Oregon Democrats (Reluctantly) Look to Address Budget Deficit with Spending Cuts

Here's why Congressional Republicans can't seem to do the same

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Governor Kate Brown
Oregon Department of Transportation / Wikimedia Commons

While a Republican-controlled Congress continually fails to address persistent budget deficits at the national level, Oregon's constitutional requirement for a balanced budget is forcing its Democratic governor and legislature to take major steps to address theirs.

Yesterday, Oregon Gov. Kate Brown came out with a three-pronged plan to cut the cost of state government in the face of a $1.6 billion budget shortfall. These proposals come on top of a statewide hiring freeze announced last week.

Prong one of Brown's plan calls for creating a task force that will study which state assets can be privatized or borrowed against to pay down pension debt. The task force will also study the feasibility of getting state employees to contribute more toward their pensions.

Oregon currently has $22 billion in unfunded pension liabilities, but more conservative estimates put that figure closer to the $50 billion mark.

Prongs two and three of Brown's plan instruct state agencies to use market compensation as a standard for salary negotiations with public sector employees, and to get tougher on collecting some $560–760 million in unpaid taxes owed to Oregon's general fund.

And the belt tightening is unlikely to stop there. Back in February, budget committee co-chairs from the Oregon House and Senate laid out a plan that relied wholly on spending cuts to tackle the state's looming budget deficit.

The supposedly nightmarish vision of this plan—which called for 1–3 percent cuts to K–12 and higher education spending—was never truly intended to pass in progressive Oregon, but it served to focus the minds of legislators on the need to do some substantial slashing within the state budget.

State Sen. Richard Devlin—the Democratic co-chair of the Senate Ways and Means committee—came out in March with a budget plan that would rely in equal measure on tax increases and spending cuts. Then on April 21, a bipartisan letter from the legislature's budget writers to the governor bluntly expressed the need for the state government to slim down as a solution to baked-in budget deficits.

"Without action to contain the growing costs of state government now, the structural imbalance will cause even greater deficits in future years," the letter reads before going on to elaborate a number of ways the state could save money.

These include some pretty good ideas, such as a two-year extension of the governor's hiring freeze—the current policy is set to last two months—and cutting the state's workforce from 1.5 percent to 1 percent of the population.

The legislators' letter also contains some face-palmingly obvious suggestions, such as to "not create new programs or funds that have no money to support them," and to fix existing infrastructure instead of building more of it.

None of this is to suggest that Oregon's bright blue politicians and voters have all the sudden become libertarian state-smashers. Indeed, intermingled with all the calls for spending cuts and efficiency savings have been more than a few ill-advised proposals for a gross-receipts tax and for brand new levies on hospitals, coffee, and junked cars. (The latter two were, mercifully, killed.) Instead, the lesson—and one that should be instructive on the national stage as well—is how to get Democratic lawmakers to consider spending cuts in the first place.

One reason for this seeming change of heart is the spectacular failure of Measure 97, a 2016 ballot initiative that called for a 2.5 percent gross receipts tax on corporations making over $25 million in sales, which was expected to bring in $3 billion annually. Had that revenue materialized, spending cuts would no doubt be off the table.

But a shortage of tax receipts to match their wish list doesn't stop Democrats in Washington from becoming hysterical at the thought of small trims to federal programs. The real difference is the constitutional requirement that Oregon actually balance its books over the biennial budget cycle.

This combination of voters saying no to new taxes and lawmakers being constitutionally prohibited from endless borrowing is forcing Oregon's otherwise spend-happy politicians to slow the steady growth of state government.

Sadly, the federal government faces no such restriction. Congress has the authority to borrow nearly limitless sums of money to finance its current expenditures. The result: a $560 billion budget deficit, $19 trillion dollars in debt, and unfunded liabilities that official estimates put at $55 trillion, but could be as high as $222 trillion.

And despite the fact that Congress is now controlled by Atlas Shrugged–reading "small-government conservatives" (their words), no serious reductions in federal spending seem likely at the moment. President Trump's much-talked-about "skinny budget" would only shift dollars from wasteful domestic spending to destructive military spending, and it's doubtful that House and Senate Republicans would even pass that.

The takeaway is that politicians will rarely if ever shrink the state unless they are forced to. Democrats in Oregon have their hands tied by the state Constitution, and are therefore taking spending cuts seriously.

Republicans in D.C. are given free rein by the U.S. Constitution, thus dooming federal taxpayers to uncontrolled debt and deficits for the foreseeable future.

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  1. “And then I fingered them both at the same time, like this.”

    1. It was *this* long and I couldn’t believe the whole thing fit!

    2. “You’ll just have to imagine the third prong here, folks.”

  2. It’s a tad bit disingenuous to compare the fiscal situation of a state with the federal government, considering that a state cannot print its own money and its bonds are not the basis for the financial system (like treasury notes), thus requiring them to balance their finances (sometimes). Their are external pressures placed on states that don’t exist for the federal government.

    And, if we’re looking for a state that has been fiscally responsible, Oregon is not the state to choose (although it is better than its blue contemporaries).

    1. WTF? The entire comparison is based on one government being able to borrow without limit and one not being able to borrow at all.

      What’s disingenuous is to complain that you have a different technical reason for why one can borrow and one can’t, and therefore to call the article defective.

      Loser.

      1. Quite the vapid comment. Par for the course, I suppose

      2. WTF? The entire comparison is based on one government being able to borrow without limit and one not being able to borrow at all.

        Would’ve had to actually read the article to realize that, and “reading iz 4 faggitz,” fag.

        1. Apparently you didn’t understand the comment, either. You’re not too bright, are you?

          1. Your dimness hasn’t enlightened anybody yet.

          2. No, we understand your comment.

            It’s just stupid.

    2. Christian addresses the difference between the state and federal governments in paragraphs 14-16 by explicitly stating that the state is constitutionally required to balance its budget while the feds can borrow all they like.

      Also nowhere in the post did he write or even imply that the OR state government is fiscally responsible. In fact he starts out paragraph 11 by stating the opposite of that.

      1. My mistake, I must have missed the discussion of Oregon. But, the mention of a balanced budget amendment is not really the explanation (49 states have the same mandate, including Illinois and New Jersey that have wildly unbalanced budgets).

        The point stands that there are external pressures that are imposed on states and not the federal government. It’s not meant to excuse the federal government’s inaction, I’m just saying that it isn’t exactly a fair comparison.

        1. Where does fairness come in to play? The article isn’t lauding the state government and saying it’s better than the feds. It’s pointing out how lack of restrictions on the federal government enables perpetual deficits in a way that states can’t do. I do agree that the currency/treasury bond angle should have been brought in to make the argument stronger, but the balanced budget requirements on states certainly do limit their ability to take on debt compared to the feds even if there’s also other reasons for it.

          1. Fair point, but that’s not entirely true. Many states produce unbalanced budgets, despite 49 of them having balanced budget constitutional amendments. They get around that by over estimating revenue in the coming fiscal year when they are crafting their budget. That’s how states like NJ and IL continually produce unbalanced financial statements despite having a balanced budget amendment in their constitution.

            I think we over emphasize a balanced budget amendment and the impact that it would have on the federal government. Ultimately, states need to live within their means otherwise they’ll be punished by the bond market (ask NJ and IL officials). The federal government will not behave responsibly until the treasure market punishes them (which is unlikely to happen any time soon)

            1. States don’t always run balanced budgets, but they don’t run up debt at the rate the feds do. The feds don’t even need to pretend to estimate revenues will exceed spending.

              1. True. But, an argument could be made that some states actually do run up just about the same amount of debt as the federal government, if we’re including unfunded liabilities. If we’re just talking about pure debt obligations, the reason why states don’t run up as much is because the bond market won’t let them.

      2. Illinois has a requirement in its Constitution that its budgets be balanced.

        Since at least 2004 it has failed to meet that requirement. Accounting tricks have been used, and of course not paying into the pension fund what it is supposed to.

        Which is to say, a balanced budget amendment is no barrier to profligate spending politicians.

  3. Color me surprised that a blue state didn’t voluntarily raise their own taxes to pay for all the things they believe are rights. It’s almost as if they think someone else should pay for their beliefs…

  4. Baby steps. At least now with Ryan running Congress, there’s no more of this stop-gap continuing resolution crap where Congress punts on even the most basic task of coming up with a budget except as a last-minute cram-through to avert a government shutdown. Remember when that stuff used to happen on a regular basis when Boehner was in the Speaker’s chair and Obama was in the White House? At least now the budget is being deliberately considered in discrete chunks in a series of budget bills where we can start to get a handle on where all the damn money is going. Just like Ryan promised.

  5. Indeed, intermingled with all the calls for spending cuts and efficiency savings have been more than a few ill-advised proposals for a gross-receipts tax and for brand new levies on hospitals, coffee, and junked cars. (The latter two were, mercifully, killed.)

    No good-thinking hipster is going to pay more for their triple-mocha latte unless they do so ironically!

  6. Spending cuts? This ought to go over like a lead balloon in Proglandia.

    1. Wasn’t that the episode where everyone was lying around limp in the streets like dead chickens? They couldn’t afford to keep bus lines that had less than one passenger. In the end they found some coins behind the cushions in the mayor’s office and could run the buses one more day…

  7. So which does she prefer more – the cock or the muff?

  8. or borrowed against to pay down pension debt.

    Wait, what?

  9. Prongs two and three of Brown’s plan instruct state agencies to use market compensation as a standard for salary negotiations with public sector employees, and to get tougher on collecting some $560?760 million in unpaid taxes owed to Oregon’s general fund.

    Surely there’s entire agencies that could be eliminated.

    BTW, even if Oregon cracks skulls and gets… I’ll be generous… 90% of those unpaid taxes, that’s not even going to get them in the ballpark of solving a $50b pension crisis.

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