Oregon Government Spending

Senator Doug Whitsett R- Klamath Falls, District 28, 1/24/13

Oregon desperately needs to establish a constitutional limit on the growth of state government spending. The need is made painfully clear by a comparison of what the growth of state budgets would have been with a spending cap in place over the past twenty years, and the increase that actually occurred without a limit on spending growth.

Our Legislative Fiscal Office proposed a spending growth cap for the purpose of comparison. That cap would limit budget growth to the rate of population growth plus the rate of inflation as measured by the Consumer Price Index.

Oregon spent about twenty billion dollars in all-funds budgets twenty years ago. The all-funds budgets would have grown to about twenty seven billion dollars during the current budget period with the spending limit in place, according to LFO calculations. That would have been an increase in spending of about seven billion dollars over twenty years.

Oregon all-fund spending actually grew to sixty billion dollars over that twenty year period. State government spending has in fact tripled during the last twenty years. The actual increase in spending was forty billion dollars. The rate of spending increase that actually occurred was nearly six times what it would have been with the proposed limit on spending growth in place.

To put that gigantic amount into perspective, state all-fund spending for the current budget period exceeds fifteen thousand dollars for each man women and child now living in Oregon. We might ask if the average Oregon family-of-four received sixty thousand dollars in benefits from all that state spending.

Virtually the entire sixty billion dollars that the State spends is produced from taxes, fees, charges, licenses, registrations and other charges to enforce compliance with regulations from the private sector economy. Even the taxes and fees paid by public employees come largely from revenue that originates in the private sector. We might also ask what negative influence on private sector economic growth and job creation results from the extraction of sixty billion dollars in working capital to fund that level of state government spending.

Those stark figures would be bad enough if all that spending was actually paid for during each budget cycle. It is not! During the same twenty year period, taxpayer supported debt has increased from about two hundred twenty million dollars to well more than two billion dollars ($2,000,000,000).

That is nearly a ten-fold increase in taxpayer supported debt. Much of the money owed by the State and its taxpayers has terms of repayment that stretch out for more than twenty years.

The principle and interest payment on the debt has also grown. Twenty years ago the total debt service would calculate to around thirty million dollars per budget cycle. The cost to service the debt in the current budget period is more than four hundred million dollars. Nearly five percent of our General Fund, twenty five percent of our lottery revenue, and nearly thirty percent of our state highway revenue are now required to pay the principle and interest on Oregon’s accumulated taxpayer supported debt. The total principle and interest payments accumulated over the next twenty years will likely exceed three billion dollars.

Even these stark figures do not appear to have swayed the majority party’s determination to increase spending. Governor Kitzhaber’s recommended budget would increase general fund and lottery fund spending by about two billion three hundred million dollars ($2,300,000,000). That calculates to nearly a sixteen percent increase in discretionary spending for the next budget period.

Our Legislative Fiscal Office calculates a projected increase in General Fund and Lottery revenue of about ten percent. Most businessmen would be pleased with a ten percent increase in revenue growth during these difficult economic times.

However, that increase is not nearly enough to satisfy the spending appetite of Oregon government. Legislative Fiscal Office calculations estimate that we are projected to have about seven hundred and fifty million dollars ($750,000,000) less combined general fund and lottery fund income than the Governor proposes to spend. That deficit could easily grow to one and a half billion dollars in the event that the Legislature fails to enact the Governor’s proposed reforms to the Public Employment Retirement System.

That deficit leaves three choices to balance the budget.

We could responsibly reduce the growth of spending to meet our revenue projections. This option would still allow for about ten percent growth in discretionary state government spending without further raising taxes and fees.

Another alternative is to continue to borrow more money to fill the budget holes. Of course, this option serves to allow the next generation to pay for our profligate spending habits.

A third alternative is to raise taxes and fees to make up the shortfall. This option would continue, and serve to escalate, the drain on private sector resources that already has our state economy in disarray.

More than twenty years of history tells us that the majority party will not voluntarily choose to reduce spending. Only dissent from the people, loud and long, will likely deter their resolve.

We often look aghast at the spending deficits in Washington D.C. We make fun of the profligate spending in our neighbor state to the south. In reality, on a per capita basis, Oregon practices are little better.

Please remember, if we do not stand up for rural Oregon no one will.

Best Regards,

Doug