Oregon’s initiatives, ever more expensive endeavors
themselves, take their toll on the state’s finances
— and are poised to do it again this election.
By Christina
Williams
Consider the loathed and loved Oregon ballot initiative. Since
its debut in 1902 — Oregon led the nation in establishing
the modern initiative process — the ballot measure has
ushered in changes such as women’s voting rights (1912),
daylight savings time (1954) and vote by mail (1998).
But a batch of ballot initiatives passed since 1990 has left
— directly or indirectly — its red-ink mark on the
state budget, to the detriment, some argue, of public schools
and public safety. Proponents of measures say restricting state
spending only serves to trim away the waste and the fat,
leaving essential services intact.
What does it cost the state when voters pass initiatives with
fiscal impact? Here’s a startling figure: $41 billion in
the past 16 years. It’s what you get if you add up the
reductions in property tax revenue and then throw in the money
paid to house new prison inmates and some other random
administrative costs mandated by ballot initiatives since 1990.
During the economic boom of the late ’90s, that money was
barely missed, but once the bottom dropped out and
billion-dollar shortfalls became budget realities, the loss was
acute.
Two new measures with the potential to prompt deep cuts to the
state budget are on the ballot in November. And before they
even landed on the ballot, close to $1 million was spent to get
them in front of voters.
Doing the numbers, decoding the impact
Determining the true financial impact of past ballot
measures is difficult. Economic booms hide ugly
consequences that a slump lays bare. Myriad state
agencies experience cuts, invoke various measures to
make up for them and keep disparate accounts of the
impact.
Measure 5 and
Measures 47/50
To figure out the state’s loss of property tax
income since the passage of Measure 5 in 1990 and the
further caps of Measures 47 and 50 in 1996 and
’97, the Oregon Center for Public Policy used
numbers included in the Legislative Revenue
Office’s 2006 Basic Facts report. Multiply the
market value of taxable property by the
pre-Measure-5-tax rate of 2.661% and then subtract
the actual taxes levied for each year since 1990-91.
The impact adds up to $41.2 billion.
Measure
11
The Oregon Department of Administrative Services
released a report in May that estimates the impact of
Measure 11, passed in 1994, on the state’s
prison population. As of Jan. 1, the report shows
that just over 3,000 additional inmates were in
prison because of Measure 11. At what cost? The
current cost per day to keep an inmate in a
Department of Corrections facility is $67.53, so
that’s just over $74 million in added inmate
cost, not to mention the price of new facilities. The
new Deer Ridge Correctional Institution, scheduled to
open near Madras in 2007, will hold 1,884 inmates and
cost $190.4 million to build. Two other post-Measure
11 prisons, Two Rivers Correctional Facility in
Umatilla and Coffee Creek Correctional Facility in
Wilsonville, cost $121 million and $171 million
respectively and hold a total of 2,992 inmates.
Measure
37
The financial impacts of Measure 37, passed in 2004,
are just starting to roll in. To date more than 2,200
claims have been filed, requesting more than $5.1
billion in compensation. Of course, to avoid paying
such a chunk of change, local governments are waiving
land use restrictions to allow development.
Meanwhile, the cost of additional staff and legal
fees incurred by the Oregon Department of Land
Conservation (responsible for about 96% of claims)
adds up to $3.7 million for the 2005-07 biennium. The
Department of Administrative Services paid $900,000
in additional staffing costs. In Clackamas County,
which has handled almost 500 Measure 37 claims to
date (Washington and Clackamas counties have
processed 30% of all the claims so far) the estimated
administrative tab comes to $250,000 per year in
personnel costs.
Proposed ballot
Measure 41
The financial impact statement filed with the
Secretary of State’s office for Measure 41,
which would change the way Oregon law treats income
tax personal exemptions, says that in the first full
fiscal year the measure would be effective (2007-08),
state income tax revenue would be reduced by $355
million.
Proposed ballot
Measure 48
The Legislative Fiscal Office estimates that if
Measure 48 passes, it would result in between $1.5
billion and $2 billion of revenue that would be
unavailable to crafters of the state’s budget.
Extended out to the budgets of the future, the toll
would be $8 billion by 2011-13.
OREGON IS ONE OF 24 MOSTLY WESTERN states to employ ballot
initiatives. At their best, ballot initiatives are an effective
form of direct democracy, giving voice and real power to
voters. At their worst they are co-opted by deep-pocketed
sloganeers eager to push a national agenda and adept at using
the voters’ distrust of local politicians to their
advantage.
In Oregon, the cost of getting initiatives on the ballot for a
vote has been inching upward in recent years, leaving an
opening for cash from outside the state to play a more
important role.
“In the last five to seven years, there’s been a
marked increase in the cost of getting on the ballot,”
says Richard Ellis, a Willamette University professor whose
book Democratic
Delusions, a critique of the initiative process, was
published four years ago.
Ellis says that it now takes $500,000 to mount the publicity
and signature-gathering effort necessary to get on the ballot
in Oregon. When he was researching his book five or six years
ago, that figure was between $70,000 and $100,000. “As
you need more money you go to more sources, and that’s
what’s driving the increase in out-of-state
funding,” Ellis says. There’s always been outside
money backing Oregon’s ballot initiatives, Ellis
explains, there’s just more of it now — and
more talk about it.
Former Secretary of State Phil Keisling, whose own ballot
initiative to create an open primary system in Oregon failed to
get enough signatures to make it onto the ballot this summer,
agrees.
“When I was secretary of state, the majority of it was
home-grown stuff,” Keisling says. “But
Oregon’s a lab, it’s a test case. For rich people
who feel pretty strongly about issues and who want to put money
into politics, Oregon has always been seen as one of the
bellwethers.”
A prime magnet for outside money in this election is also the
initiative with the biggest fiscal impact attached. Measure 48
— which will put a limit on state spending increases to
match the increase in state population, plus inflation —
is backed by the Illinois-based Americans for Limited
Government (ALG). The group kicked in about 90% of the money,
more than $600,000, to fund the signature-gathering drive
necessary to qualify for the ballot, according to the Money in
Politics Research Action Project. The project reports that the
initiative supporting term limits, Measure 45, also got on the
ballot thanks to more than $500,000 from another Illinois-based
organization, US Term Limits.
Bob Whalen, an economist with ECONorthwest, will be the first
to tell you that anytime you bring out-of-state money into
Oregon and spend it on the kind of television broadcasts that
often accompany ballot measure campaigns, it’s going to
have a positive impact on at least that corner of the
state’s economy. “TV broadcasting is a weak
sector,” Whalen says. “But nothing is better than a
hot election for advertising.”
Then there are the jobs created: hundreds of signature
gatherers during the petition stage of the process (initiative
petitions for a constitutional amendment require 100,840
signatures) and campaign personnel once they’ve qualified
for the ballot.
BUT THE RIPPLES OF OUTSIDE MONEY and job creation resulting
from the initiative process are dwarfed by the tidal wave of
impact some initiatives have on the state budget.
Ask Whalen about Oregon voters’ recent history —
starting with the passage of property-tax-limiting Measure 5 in
1990 — of taking money out of state government’s
coffers via initiative and he responds in a word:
“Absurd.”
Whalen’s prime example is Measure 47, passed in 1996 as
an encore to Measure 5 and amended slightly by Measure 50 in
1997, which limited increases in property tax to 3% per
year.
“It was passed at a time when inflation was barely
measurable,” Whalen says. But now inflation is coming
back, running at about 4%. If the countries that are holding
U.S. bonds — China and Japan — start selling,
inflation could easily jump to 6% or 7%, Whalen says, and
Oregon’s property tax receipts would be left in the
dust.
“It’s an artificial barrier,” Whalen says of
the 3% cap. “I kind of wish they’d asked an
economist before they wrote the measure.”
Measure 5 first limited property taxes and transferred
responsibility for school funding from the local to the state
level in a bid to equalize the financial support for urban and
rural schools. Since then, a few other measures, including 47
and 50, which capped annual property tax increases, have had a
direct impact on the state government’s budget and
services.
In 1994, voters passed Measure 11, establishing mandatory
minimum sentences for certain violent felonies. The initiative
is still praised by victims rights groups, but the change in
law has put the squeeze on state prisons, with longer stays for
felons who commit what are now known as Measure 11 crimes.
The state has spent just over $400 million on new prisons in
recent years, and opponents argue that warehousing criminals
for longer stays in prison has reduced the state’s
ability to spend money on other rehabilitation efforts.
THE LATEST SALVO in budget-impacting initiatives includes
Measures 41 and 48 on the November ballot.
Measure 41 would change the way Oregon law treats income tax
personal exemptions, making them tax deductions rather than tax
credits. While a tax credit is a dollar-for-dollar reduction in
the amount of tax to be paid, a deduction reduces the amount of
income used to calculate how much tax is due. If passed, it
would reduce state taxes for most Oregonians and trim state
income tax revenue by more than $300 million.
The ballot measure, heralded as the “Oregon Family Tax
Cut,” is sponsored by the Oregon chapter of the national
anti-tax group FreedomWorks and has the financial support of
Nevada resident Loren Parks, who owns an Oregon business and
contributed $157,500 to the campaign.
Measure 48 — also known as TABOR, the moniker for a
taxpayer’s bill of rights — is one of the more
hotly debated initiatives on the ballot. Oregonians can line up
behind either the Oregon Center for Public Policy, a
left-leaning Silverton-based economic research group, which
calls Measure 48 arbitrary and says it would make recessions
worse, or the Cascade Policy Institute, a conservative economic
research group in Portland that plays up the ballot
measure’s “Rainy-Day Amendment” nickname,
saying the measure will keep the size of government in check
and fund a robust rainy-day fund to help fund the state budget
in a downturn.
At the heart of the spending cap debate, and the reason why
initiatives such as Measure 48 have a good chance of passing,
is a deep-seated distrust of state government to spend
wisely.
Sen. Ryan Deckert, a Beaverton Democrat who worked with
Keisling on the open primary campaign, says he understands that
it’s incumbent on those elected to earn the confidence of
voters by putting the lid on partisan bickering and getting
some work done in Salem. “We’ve got to find a way
to reclaim representative democracy,” says Deckert.
“As bad as it is in Salem, I’ll take that over the
initiative process any day.”
Keisling would tell Deckert to keep dreaming. The legal
framework of the ballot initiative process in Oregon has
created a co-equal stem of the legislative branch of government
that is squarely in voters’ hands. “For better or
worse, we’ve split the branch in two,” Keisling
says.
Over the years there have been various attempts to reform the
system, most recently 2002’s Measure 26, which prohibited
the practice of paying signature gatherers by the signature
rather than by the hour.
Constitutionally, Oregonians could confine ballot initiatives
to issues that don’t have direct fiscal impact, but
Keisling posits that the Legislature’s pitiful
credibility with voters would make it tough for proponents to
convince them that they ought to give up control of the
state’s purse strings.
Instead, Keisling suggests that the Legislature take matters
into their own hands by convening to discuss and potentially
act on ballot measure topics as soon as they make it on the
ballot. “That would force some interplay between the
two,” Keisling says. “Right now they’re in
parallel universes.”
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