GOVERNOR BROWN’S BUDGET RECOMMENDATIONS DON’T SET STAGE FOR POLITICAL AGREEMENT ON SPENDING AND TAXES

PERSPECTIVE FROM THE 19TH HOLE: This is the title I chose for my personal blog, which is meant to give me an outlet for one of my favorite crafts – writing – plus use an image from my favorite sport, golf. Out of college, my first job was as a reporter for the Daily Astorian in Astoria, Oregon, and I went on from there to practice writing in all of my professional positions, including as a Congressional press secretary in Washington, D.C., an Oregon state government manager in Salem and Portland, press secretary for Oregon’s last Republican governor (Vic Atiyeh), and a private sector lobbyist. This blog also allows me to link another favorite pastime – politics and the art of developing public policy – to what I write.

Governor Kate Brown complied on December 1 with a state law requiring governors to produce what’s called a “Recommended Budget” for the next two-year period. It includes both spending and new taxes.

But, there is a better way for governors like Brown to underline what they believe to be the necessity for new money. It would be to submit a budget based only on current tax rates, not new taxes. That would show the depth of cuts necessary to live within current means.

In a Salem Statesman-Journal front-page article early in December, this is how Brown described her recommended budget for 2017-19:

“The budget includes significant cuts at a level I find absolutely unacceptable. This budget is a short-term solution, nothing more.”

In what the governor announced, she followed a script favored by her predecessor John Kitzhaber who always produced a “recommended budget” pinned to new taxes. In fact, according to the Statesman-Journal article, Brown built a total of $897 million of new taxes into her budget recommendations.

Included are increased taxes on tobacco and liquor worth $74 million, eliminating a specific business tax break known as “the partnership pass through,” thus boosting revenues by $117 million, and turning taxes on hospitals into what Brown called “true taxes,” which means hospitals and insurers won’t get their money back after paying taxes.

A bit of background on the hospital tax: Originally, the tax, negotiated first in 2003, was meant to generate state revenue that would be used to garner federal matching funds under Medicaid. When the increased money arrived in Oregon, hospitals would be paid back for the taxes and the “extra” would be used to improve health care programs for low income Oregonians.

Most states were engaged in this legal matching funds scheme. But, now, the original deal hospitals cut with the governor and legislature has been turned on its head. It could become a straight tax, which will mean an increase in costs for hospitals that then will have no choice but to pass on the increased costs to consumers.

Beyond all this, the challenge the governor and legislative leaders will face in the 2017 legislative session is how to bring business and labor together to find a middle-ground compromise on new taxes, especially after the bruising battle at the polls where the business community came together as never before to kill the onerous tax on sales.

Governor Brown, along with House Speaker Tina Kotek, endorsed that tax (Ballot Measure 97), so it could be contended they have some damage to repair with the business community. If businesses are smart, they will wait for entreaties from Brown, Kotek and other leaders to become involved. Meanwhile, they should hold their own private counsels to determine if there are tax increases business could tolerate to fund important government programs.

The elephant in any room where there is such a budget discussion will be the “PERS problem.” That is the fact that the Public Employee Retirement System is underfunded to a substantial degree and any wide-ranging budget and tax compromise will have to include a PERS fix, which won’t go down easily with public employee unions.

Incredibly, Brown took the stage at the Business Summit last month to appeal to business leaders “to find new revenue.” She made the plea without any assurance of her own involvement, which, given Ballot Measure 97’s defeat, is a little like asking the winning team to forfeit its victory.

The current “Governor’s Recommended Budget” could have represented a solid starting point for a reasoned discussion of taxes and spending in the 2017 legislative session.

Instead, it doesn’t contribute much to what needs to be a real debate over the future of state government’s services to Oregonians.

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