October 20, 2006 Volume 107 Number 20

Oregon AFL-CIO backs just one measure

Every two years, Oregonians get to be supreme legislators for a day, voting yes or no on questions framed by others in the ballot initiative process. This year, nine initiatives got enough signatures to win a place on the ballot.

The state’s unions, at least those affiliated with the Oregon AFL-CIO, have taken positions on six of the nine.

Just one, Ballot Measure 44, got the state labor federation’s support. If Measure 44 passes, any Oregon resident who doesn’t have insurance covering prescription drugs can enroll in the state’s fledgling prescription drug bulk purchasing pool. It’s a common-sense idea: Get all the buyers together to bargain a better deal on drug prices (kind of like the idea of a union, actually). But drug companies saw the proposal as a threat to their profits, and used their powerful lobby to control the minds of enough Oregon legislators to stop the bill. A union-backed coalition did the work to get this on the ballot. Now it’s up to voters.

On three measures — 39, 42 and 43 — the Oregon AFL-CIO took no position.

The rest of the measures are opposed by th AFL-CIO.

Measure 40 requires that Oregon’s seven Supreme Court judges and 10 Appeals Court judges be elected by district instead of statewide, as they are now. Opponents say the measure is likely to politicize the courts. Voters rejected this before in 2002.

Measure 41 would allow an income tax deduction equal to the federal exemptions deduction to substitute for state exemption credit. Did you catch that? Should detailed tax policy be made by ballot measure, or is that the job legislators are elected and paid to do? In a nutshell, this would reduce state tax revenues by about 6 percent, or roughly $400 million a year. That would necessitate cuts in public education, public safety and human services.

Measure 45 would bring term limits back to the Oregon Legislature: State House reps would be limited to six years, state senators would be limited to eight years, and no one could serve longer than 14 years total in the Legislature. Oregon had voter-approved term limits from 1992 to 2002, when the Oregon Supreme Court threw them out. Opponents say legislators already face term limits — they’re called elections: Voters can and do decide not to return incumbents to office. This measure would take away voters right to send back popular lawmakers.

Measure 46 would amend the Oregon Constitution to allow laws that limit or prohibit political campaign contributions or expenditures. Opponents say this would permit limitations on free speech — the Oregon Supreme Court has ruled that under Oregon Constitution, campaign contributions are protected free speech.

Measure 47 would prohibit corporations and labor unions from contributing to state and local candidates, political committees or political parties, or making independent expenditures supporting or opposing candidates or political parties. It would also set up detailed limitations on individual political contributions in state and local races. Opponents say that it will tie the hands of membership groups like unions, while provisions limiting the ability of rich individuals to fund their own campaigns would be overturned in court.

Measure 48 — Of all the items for voters to decide in the general election, the one that has the greatest potential to choke off state spending — on schools, public safety and whatever else the state spends money on — is Measure 48.

Measure 48, a constitutional amendment, sounds simple and reasonable: It limits increases in state spending to population growth, plus inflation.

But state needs don’t always rise according to such neat formulas. When investigations determined that many Oregon bridges had serious need of repair, it was not a project that could wait. When a recession threw record numbers of Oregonians out of work beginning 2001, the Legislature was able to respond to the crisis by extending unemployment benefits. Thanks to voter-approved mandatory minimum sentences, the prison population is growing faster than the population overall. Thanks to the postwar baby boom and the miracle of modern medicine, the senior population is growing faster than the population overall. Prisoners and seniors are more expensive than the population at large in terms of state services. All these kinds of expenditures come out of the state budget and would be restrained by Measure 48 limits.

And Measure 48 could have a couple of perverse effects that aren’t obvious. One is the ratchet effect. During recessions, government revenue tends to fall. If Measure 48 were in place, and a decline in revenues led to spending cuts during a recession, future increases would then be based on that lower level of spending — basically, state government could never catch up to the level of services it provided prior to the recession-caused budget cuts. This ratchet effect would tighten the state’s belt every time tax revenue falls.

Then there’s the fact that not all state spending is equal. Some, such as making good on past pension obligations or paying interest on past bonds — is required by law. Some spending is attached to specific revenue, like gas tax and road maintenance. But for the purposes of the Measure 48 spending limitation, these would be in the same boat as discretionary K-12 budgets, or money spent to generate federal matching funds. Putting the squeeze on state spending could mean walking away from federal matching funds.

Perhaps most importantly, there’s a tricky little economic factor that the logic of Measure 48 ignores. Oregon’s state budget — and government budgets generally, have always grown faster than population and inflation.

How can that be? While it’s true that governments have grown as society has become more complex (Oregonians had no need of traffic courts or electrician licensing in 1890), it’s also true that overall per-person productivity and prosperity grow faster than inflation. Government can stay the same size, as a share of economic output, and yet grow faster than population and inflation — because the economy is becoming more productive.

And it turns out that Oregon already has a state government spending limit that takes such economic growth into account. A state law limits spending from the state’s general fund to 8 percent of total personal income. The law excludes bond proceeds, federal funds and trust obligations from the limits.

Aggregate personal income is regarded as the best overall measure of a state’s economy. Under Oregon’s existing spending limit, state government can grow, but it can’t grow as a percentage of the overall economy.

Measure 48, on the other hand, would freeze Oregon’s government at 2006 levels, making it unable to meet the needs of a 2016 citizenry or make use of the potential prosperity of a 2026 economy.

In the 1990s, personal income grew 6.5 percent a year on average, while population plus inflation was 4.7 percent a year. Extrapolate that out over a decade or two, and you’d see government shrink in size relative to the private sector. This kind of nitty-gritty gets to why labor and business groups are opposed to Measure 48.

If it passes, bond rating agencies have announced that Oregon’s credit rating would fall, meaning more tax dollars would go to pay higher interest rates.

In short, Measure 48 would be an experiment. In fact, it’s an experiment being waged in several states, by a New York real estate millionaire with ties to a network of right-wing anti-government groups. Howard Rich’s riches paid for petitioners to gather signatures to qualify Measure 48 for the ballot.

If it passes, the Legislature will be unable to amend it, because it’s a change to the Oregon Constitution. Under Measure 48, the state could exceed the limits on a one-time basis but only if two-thirds of both chambers of the Legislature agree, and a majority of voters approve the exception.

Constitutional amendments take effect 30 days after passage. Voters rejected another spending limit proposal, Ballot Measure 8, in 2000. If voters buy Measure 48, it could have immediate effects.

The non-partisan Legislative Revenue Office predicts that if the measure passes, there would be greater pressure to privatize government services. The Legislature might cut budgets in the discretionary portion of the general fund, and/or shift to local governments the burden of paying for basic services like education and public safety.

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