Oregon Democrats (Reluctantly) Look to Address Budget Deficit with Spending Cuts

Governor Kate BrownWhile a Republican-controlled Congress continually fails to address persistent budget deficits at the national level, Oregon's constitutional requirement for a balanced budget is forcing its Democratic governor and legislature to take major steps to address theirs.

Yesterday, Oregon Gov. Kate Brown came out with a three-pronged plan to cut the cost of state government in the face of a $1.6 billion budget shortfall. These proposals come on top of a statewide hiring freeze announced last week.

Prong one of Brown's plan calls for creating a task force that will study which state assets can be privatized or borrowed against to pay down pension debt. The task force will also study the feasibility of getting state employees to contribute more toward their pensions.

Oregon currently has $22 billion in unfunded pension liabilities, but more conservative estimates put that figure closer to the $50 billion mark.

Prongs two and three of Brown's plan instruct state agencies to use market compensation as a standard for salary negotiations with public sector employees, and to get tougher on collecting some $560–760 million in unpaid taxes owed to Oregon's general fund.

And the belt tightening is unlikely to stop there. Back in February, budget committee co-chairs from the Oregon House and Senate laid out a plan that relied wholly on spending cuts to tackle the state's looming budget deficit.

The supposedly nightmarish vision of this plan—which called for 1–3 percent cuts to K–12 and higher education spending—was never truly intended to pass in progressive Oregon, but it served to focus the minds of legislators on the need to do some substantial slashing within the state budget.

State Sen. Richard Devlin—the Democratic co-chair of the Senate Ways and Means committee—came out in March with a budget plan that would rely in equal measure on tax increases and spending cuts. Then on April 21, a bipartisan letter from the legislature's budget writers to the governor bluntly expressed the need for the state government to slim down as a solution to baked-in budget deficits.

"Without action to contain the growing costs of state government now, the structural imbalance will cause even greater deficits in future years," the letter reads before going on to elaborate a number of ways the state could save money.

These include some pretty good ideas, such as a two-year extension of the governor's hiring freeze—the current policy is set to last two months—and cutting the state's workforce from 1.5 percent to 1 percent of the population.

The legislators' letter also contains some face-palmingly obvious suggestions, such as to "not create new programs or funds that have no money to support them," and to fix existing infrastructure instead of building more of it.

None of this is to suggest that Oregon's bright blue politicians and voters have all the sudden become libertarian state-smashers. Indeed, intermingled with all the calls for spending cuts and efficiency savings have been more than a few ill-advised proposals for a gross-receipts tax and for brand new levies on hospitals, coffee, and junked cars. (The latter two were, mercifully, killed.) Instead, the lesson—and one that should be instructive on the national stage as well—is how to get Democratic lawmakers to consider spending cuts in the first place.

One reason for this seeming change of heart is the spectacular failure of Measure 97, a 2016 ballot initiative that called for a 2.5 percent gross receipts tax on corporations making over $25 million in sales, which was expected to bring in $3 billion annually. Had that revenue materialized, spending cuts would no doubt be off the table.

But a shortage of tax receipts to match their wish list doesn't stop Democrats in Washington from becoming hysterical at the thought of small trims to federal programs. The real difference is the constitutional requirement that Oregon actually balance its books over the biennial budget cycle.

This combination of voters saying no to new taxes and lawmakers being constitutionally prohibited from endless borrowing is forcing Oregon's otherwise spend-happy politicians to slow the steady growth of state government.

Sadly, the federal government faces no such restriction. Congress has the authority to borrow nearly limitless sums of money to finance its current expenditures. The result: a $560 billion budget deficit, $19 trillion dollars in debt, and unfunded liabilities that official estimates put at $55 trillion, but could be as high as $222 trillion.

And despite the fact that Congress is now controlled by Atlas Shrugged–reading "small-government conservatives" (their words), no serious reductions in federal spending seem likely at the moment. President Trump's much-talked-about "skinny budget" would only shift dollars from wasteful domestic spending to destructive military spending, and it's doubtful that House and Senate Republicans would even pass that.

The takeaway is that politicians will rarely if ever shrink the state unless they are forced to. Democrats in Oregon have their hands tied by the state Constitution, and are therefore taking spending cuts seriously.

Republicans in D.C. are given free rein by the U.S. Constitution, thus dooming federal taxpayers to uncontrolled debt and deficits for the foreseeable future.