)

When a state’s controlling political party loses eight seats and gains none in a single election, it is worth considering what message the voters were sending to their elected government leaders. The way our system works, if the elected representatives do not make the necessary course corrections desired by a majority of the voters today, the voters may choose to speak even more clearing at the ballot box in 2012. Alexander Hamilton stated it well: “Here, sir, the people govern; here they act by their immediate representatives.”

We can have great faith in the voice and will of the people. The majority of Oregonians understands and desires to restore the basic principles espoused by our state’s founding pioneers—principles which helped our state lead and prosper for more than a century. We would do well to shake ourselves out of the fog of social experiments which has clouded our collective judgment and hearken back to those fundamental principles that secured for us freedom, liberty and prosperity.

I believe the fundamental principles of our Oregon Pioneer heritage include the following:

  1. God gave each individual rights and liberty, secured and protected by the U.S. and Oregon Constitutions;
  2. Oregon’s government should be sustainable and limited in size, scope and cost;
  3. Oregon should maintain low taxation while leaving as much economic wealth as possible in the hands of those who earned it—this is the law of the harvest: one’s efforts determines one’s outcomes;
  4. Oregon stands for self-reliance, personal responsibility and individual freedom to pursue happiness as one chooses, including the freedom to succeed or fail depending on individual initiative, hard-work and self-discipline, without excessive government regulation, control or intervention;
  5. Oregon citizens are charitable and accept the duty to serve and care for those who cannot care for themselves—charity based on individual and group philanthropy, not on tax-funded redistribution of wealth under threat of government confiscation and imprisonment.

Perhaps the recent legislative election results and the decisive course correction ordered by the voters will help legislators in both parties “man up” the political courage to act decisively to solve our fiscal problems. It will require the combined resources of Oregon’s new (renewed) Governor and both houses of the Legislature to develop a plan to restore Oregon’s pioneer spirit and chart a new course for Oregon’s future.

To reform and restore Oregon, our elected officials need the help of interested and informed citizens. If you have ideas that can help transform Oregon, please share them at www.OregonTransformation.com. This transparent website was created to give all Oregonians access to information they need to advance innovative solutions. We must change the paradigm in Salem and you can make it happen. This is not the time for any man or woman to sit on the sidelines with ideas that could make Oregon a better place, both now and in the future.

In conclusion, regardless of what the official version of Oregon’s economy might be, our State revenues have steadily declined for the past three years and the Oregon voters want real change in the way our State functions and spends its resources. Time will tell whether our legislative leaders understand the true nature of Oregon’s economic decline and heard the message sent in this month’s General Election.  It is time for the Legislature to change Oregon’s course accordingly.

Sincerely,

Dennis Richardson
State Representative