Five Steps to Sustainable Government
1.) Grow the Economy
A healthy and growing economy is the best single thing we can do to ensure we have the resources to meet the needs of Oregon citizens.¬† We need¬†private sector job growth.¬† In fact, what we really need are careers, jobs with a future, for ourselves and our children.
People ask me, "How are you going to do this?¬† What jobs programs will you create?"¬† The bottom line is we have to get out of the way.¬† Government is getting in the way of career creation. ¬†We have focused our Economic Development efforts on recruiting companies from outside of the state.¬† We give them massive incentive packages to re-locate here.¬† Once those multi-million dollar packages run out, many of the companies leave.
Action: We have to focus on the companies that are here.¬† On the people who have made a willing investment in Oregon and help them build¬†businesses in Oregon. ¬†Many of these companies are smaller companies, so the assistance has to be structural (meaning we set policies that encourage business development¬†and growth) rather than picking winners and losers with expensive incentives. ¬†Government has gotten way too involved in picking winners and losers through their use of tax credits and other incentives. ¬†I'm for green jobs.¬† But, I'm also for red jobs, white jobs, and blue jobs.¬† In fact, if you're¬†unemployed, do you care what color your job is?
No!¬† You want to earn a living to provide for your family.¬† Let's let Oregonians create jobs, whatever their color, and get this state moving again.
2.) Tax the Government & Fund a Rainy Day Account.
It's time to "tax" the government.¬† A constant refrain in Salem is that a budget cannot be touched because it is guarded in "statute."¬† Are our lawmakers really arguing that they're not allowed to change the law?¬† Their argument is that a fee or a tax that has been established for a specific purpose cannot be touched.¬† When you're cutting school days and letting violent criminals out of prison early, it's time to re-evaluate this position.
The Salem game is to put as many things in a dedicated category as possible and then, once they've shifted a budget from the General Fund to the Other Funds, claim there isn't enough money in the General Fund to fund education.¬† The result is that the fungible General Fund is $14 billion while the statutorily funded Other Funds budget has ballooned to over $40 billion.
When politicians run out of money to pay for General Fund programs, they simply raise taxes on Oregon families or borrow money.¬† Debt per capita has increased 101% since 2000 to over $2,800 per person.¬† Yes, that's per person, for every man, woman and child.¬† Our debt has doubled in ten years.5
Most citizens don't realize that the entire state budget is $55 billion per biennium.¬† They only see the rancorous debate every other year dealing with the General Fund, which is currently $14 billion.
Budgets for most of the state government are approved with little discussion while we make decisions that compromise our state's education and public safety systems.¬† It is unconscionable that our state budget has increased by 37% over the last four years and Salem politicians still can't find the resources to keep schools open for an entire year and are still granting early release to violent criminals.
I think it's time to stop taxing families and businesses or mortgaging our children's future.¬† It's time to start taxing the government.
Action: I propose enacting a 0.5% annual "tax" on the All Funds Budget (General Fund + Other Funds) and directing these funds into a Rainy Day Fund.¬† For ‚Äė09-'11 this would be approximately $275 million.¬† Additionally I would direct any ending balance between 0% and 2% into a Rainy Day Fund.¬†¬† I would place a cap on the Rainy Day Fund equal to 5% (currently approximately $2.75 billion) of the All Funds Budget and any additional tax¬†and fee receipts above this cap would go to pay down our debt.
Taxing the government may at first sound like a radical concept, but here's why it makes sense:
Firmly establishes our priorities as a state.¬† My focus as governor will be on education and public safety, which we must fund adequately.¬†¬†
Asks for very modest efficiencies ‚Äď provide the same services with 99.5% of the funding ‚Äď which will start demanding better performance from all¬†corners of the government.
Avoids passing our debt forward to future generations or imposing taxes that will further erode job creation and¬†push the crisis unfairly onto the¬†shoulders of hard-working Oregonians.
Ensures the kicker remains untouched as the most important taxpayer safeguard against unchecked government growth.
This is the type of accountability and conviction I demand from Salem.¬† Over time, I would hope this is a temporary solution that is resolved by a more rational way to run our government.¬† Until then, this is a way for us to actually demonstrate leadership in Salem.¬†¬†
This can be done and it is not difficult. Oregon families and businesses get up and do it every day.¬† Salem politicians pass tax increases and tell families and businesses to do more with the same resources; it's time for them to do the same.
3.) Establish Oregon PERS Reform Commission
Our teachers, police officers, fire fighters, and other government workers provide an invaluable service to our state.¬† Yet, their retirement security is risked by underfunded pensions.
Every elected official in Salem knows this, but there is no leadership to address the problem.¬† We must act to preserve the retirement benefits of 300,000+ hard-working state employees who served our state well and whose contract we must honor.¬†
The current PERS structure is not sustainable.¬† Current projections6 to fully fund PERS suggest we have to increase the reserve by an average of more than $2.2 billion per year to a total reserve of $85 billion over the next 15 years.
Additionally, people are living longer.¬† The average 51 year old state employee who retires today after 30 years of service, based on an average life expectancy of 86 years7, will receive PERS retirement benefits for 35 years.¬† Five years longer than they worked.¬†
We have created a system that cannot be supported.¬† It places the retirement of our state employees at risk and the entire economic viability of our state in peril.¬† We need to create a sustainable system that ensures benefits for future retirees.¬†
Action: There are four things I have identified that must be addressed:
- We must control the growth of the state government payroll.¬† All of the current forecasts assume state government payroll increases 80% 15 years.8 ¬†This is unsustainable.
- We will ask our government to do more without more people.¬† We must invest in tools and training to make our employees more productive.¬† Technology, software and other tools of the trade must be upgraded.¬† We cannot simply ask employees to do more with less.¬† Invest in training our employees.¬† We must train our employees in global best practices to insure that they are as productive as possible.¬† Unleash the creativity of our employees to enlist them to help solve these issues.
- Offer optional voluntary retirement plan alternatives that could present a win-win scenario.¬†¬† Retirees could elect a buy-out and get cash up front in return for limiting the ongoing liability for the state.
- Create a fourth tier of retirement benefits that is more of a shared responsibility model where individuals can craft their own plan and share in the funding of the plan.¬† This would be offered to any new public employees.
We must create a plan that helps public employees achieve self-sufficiency in retirement without putting as much of the burden on Oregon taxpayers. ¬†Ensuring peace of mind in retirement for our public employees is an important part of attracting and rewarding a talented workforce.¬† But, it is our duty to pay for our promises today, not pass them on to the next generation of Oregon taxpayers.
I propose the creation of a bipartisan commission chaired by the Governor to expand on these recommendations to ensure the long-term stability and viability of PERS.
We need to put PERS on solid financial ground for current and future retirees.¬† But, that will only happen if the Governor and Legislature are all invested in the solution.
4.) Begin Zero-Based Budgeting
When I ran my company, I implemented a "no budget" policy.¬† That is, every year we started with the number "zero" and each department had to justify every dollar of budget they were requesting.
In government, it's just the opposite.¬† Agencies start with "Current Services Level," which means they assume an automatic increase year in and year out despite the quality of programs or their performance.¬† Not every business concept translates into the public sector, but this one does and we must do it to add the accountability and rigor in our public agencies that we ask in the private sector.
Government is funded with the sweat-equity of Oregon taxpayers.¬† Oregon spends more than $27,0009 per year for every family of four in Oregon.¬† We need to start respecting their investment more and generating a real return on that investment.
Action:¬† I propose taking every government agency to a "zero budget," whereby they are asked to conduct a top-down audit of their programs and performance on an annual basis.¬† Their funding will reflect a need to prioritize within agencies and drive efficiencies throughout government.
5.) Build a More Accountable and Transparent Budget Process
After spending some time in Salem, I found the budget process and allocation of funds to be convoluted.¬† Our citizens deserve more accountability and transparency in their government.¬† Here are two steps that will help ensure that is the case.
a.) Outside Independent Audits‚Äď Oregon needs strong, independent audits that will hold government accountable regardless of which political party is in charge.¬† There is a lack of investigation into the operation of government programs and the benefit of tax expenditures.¬†
Action:¬† Use external private auditors.¬† Private audit firms have the benefit of seeing best practices in other states and can offer a valuable perspective. ¬†Audits can uncover issues but the biggest benefit is to recommend process improvements.¬† Only external private auditors can provide this valuable feedback.
b.) Create a strong state budget and management office in the Governor's office ‚Äď The Governor needs a more robust process to question agency budgets and drive efficiencies.¬†
Action:¬† Move the current executive budget and controller functions from within the Department of Administrative Services and raise it into a cabinet-level position in charge of analyzing and approving every agency budget.¬† This new budget director would report directly to the Governor.
Action:¬† Hire an accomplished budget director with deep experience in analyzing department operations and finding ways to do more with less.¬† The Current Services Level budget process, which automatically takes the last biennium budget and adds a double-digit increase, would never survive in the real world.¬† It's the outcome of a system that is never challenged to create new ways of delivering service to Oregonians.
5Oregon Comprehensive Annual Financial Report, Fiscal year ended June 30, 2009
6PERS Actuarial Accrued Liability 12/31/2024 estimate is $85 billion
7PERS retiree (age 50-65)¬† life expectancy estimate age 86
8Mercer - Oregon PERS Financial Modeling Economic Projections May 29, 2009
9State of Oregon Legislative Fiscal Office, Office of Economic Analysis May 2009 and U.S. Census Bureau, Oregon 2009 population 3,790,060