Eight reasons Oregon is in deep budget trouble
1. Recession: Unlike past economic troughs, this one was too deep, too vicious to muddle through with nips and tucks.
2. No sales tax: Our heavy dependence on income taxes to pay for schools and state programs leaves us vulnerable when jobs dry up.
3. Failure to apply spending brakes: Lawmakers went on a spree in 2007 that came back to bite them.
4. Dinky savings accounts: The state's first-ever rainy day fund, established in 2007, was all but depleted within two years.
5. Ballot measures approved by voters: Property tax limits, longer prison sentences, kicker rebates and mandatory parks spending leave little wiggle room when income stalls.
6. Public employee benefits: Most state employees get fully paid medical insurance. And the retirement system, despite rollbacks and changes for newer employees, still has old guaranteed returns and present retirement contributions that add up to soaring future costs.
7. Federal stimulus: It saved jobs for two years, but now it's going away and the economy did not recover fast enough to replace it.
8. The kicker: If the economy takes off faster than state officials anticipate, Oregon could be sending money back to individuals and corporations while cutting schools and services.
#1 is clearly correct, this is the worst recession since the great depression, there is no way to escape its downward pull. But #2 is simply wrong. As I have illustrated in this blog through a rather extensive bit of research, a sales tax would not solve anything as consumption and income are very highly correlated. Sales taxes are almost as volatile as income taxes. It is the shift away from property taxes that contributed most the the current volatility of state revenues - which is alluded to in #5. [Though Ironically de-coupling property taxes from market values helped a tiny bit as the housing crisis hit] #6 is also misleading. I don't know of a full accounting for all state employees, but the relatively generous benefits I get as a state employee are more than outweighed by the much lower salary I get relative to my peers. I accepted a salary that was 25% below a competing offer when I moved back in 2006. I had a very, very strong preference for living in Oregon, but we are at a competitive disadvantage amongst those without such preferences.
I do agree most strongly with #4 as you all well know. In fact I think a good rainy-day fund built into the kicker would render the kicker question (#8) moot. I think this is the #1 priority for the state legislature going into the next session.