Oregon Needs to Cap Spending

Originally published in The Oregonian, February 15, 2013 –

Oregon must cap the growth of spending with a constitutional limit –

Oregon desperately needs to establish a constitutional limit on the growth of state spending. That’s clear when you compare what the growth of state budgets would have been with a spending cap over the past 20 years to what actually occurred without one.

The Legislative Fiscal Office proposed a spending growth cap for purpose of comparisons. It would limit budget growth to the rate of population growth plus the rate of inflation.

Oregon spent about $20 billion in all-funds budgets 20 years ago. With this spending limit in place, the state’s all-funds budget would be about $27 billion today. That’s roughly a $7 billion increase over two decades.

So how much has Oregon’s all-funds spending actually grown over this same period? Prepare yourself. It’s $60 billion today. In other words, state spending has tripled over the past 20 years. The actual increase is more than $10,000 per Oregon resident, almost six times greater than it would have been with a spending limit.

Virtually the entire $60 billion comes from taxes, fees, charges, licenses, registrations and other charges to enforce compliance with regulations on the private sector economy. Even taxes and fees paid by public employees come largely from revenue originating in the private sector.

What’s worse, not all of this spending is actually paid for in each budget cycle. Over the same 20-year period, taxpayer-supported debt has skyrocketed from about $220 million to more than $2 billion. Much of this tenfold increase in debt has terms of repayment that stretch out for more than 20 years.

Principal and interest payment on this debt has also grown. Total debt service totaled around $30 million each budget cycle two decades ago. Those were the days. Now it’s more than $400 million a budget cycle — nearly 5 percent of our general fund, 25 percent of our lottery revenue and about 20 percent of our state highway revenue.

Not even these stark figures have curbed Democrats’ itch to spend. Gov. John Kitzhaber’s proposed current service level budget would boost general fund and lottery fund spending by $2.3 billion — almost a 16 percent increase.

The Legislative Fiscal Office estimates that general fund and lottery revenues will go up 10 percent in this budget cycle. Most businesses would be pleased with such revenue growth these days. That kind of revenue increase is not nearly enough, however, to satisfy the Oregon government’s spending appetite.

According to Legislative Fiscal Office estimates, we are projected to have about $750 million less general fund and lottery fund income than the governor proposes to spend. And that deficit could easily grow to $1.5 billion if the Legislature fails to enact the governor’s PERS reforms.

Which leaves three choices to balance the budget.

One, we can raise taxes and fees. This would escalate the drain on private sector resources that already has our state economy in disarray.

Two, we can keep borrowing more money to fill the budget holes and let the next generation pay for our profligate spending.

Or — my favorite — we can reduce the growth of spending to meet revenue projections. This would still allow for a 10 percent increase in discretionary state spending. Yes, a 10 percent increase in spending without raising taxes and fees.

Then we can get about the business of a constitutional spending limit.

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Filed Under: Budget and GovernmentOregon ConstitutionOregon PoliticsSpending

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