Why is it Important?
A prosperous economiy needs quality public services including education, public safety, healthcare, parks and infrastructure. And, the best way to pay for quality public services is with the tax revenue generated from a strong, healthy economy [if you don’t understand the connection, check out this cool animated video and interactive widget from local creative firm Epipheo].
We call this relationship the “Circle of Prosperity,” and it is illustrated in the diagram above. Unfortunately, Oregon has fallen off of the “Circle of Prosperity” and onto a “Circle of Scarcity” that threatens funding for our basic public services. Learn more about the Oregon’s Circle of Scarcity on the Oregon’s Challenge page.
Oregon Business Plan Strategy
To break the Circle of Scarcity and pursue the Circle of Prosperity, we suggest a five-point strategy.
1. Improve the business climate for high wage job growth, which is the best source of public revenue
The best source of public sector revenue is job and income growth. Oregon’s unemployment rate is above the national average and Oregonians’ average incomes are below the national average. That means we have less tax revenue available to pay for public services. The Oregon Business Plan has a goal to create 25, 000 new jobs per year and raise the average income of Oregonians to the national average by 2020. Doing so would generate billions of dollars in tax revenue to support critical public services like education. Oregon public officials, at all levels, have an important role to play. The 2013 Oregon Business Plan Policy Playbook and the initiatives outlined on this website present fifteen ideas for how to get there. Suggestions provided by Oregon’s industry clusters, also presented on this website, provide additional opportunities to grow jobs in Oregon’s key industry sectors.
2. Revamp the state budget process to focus on long-term needs and achieving results.
Oregon’s biennial budget process is strangling the state. It is myopic and incremental and does not drive continuous improvement. Myopia combined with a volatile tax system leads to continuous budget crises, and a slow withering of essential services. The key to budget redesign is identifying populations the state is trying to serve or support (e.g. students, patients, seniors, inmates), spelling out the results we seek for each group, identifying how much we are paying for those services per person today, determining how much we want to pay for them moving forward, and investing in the most cost-effective strategies to achieve those outcomes.
We should examine trends and forecast what costs will be in the future. We should anticipate the long-term revenue and expenditure impacts of each budget decision. A complete budget system overhaul is essential to get Oregon on track. It was recommended two years ago by Governor Kulongoski’s Revenue Restructuring Task Force and it has been a centerpiece of Governor Kitzhaber’s public finance strategy. The Governor’s 2013-2015 Budget was designed with these principles in mind and is part of a larger 10-yr Plan for Oregon effort being led by the Governor and COO Michael Jordan.
These efforts must continue, and should extend beyond the Governor’s Office into the legislative branch of Government and the Ways and Means process.
3. Redesign the delivery of services to provide the greatest value for Oregonians’ tax dollars.
If we don’t like the trend lines we see in our long-term budget picture, we need to reinvent the service to save dollars and get better results, or adjust our priorities. This means taking a fresh look at funding formulas, incentives and the menue of services we provide and determining if they are driving value and improvements in outcomes. If not, we need to change them. This is a long-term, concerted effort that will require tremendous cooperation between state, local and federal officials. However, given the enormity of our challenge, its the only way to get through the decade with the key services we value in tact. There are also many opportunities to “redesign” services that can be moved on quickly. The Governor Kulongoski’s reset report outlined some of them. Governor Kitzhaber’s efforts to redesign 0-20 education and Medicaid delivery are heading in the right direction. We must take a similar approach with public safety. Together, education, health/human services and public safety make up 90% of State General Fund spending.
The most immediate change we need to make to the delivery of public services is reforming the PERS system, which is taking dollars out of the classroom at an unsustainable rate.
4. Adjust the tax system with tweaks today; look forward to a complete overhaul in the future
Budget and spending reform should be the first order of business for Oregon public finance policy. Meanwhile, steps can be taken to improve the tax system incrementally. We need to bolster the state’s emergency reserve fund and create a permanent mechanism to fill it, such as future corporate and personal kickers. The fund should particularly safeguard education and other needs when the economy turns south.
Beyond these steps, the Oregon Business Plan has long advocated for a fundamental overhaul of the tax system, with reductions in income and capital gains taxes being offset by the addition of sales/consumption taxes. High income and capital gains taxes discourage economic activity in Oregon, punish succesful entrepreneurs and discourage wealthy individuals from locating and conducting major transactions in Oregon. At the same time Oregon needs adequate revenue to fund vital services.
We recognize that strong leadership from our elected leaders, a broad coalition of business, labor and consumer advocates, and a long-term effort is needed to bring this type of change forth to voters. We need to come together to develop a plan-both the policy and the political strategy to pass it. The Governor has been leading such an effort.
Click here to review progress on this initiative.
Tell us what you think!
We need your input to shape the Oregon Business Plan. Are we on the right track? Do you have specific ideas to advance the strategy? Please share them.