The key to our problems is the state budget and economic recovery. In the last two legislative sessions, the budget has grown by 16% - 20% per session. Oregon is required to balance its budget, and pays for the increases with new taxes and fees. In 2009, Oregon saw an increase of $1.6 billion dollars in taxes and fees to pay for the budget increases. Salem, Lane County, and local city governments need to hold the line on spending because when they increase spending it takes money from people and businesses that will generate jobs in the economy. In this election cycle, Oregonians should talk about the budget and the economy as the same issue because it is.

How do we address structural issues in Oregon? For the next decade, it is going to require that we rethink how Oregonians access government services on all levels. This requires government reform. Every part of the state government needs to be evaluated and questioned. An old saying about business is that they must “Change or die”. Oregon can’t die, and if it doesn’t change it will continue to punish Oregonians with poor service and high taxes. We need to have the political will to govern differently.

We should start by asking critical questions about the structure of government on the state, county, and local level. Oregon has 36 counties in the state. Sherman and Gilliam Counties have under 2,000 people a piece. In the Portland Metro area, we have four counties that are practically on-top each other. The last time we changed our county structure was in 1914. Does Oregon have the right amount of counties? Can we change our county structure, and still maintain local control and services? Can counties share the same administrative personnel to better support services for citizens? There are many other places to question. Does Oregon need a State Senate? Are Oregonians any better represented by having a Senate? The State of Nebraska has only one legislative assembly in their state house.

An example of this type of thinking occurred in Eugene and Springfield recently. Due to the retirement of the Springfield Fire Chief, the City Councils in the metro areas integrated the management of the fire departments. The fire departments are separate, but the Chief of Eugene is the Chief of Springfield. In a tough economic environment, an integration of the management saved tax payers an estimated $800k per year, and didn’t decrease services or response times. This type of partnership focused on services to the customer, and improving competitive efficiency. In an era of decreasing tax revenue, all levels of Government can utilize this strategy.

The state needs to question state employee benefits costs. This is the right thing to do for both the state and employees. Our employees deserve to know the benefits they have been promised are stable. The retirement system is going to have to change. Employees are going to need to contribute at least 3% of their income to retirement savings. No level of government can afford to pickup the required employee’s contribution to their benefits. Furthermore, new state employees should be moved into either a portable formula arrangement or a 401(k) type retirement plan. Both ideas would end state employee uncertainty over promised benefits. Once PERS is rebalanced, Oregon, through state law, should enact funding guidelines for pension plans. For example, Kansas requires that the legislature keeps their retirement system at a certain funding level, and their pension plan hasn’t become a fiscal time bomb for their state.

Oregon is one of the top ten states to vote incumbents back into office. Oregon’s financial and economic situation has changed. It is time that we accept that. Decades of legislative experience is what has gotten us into this problem. It is time Oregonians challenge incumbent politicians to explain what they will do differently to solve our state’s problems. We need solutions for Oregon’s next decade, not the last one.

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In business when your cost grows faster than your revenue, it is a cost problem. In our households if we spend our money frivolously, it would be a spending problem. These collective experiences of Oregonians should point to the problem as being a spending problem. Before we get into how to address our structural problems, I want to be clear that this isn’t a judgment on what we spend our money on. This is a discussion about the limitations of the state budget, and what it means to our families.

Last month, the Lane County democratic legislative delegation had a town hall meeting. Because the economy is bad, the state budget came up several times. The delegation claimed that they had cut $2 billion out of the current budget. If you called up House Minority Leader Bruce Hanna (R-Roseburg), he would claim that in 2009-2010 the legislature spent $9 billion more than the previous budget. The budget went up by 16%. How can both sides be correct? Oregon should be able to agree if the budget has gone up or not, right? It seems like a simple question. Well, the problem is something called the effective budget level. Oregon’s use of the effective budget level contributes to our inability to fund essential services.

During the legislative session, the Legislative Fiscal Office (LFO) puts together the effective budget level. The effective budget level looks at the previous budget as a base. The previous budget is then grown based on labor contracts, benefit increases, inflation, and other cost factors. The LFO is estimating inflation from one cycle to the next cycle.

The issue is that the LFO is hiding the growth in employee costs from the legislature. Health care, wage increases, and retirement costs are all major components of the state budget. That cost is built into the budget when it is handed to the legislature. If the budget doesn’t treat raises like increased cost, how do we expect our leaders to work to off set them? Like a lot of Oregon’s problems, the essential budget level creates an information problem for Oregonians. The budget process leads the legislature to fight over money to fund services, instead of addressing increasing costs.

To address that problem, we need to replace the effective budget level with a different budgeting strategy. A budget process called zero-based budgeting. Zero-based budgeting requires that all departments begin with the previous years budget. Departments would have to off-set increases in spending with cuts in other parts of the budget. The goal would be that the budget for the state always sums to zero.

The advantage to this type of budgeting is increased costs are presented as new spending. If health care costs go up, then the state would need to off-set those costs. If the legislature wanted to add programs, the budget would have to be either off-set or it would show to Oregonians as growing. It should be clear to the public when the budget is increasing. Using zero-based budgeting, no one could be able to politically hide from budget increases.

By changing the budget process, we will force ourselves to face our out of control spending. The state needs to address the actual structure of state government. Our forecasted budget shortfalls are a structural problem. Once we see the budgetary reality, we can ask questions about state spending. Does the state have the right amount of state boards and commissions? Do we have the right amount of state departments, and do they have clear responsibilities? Do we have the right amount of offices in the community? Do Oregonians access the state government in the way we want them to in the future?

Looking forward to the next decade, we need to change the way we think about, and spend the state’s money. In the 2010 election cycle, don’t let state candidates hide from spending that is growing faster than revenue. This is our opportunity to act, and put Oregon on sound fiscal footing.

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When it comes to state spending, Oregonians have an information problem. In January, voters voted on the best available information, but it was at best incomplete. The state said it couldn’t fully fund schools without Measures 66 and 67. So, the Yes Campaign took that message to the voters. Voters could easily see that schools were being cut. It was logical that Oregonians that they had to vote to save schools. The budget is simply too big and too complicated for the average Oregonian.

For the last 20 years, Oregon has increased spending, but reduced services to Oregonians. In order to hold our government accountable, Oregonians need more transparency. Oregonians need better information. Better information would allow Oregon voters to use the same skills that balance their personal budgets at the dinning room table on state finances. Oregon needs to put its financial information on-line with an Application Programming Interface (API). An API would allow organizations to write programs that access state financial information. Media and political organizations would have financial information available to share with Oregonians. It is the technology that would allow us to account for all $55 billion.

Since 2010, Oregon has a website called http://www.oregon.gov/transparency/. It contains good background information on the budget process and revenue sources. It also contains a list of expenditures from the 2009 fiscal year. The expenditure list is several Excel file with tens of thousands of entries, and no description for the expenditure line. Until you’ve read the expenditure list, you will never have wondered what “Travel for Personal Development” is. For Oregonians without Excel skills and lots of time on their hands, it means you can’t find anything.

I looked at the expenditures for the Departments of Human Services and Education, and listed a few statements below. Some of the expenditures could make sense, and some of them don’t. I admit I am being a little nit-picky, but my point is that I would rather cut back on travel expenses and membership fees before we cut back on school days.

Department of Human Services:

• Advertising Budget: $1 million
• In-State Travel Budget for employees: $10 million
• Magazine Subscriptions: $300k
• Professional development for employees: $2.6 million

Department of Education:

• Membership Fees to Out of State Associations: $300k
• Travel: $500k
• Professional Development: $157k
• Salus University in Pennsylvania: $35k
• YWCA of Seattle-King County: $45k

The expenditure list shows that only 50 cents out of every dollar actually goes to an university, community college, or K-12 education. As a voter, I would like to know where the other money is.

The state government needs to take a leadership role in transparency. Better information translates to better government. When it comes to getting educated about voting, we should “have an app for that”.

More importantly, an on-line budget would change how we budget in Oregon. Currently if you talk about cutting state spending, the press will asks what department to cut. An on-line budget will give people a chance to cut specific parts of specific budgets. Instead of worrying about cutting teachers, our policy makers could cut items like travel expenses.

Controlling the growth rate of the state budget is one of many challenges that Oregon faces. Oregon’s budget has to grow between 9 – 12 % a year just to pay for the same services as the previous budget. Since the budget grows faster than even a robust economy, the State consumes more and more of wealth in our economy. Currently, 33% of the economy is controlled by state and local governments. If we can’t control spending, then Oregonians won’t be able to improve their financial situation even in a good economy because the state is consuming so much wealth.

The way to fight our out of control budget is to provide all of the budget and expenditure information on-line to both the media and voters. On-line applications, charts, and graphs will draw the public into budgetary discussions. It gives the public information so they can ask more questions, and challenge their leaders. We don’t need to hide the size of the budget, and the level of services it provides. Oregon is better off if it is governed in the daylight.

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Oregon, we have policy options, but the clock is ticking on this special session.  First, we need to talk about the recession and why it is a jobless recovery.  Then, we can discuss the Main Street Incentive Plan (HB3620) which is in the best position to create job growth in 2010.  We need to understand these policy options so we can pressure our political leaders to act.  Before we get started, please keep in mind that Oregon’s economy has a lot of different problems.  While I believe the Main Street Incentive Plan is an important policy option, it is by no means the only economic reform we should be enacting.

Our Jobless Recovery

A recession isn’t caused by a single event nor is it a single moment in the economy.  The technical definition is two consecutive quarters of negative growth.  The recovery begins when the economy begins to grow again.  Sid Leiken, Mayor of Springfield, shared this description with me;  A recession is like falling down a ten foot hole.  We call it a recovery when you climb one foot out.  He was illustrating how things in the economy can be improving, but you’re still in a hole.

The causes of this recession explain a lot about this being a jobless recovery.  It started in the real estate market.  Since so much money was tied up in real estate backed bonds, financial institutions didn’t know how much their assets were worth in the current environment.  When financial institutions stopped lending, the recession began to get very painful.  This is a simplification of events, but the point is that business lost access to short term credit.  Businesses need access to short term funds to function.  Short term credit allows business to finance things like payroll, purchase inventory, and cover other expenses while accounts payable are still due.

During the recession, businesses changed to accept a new reality where access to short term credit was difficult.   To compensate, they asked their current employees to do more.  In a lot of cases, businesses made structural changes to their businesses to eliminate positions.  As economic growth begins, businesses are going to work their current employees longer hours prior to hiring new employees.  Hiring employees costs money, and businesses want to avoid that cost if they think the economic recovery is uncertain.

Assume that I have a business.  My one employee works 8 hours per day during the recession.  When the recover starts, I may get another hour of work to do.  Because I am unsure of the economic future, I will pay my one employee 9 hours per day before I hire another employee.  It simply doesn’t make sense at this point to hire more people.

To get businesses to hire again, we need to enact policies that increase growth in the economy. This may seem obvious, but we are in a sluggish, uncertain recovery. The economy is at a point where it doesn’t make sense for businesses to hire.  If we can increase activity in the economy, then jobs will follow.

Main Street Incentive Plan

The Main Street Incentive Plan (MSIP) or HB 3620 was proposed by the House Republicans during the 2009 session.  The plan was designed to promote job growth through investment in houses and businesses.  Under the plan, Oregonians would be eligible for a tax credit of 50% of the project or 100% if the project is a green project.  The credit would be between 10k-50k for homeowners and 25k-500k for business.   You would be able to take the 20% of the credit for five years.

In a jobless recovery, the Main Street Incentive Plan is the best policy option that the State Legislature has.  The MSIP is in a unique position to create jobs in the short term and create an environment for job growth in the future.  The advantages of the MSIP are as follows:

• Allows State to pass effective stimulus: Because the state has to pass a balanced budget, it cannot pass an effective stimulus. Government fiscal stimulus depends on the ability to deficit spend.  By using the incentive plan, the state can get around its inability to make fiscal policy.  Businesses using the Incentive Plan will spend the money in our current weak economy. But the cost to state will be paid over 5 years.
• Private investment protect Oregon’s future:  By providing incentives to private industry to invest, we encourage companies to begin infrastructure projects.  New infrastructure is cheaper to operate, which will help keep Oregon business strong.  Furthermore, new infrastructure will continue to pay returns to Oregon’s economy.
• Private industry gets to choose how the money is spent: Under normal fiscal stimulus, state politicians would choose how the money is spent.  State projects are funded based on political need, but not economic need. If we rely on private investment, we can avoid the political games, and focus on economic needs.

Conclusion

Oregonians need jobs now. The MSIP is aimed specifically at promoting job growth in the short term economy.  In the 2010 special session, it is the most effective jobs creation bill that is being considered.  Unfortunately, the bill is stuck in the democrat-controlled House Revenue Committee.  The MSIP was proposed by the minority party, but that doesn’t mean it should die in committee.  In a time when Oregonians are out of work, a bill, which has a large base of support like this one, deserves a floor vote.  It is a shame that the Revenue Committee continues to chose their own egos over the needs of working and unemployed Oregonians.

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The Famous Green Gold Story

The setting is Allen Alley’s trek across Eastern Oregon.  He began the walk in August 2009 and it lasted through September.  While Oregon’s unemployment topped 12%, Eastern Oregon had 25% unemployment in some places.  During a campaign stop, a group of miners approached Alley, and challenged him to open up state lands to help create additional mining jobs. He told the miners that he couldn’t win a fight to open state land for under two dozen jobs.

Oregon has been blessed with an abundance of natural resources.  For the last 30 years, Oregonians have been fighting amongst themselves over how to use those resources.  Do we manage those resources for economic growth or environmental preservation?  Is there a balance between growth and preservation?

Alley offered the miners a viable alternative.  He suggested that they partner with environmentalists to create a brand call Oregon Green Gold and sell that Gold in Portland to make wedding rings at a premium.  In Eastern Oregon, a majority of the miners work in dredge that the Corps of Engineers cleared from the streams in the last few decades.  A partnership between miners and environmentalists could help restore  these streams and build brand loyalty for their work in Portland.  Alley believed that Americans would rather purchase a green alternative for their wedding rings than Russian gold with no environmental standards.

With Alley’s leadership, Oregonians can expect that political leaders will be partners.  The green gold story shows that whether you’re a miner in Baker or a technology company in Beaverton,  you have a partner in Alley.  As Governor, Alley will be driven to find solutions that bring jobs to Oregon in a responsible way.

Passports and the Real Id Act

Another example of Allen Alley’s innovative leadership was his work with the Real ID Act, as the Deputy Chief of Staff to Governor Kulongoski.  Basically, the Real ID Act would require that states issued driver licenses using standards that were roughly equivalent to US Passports.   During an early  meeting about the Real ID Act, ODOT priced the cost to the state to comply at $500 million.

Alley’s suggestion was that the state purchase passports for all Oregonians.  His point was that you could issue the passports at ½ the price that ODOT estimated for compliance thru the DMV.  Oregonians would get the benefit of having a passport, and the US government would have to do the work to comply.

When dealing with the Real ID Act, Alley didn’t accept the costly solution.  The solution that Allen Alley proposed was creative, cost-effective, and had a benefit to Oregonians.  Going into the next decade, that is the type of leadership that Oregonians need.

The Idea List

Here is a list of other ideas that I have heard  Alley speak about during his campaign.  Most of them have been without talking points in open discussions.

• Investing some of Oregon’s pensions dollars in Oregon businesses.  Our pension dollars are currently invested out of state.
• Leveraging technology to help drive down medical cost.
• Addressing Oregon’s high capital gains tax.
• Taxing Oregon’s other funds budget to help address school shortfalls
• Relying on modern forestry practices to manage state lands

Conclusion

Spend 5 minutes talking to Allen Alley, and you will find your head filled with ideas like these. Allen Alley is an idea guy.  He isn’t afraid to think out ideas in discussions.  He isn’t afraid to give you his opinion without checking with a focus group. Unlike previous Oregon Governors, Alley won’t be paralyzed by politically risky issues.  He is not afraid to take political risks. He understands that you can’t succeed without risk.  With Alley, Oregon will redefine success as progress to actual solutions.  Vote Allen Alley for Governor.

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As the election gets closer, Lane County will be bombarded with two messages.  First, Measure 66 and 67 will kill jobs.  Second, Measure 66 and 67 will protect essential state services.  The choice  being presented is either jobs or state services.  These tax measures will kill jobs. More importantly, these measures don’t protect essential services in the long term. The tax increases were designed to raise money that the legislature wanted to spend, but not that it needed to spend.  It is as though our state has lost its job, and the legislature wants to continue to live the same lifestyle on a credit card instead of addressing the fundamental problem.

The state is addicted to spending.  The 2009-2011 budget was $53 billion, which is 9% higher than the previous budget.  The last year that the state decreased spending was the 1981-1983 budget.  I know our local school districts are struggling with budget cuts. My question to the state legislature: Why wasn’t some of the $5 billion in additional money spent in schools? Just to put this in perspective, the total K-12 budget is around $6 billion.

Measure 66 and 67 are presented as a response to the economic situation.  The democratic leadership in Salem didn’t want to waste a good crisis.  For years, the Democrats have wanted to reform the corporate tax structure.  The current crisis gave them the opportunity and the political capital to do it.  If the tax measures were actually a response to the economic situation, they would be temporary.  I recognize that they do have temporary components, but they never expire.  We will always be paying these taxes even after the economy recovers.

Rep. Phil Barnhart (D- Eugene), the chair of the committee that sponsored the bill, supports removing the kicker, corporate tax increases, and a sales tax.  As Lane County Citizens, we want our schools, state police, and roads to have proper funding.  So imagine that we gave Rep. Barnhart and the Democratic leadership every tax increases that they want.  Do you think your local High School would have enough money to hire the right amount of teachers the next year? What about the year after that?

How long would it be before House Democrats came back for more money?

The state understands that people will pay more taxes to protect essential services.  That is why the state presented Measure 66 and 67 as funding for essential services.  We didn’t get to vote when a $122k per year job is created for Sen. Margret Carter in the Department of Human Services.  By the way, DHS just hired her without a proper job search.  We don’t get to vote when a $96k per year job was created on the Parole Board for Sen. Vicki Walker.  The job fell through, but the Governor found her a temporary job at $86k/year.  In 2008 while Oregon was sinking into a recession, the Governor gave raises of close to 30% to some department heads. Those raises were never on a ballot.  DHS has an administrative budget of $200 million.  The state spent $500k to recognize employees last year with trinkets and coffee cups. In a recession, the state legislature wasn’t responsible enough to balance the budget by holding the line on spending where they could.  Our state legislators need to be honest with us about these measures.  We are being asked to save funding for schools because they didn’t make schools a priority in the legislative session.

This recession has been hard for Oregon. It has been hard for families and small business in Lane County.  The job picture in Lane County hasn’t gotten better, and isn’t forecasted to get better for months.  While local schools and governments are working hard to deal with the recession, consider what the State Legislature has done. When they increased the budget by 9%, have they done their job during a recession? Have they questioned every expense in the budget or was it easier to pass new taxes?  Have they used our rainy day fund, the fund that was intended to be our safety net against recessions, responsibly?  Is Measure 66 and 67 going to fund your children’s education or six figure jobs for retired State Senators?  Vote “no” on Measure 66 and 67, and ask the legislature to be responsible with our money and make education a real priority.

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Measure 67 is poor policy.

I want to evaluate Measure 67 as policy. For people less conservative than me, its going to require a leap of faith. When I say Measure 67 is bad, that doesn’t mean schools are bad. It just means that the state legislature turned in poor quality work.

• Gross Receipts vs. Income Tax: Measure 67 is two taxes even though businesses only have to pay one. Businesses will need to calculate both taxes, and pay whichever is higher. The first is an income tax. Companies will pay income taxes on profits. They can also reduce their income tax though tax credits that the state offers. The second is a tax on gross receipts. Gross receipts are a businesses total sales for the year. A corporation cannot use tax credits or expenses to reduce this tax.The problem is that the tax is complicated. If you do business in Oregon, it needs to be clear how you’re going to be taxed and what you are going to be taxed on. Good tax code allows business to plan for their tax burden. Businesses can’t plan for their tax burden because they won’t know what tax they are paying prior to the end of the year.
• It makes Oregon an untrustworthy partner: The state uses tax credits and breaks to promote behaviors within the business community. Tax credits can be used for anything from to offset cleaner technology to actually attracting new business. Under Measure 67, you can’t use tax credits to offset the gross receipts tax since the credits are written for income taxes. So on one hand, Oregon is telling businesses that they will receive benefits for doing a stated activity. On the other, Oregon is telling businesses that they can’t have the promised benefit. The state government can’t grow the economy by being hypocritical.
• It ignores the larger issue: Measure 67 is a response to the current economic crises. It gets us by today, but what are we going to do tomorrow. Currently, state services are unsustainable because the budget grows at 9% a year which is faster than the 3% average annual growth rate for the rest of the economy. Just to illustrate this, assume the state could raise taxes every year to balance the budget. To fund the state government, you would need to give the state 6% more money every year. Basically, you will give up more than any raise you’re going to receive. Every year you will be worse off than the previous year. We need leaders in Salem that won’t ignore the 500 lb gorilla in the room.

Will Measure 67 kill jobs?

Oregonians need to understand the impact of Measure 67 on the economy when they vote in January. Currently, Oregon’s unemployment rate is 11.5%. Most economists don’t see the job picture getting better until late 2010. Measure 67 is going to cost private sector jobs and hurt Oregon’s families by the following:

• Higher prices: Traditionally, sales taxes or gross receipts taxes are shared with the consumer. We may have convinced ourselves that these taxes will get paid by profits hidden away in the Caymans. It is not the reality. At least some of the money is going to get paid by Oregon families. For the record, the tax bill for Measure 67 is about $68 per Oregonian. If you add up the total new taxes and fees from this legislative session, it would be $435 per Oregonian. If you added in the new taxes and fees from the 2007 session, you would owe a total of $586 per Oregonian. Do you see the pattern? The point is all of these taxes will impact jobs, and I like my job.
• We’ve taken away the incentive to grow jobs: Under Measure 67, corporations could be better off not to grow their business. Most taxes in the United States are percentages. If you make a dollar, then you owe Salem a quarter. The tax on gross receipts is a flat tax. As you go through this, keep in mind that revenue is not profit. Assume that I own a company that fell into the $ 50 million to $ 75 million gross sales category. My tax would be $50,000. If I have sales of $50 million, that is a gross tax rate of .1%. If I make $ 74, 999, 999 the tax rate is .06%. So, why are we charging different tax rates to companies in the same tax bracket? This seems unfair to me.Take the same company. Assume that they have the opportunity to add another $10,000 contract. If that account puts my company into the $75,000,000 and up a category, I would pay $15,000 in additional taxes. Basically, I could lose money by growing my company with profitable business.The point is simple. State policy should be pro-growth and pro-jobs. Oregonians, who are business owners, should always benefit from hard work. Measure 67 doesn’t allow them to do that.
• You could owe money even if you lose money: This reminds me of a dairy farmer that I met. I asked him if he liked farming. He told me it was the only business that he ran where he could generate $500,000 in revenue and lose money. Of course, he loved farming. The point is that gross sales aren’t a sign of profitability. We should always tax profit, not revenue.

Conclusion

As a state, it is time to evaluate the quality of work the legislature has sent us. Is it going to cost jobs? Does it make schools more secure in the long run? Does it address the out-of-control spending in Salem? Does it build a state that is prosperous to live in? My opinion is Measure 67 is an example of poor leadership and policy making. We need to send it back to Salem, and ask them to do the job right the second time.

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The Theory of the Public Option

The first thing to realize is that the public option is different than European health care. European health care works on what is called a single payer system. In a European system, the government pays all health care costs for everyone. A public option looks and works like a private insurance company with some important differences.

How would a public option reduce health insurances costs? Public option supporters point to administrative costs. Medicaid runs very low administrative costs compared to private companies. The government could then provide a low-cost option because it has lower administrative costs. Private insurance would need to innovate to stay in business with a low cost alternative. So, would it work?

Price Fixing; Not Competition

The reason why the public option won’t work is because people don’t understand how competition works. Medicare doesn’t negotiate its lower costs. It sets reimbursement rates. Basically, it sets the price. In a place like Oregon, the Medicare reimbursement rate doesn’t cover the cost of the actual procedure. The impact is that unpaid additional costs from Medicare patients gets passed onto private insurance.

The problem for the government is you can’t regulate savings. The savings in competitive markets doesn’t come from regulation. The price savings comes from innovation and hard work. One company learns how to provide the service better than the next company. Google is a great example of this at work. When I was in college, Google was run out of a garage. Google began to provide its search engine service better than every other company. Look to see where it is now.

The public option would allow the government to set prices. When the government can set prices, they can artificially lower the price in the market. Private companies may not be able achieve the price. For example, Washington may want heart transplants done for less than $15,000, but that price just isn’t realistic. This is the same principle as rent-control in a big city. If you can find an apartment, you are very happy, but a majority of people have trouble finding apartments

Any health reform bill with the public option protects the government from lawsuits for price-fixing. Since Theodore Roosevelt, the US has broken up companies for exactly this type of behavior. We know that price-fixing is bad for competition and the consumer. Standard Oil, AT&T, and Microsoft were all investigated for this behavior. These companies have been investigated for both lowering and raising prices. If the public option was a privately run company, the Justice Department would take the company to court, and people may go to jail. If it isn’t okay for a private company, why would it be okay for the US government?

Choices are always better than a Choice.

The public option doesn’t address the lack of insurance companies in the market. Competition needs to have companies in the market competing. Currently, insurance companies can’t sell their policies across state lines. As an Oregonian, you can’t purchase a South Carolinian health plan. The company in South Carolina would need to create a new pool in Oregon. The plan would very expensive until enough people joined to spread the costs around It will be tough for the public option to drive down prices if there is very few people to compete against. Additionally, would it really be fair to allow the public option to be sold across state lines, but private insurance not to be sold across state lines?

Could the Public Option cost jobs?

I want to use Pacific Source as an example to show the impact of the public option on a local level. According to their LinkedIn site, they have 375 employees. Since the public option relies on unfair competition, a company like Pacific Source can expect to struggle to stay in business. In this climate of economic hardship, a public option means the loss of jobs for small town insurers.

Conclusion

Democrats want to lower health care costs, and they understand the hardship that health care costs are causing people. But, the belief in the public option has made them blind to the economic realities of the market place. You simply can’t drive down health care prices without letting more firms into the market. Don’t give people the choice of the public option. Give them choices between competing insurance companies, and let’s see what happens.

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Peter Defazio

After thirteen terms in Congress, Rep. Defazio may have lost the fire to represent us. He hasn’t even officially announced if he is running for the 4th Congressional District. For months, he has been calculating the risk of losing if he runs for Governor. Nothing great ever was accomplished by the timid or the indecisive. I like my political leaders willing to take political risks.

A few years ago, I learned that Springfield hired a congressional lobbyist, and I assume other cities in the Fourth District have them as well. I was shocked. I was under the impression we elected congressmen to lobby for our communities. After a quarter century, is it possible that Defazio is more in touch with the beltway than with Southwestern Oregon? Maybe, we need elect someone to Congress that would lobby for his or her constituents. Hiring a lobbyist is expensive and lobbyists don’t vote in Congress.

The Fourth Congressional District spans the political spectrum. It’s tough for any leader to represent all of its citizens. Ask yourself, what has Peter Defazio done to grow the economy? What has he done for the fishing communities and timber communities? I admit he has landed a lot of federal aid for these areas, but aid is a safety net. We need jobs.

Rep. Defazio has the seniority that gives him a powerful position on the House Transportation Committee. While that is a benefit to Rep. Defazio, it hasn’t changed the over 12% unemployment in the district and it hasn’t fixed our crumbling infrastructure.

Sid Leiken

Sid Leiken is the three term Mayor of Springfield. For the record, he has officially filed for the Fourth Congressional District. Irregardless of if Defazio decides to run, Leiken is committed and passionate about improving conditions in Oregon. Personally, I like his innovative streak. It always seems like he wants to raise his hand when it comes to trying new things. He reminds me of a boss I used to have. Every time that I came to this boss, and told him I couldn’t get something done. He would give me a suggestion, and send me back to try it again. The important thing was that he wouldn’t accept “no” for an answer.

As a mayor from Southern Oregon, Leiken has been in the trenches. He is better placed to be an advocate for local business and local communities. He understands the daily battles that cities go through to keep the library open and the lights on. Leiken understands that there needs to be a balance in the management of public lands. This means that you manage lands to reduce fire danger, create jobs, and protect lands for future Oregonians. Leiken represents a shift to the political middle on these issues which will create jobs and ensure that all voices on the issue are heard. This isn’t about how much money he can shake down from Washington for us. It is about how he can influence policy that will promote job creation.

Conclusion

I wrote this because of an article that appeared in the Register Guard about fund raising activity by both campaigns. It pointed out that conventional wisdom said that Leiken’s campaign would lose because they didn’t raise enough in one quarter in 2009. A single finance report doesn’t make a campaign, and a single finance report doesn’t change that Sid Leiken is the best person to represent our interests in Washington. Now, I need to go to his website to donate some money to help prove conventional wisdom wrong…

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Budgetary Reform

Pass the Education Budget First: Currently, education is one of the state’s biggest expenditures. School Boards around the state need a complete budget from the state to be able to plan their budgets. In a bad year, schools may re-do budgets multiple times because the state doesn’t pass the budget in a timely manner. We need to show that schools are a priority. I would support Sen. Atkinson’s call to pass the education budget first.

Put the Budget on-line: The state should put its entire budget and the monthly expenses on-line. We should promote transparency by showing Oregonians how their money is spent. A transparent, on-line budget makes waste and inefficiencies easier to find.

Define Terms: We should define how the legislature uses the terms “budget shortfall” and “budget deficit”. In 2009, the legislature often spoke of a shortfall when the budget rose by 9% from the previous biennium. State politicians often use shortfall to refer to the difference between what the budget is and what we would like it to be. It should refer to the difference between tax income to the state and the previous budget. This prevents the legislature from misusing “shortfall” to justify increases taxes and fees that are being used for additional spending.

Change the Starting Line: Currently, the budget starts with what is called the Effective Budget Level. The Budget Office estimates the level of spending required to do the same activities as the last budget. In 2009, the EBL was 13% higher than the previous budget. Why can’t we start the conversation with the previous budget? Or, simply give an inflation adjusted number? We can’t start the conversation 13% higher than the previous budget and remain fiscally disciplined.

Structural Reform

Hire a State Treasurer: The Oregon State Treasurer is responsible for managing most of the financial investments of the state. He manages issuing State Bonds, the Public Employee Retirement System (PERS), and College Savings accounts. Campaigns for State Treasurer are focused on political issues not financial issues. Candidates aren’t required to have basic financial skills.

We can change the system to allow for the state to hire a Treasurer. Under this reform, the Governor would appoint a State Treasurer that would be confirmed by the legislature. Oregon’s State Treasurer will have the financial skills to manage our assets. A Treasurer, who is an employee, is also more immediately accountable for poor performance.

Reform the Per Diem expenses for the State Legislature: Under Oregon Law, the members of the state legislature receive a per diem or a daily allowance for expenses while the legislature is in session. All legislators receive the same per diem regardless of if they are from Hermiston or Salem. For legislators that live close to Salem, the fixed per diem acts as additional pay because they stay at home during the session and so they don’t use all of their per diem allowance. Legislators that live away from Salem aren’t reimbursed at higher rate to pay for the additional expense that the distance provides. To deal with this, politicians are able to reimburse those expenses from their campaign PAC funds. This provides a situation where politicians may benefit directly from campaign donations without oversight.

The state needs to address a couple of things. First, the state needs to reimburse expenses by forcing legislators to turn in receipts. If we replace the per diem allowance with expense reimbursement, we would only pay money to legislators to reimburse expenses. Second, the state should ban the use of PAC money to purchase gifts for state legislative committees or to reimburse expenses not related to campaigning. If the state pays expenses fairly, then there is no need to allow PAC money to pay legislators for expenses. Third, an expense reimbursement plan can easily be monitored and approved by the caucus leaders. By using the leaders, we can provide common sense, practical application while balancing privacy concerns.

Create an appointed State Clerk Position: Currently, the Secretary of State monitors and enforces election law in this state. It is one of many duties that is performed under the office. The secretary of state is a partisan election with four year terms. In practice, this means the person we elect to referee the elections process is a member of one of the teams. The Mariners wouldn’t let one of the Yankees be the umpire when they came to town. Elected officials should work together to hire an unbiased umpire when it comes to enforcing election rules. We would be crazy not to.

If you’re going to change a Measure, send it back to the voters: Good leaders make decisions that build confidence among followers. Oregonians have always complained about the amount of changes that their legislators make to measures that are passed by the voters. No one has ever said that measures passed by voters are 100% error free. A lot of legislation passed by Salem or the voters has unintended consequences. This is an opportunity for the legislature to build trust. If they need to make a change to a voter-approved measure, they should refer it back to the people. They should go back to their boss. Explain the problem. Explain how you want to address it. Argue how your ideas better fit with their intentions. Show your leadership skills by being humble.

The 72-Hour Rule: Borrow from Rep. Walden’s petition to Congress. Provide a 72-hour waiting period to allow people to read the bill. I don’t think this is a huge issue in Salem, but it is in Washington.

Call special elections to fill empty seats: Under Oregon law, empty seats in the legislature are filled by appointment. The process requires that members of the same party replace the departing legislator. The goal is to not alter the balance of power.

In practice, legislators retire or resign prior to their term of office ending. This allows their replacement to be chosen, and keeps the seat from being open during the next election cycle. Incumbents have a much higher change of winning than their opponents. This practice keeps the number of truly open seats down to a minimum. Neither party wants to risk seats when there is a built in way to protect them.

The state should begin to hold special elections to replace departing members. We should give voters a choice though elections when their representatives retire instead of letting parties stack the deck. Elections cost money. However, if we take away the political advantage to resigning prior to elections being held, then I bet most people will retire at the next scheduled election.

Conclusion

The list above is by no means a complete list. It is a starting point for the conversation about genuine political reform at this stage. We all have discussions about reform. Lists like this start with friends and neighbors in bars, over dinner, and at football games. We need to bring these lists to the legislature. The 2010 election is a call to action. Our state cannot continue to do what we have always done. We simply won’t survive.

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