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.
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.
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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