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Remarks from Ronald C. Parker -- Vice Chairman, Hampton Affiliates December 6, 2004 -- Leadership Summit 2004 The Oregon Business Plan recognizes the vital interdependency between a health economy and quality of services. We call the relationship the circle of prosperity. (Slide 1: Public Finance Vision) A
high-wage, high-skill economy enables us to finance needed public services
with relatively low tax rates.
And good public services, including education, infrastructure, public
safety, and transportation, are critical to a growing and prosperous economy. When
we introduced the plan two years ago we found that this circle was frayed.
With the recession, about $2 billion of anticipated revenue had
evaporated even while we observed runaway expenditure increases in
corrections, health care and especially the Public Employees Retirement
System.
We set forth recommendations to stabilize our revenue system and to
create spending discipline.
We
recommended that PERS reform be the first order of business.
The 2003 legislature adopted significant reforms, potentially saving taxpayers
over $8 billion, and averting severe service disruptions in education and
state and local government services. I
don’t know if we have any Supreme Court Justices in the audience, but we
trust that the court will issue a decision upholding the reforms soon.
Thanks go to the Governor, Committee Chairs Tim Knopp and Tony Corcoren,
Greg McPherson and many others, for their courageous work.
We
recommended an elimination of “current services budgeting”,
a system that rolls up past spending with inflation and caseload as the
starting point for budget discussion.
The last Legislature began the journey, and I hope you will all read
the Governor’s letter, which is included in your materials.
I’ll return to the Governor’s budget in a moment. Finally,
we recommended that we find a way to stabilize the revenue base.
There has been considerable discussion and debate both in the
legislature and around the state about how to stabilize our volatile tax
system.
There is widespread recognition of a need for change, even if we
can’t yet agree on what those changes should be. So,
if our goal is to grow the economy and provide high quality public services,
what do we need to do next? I
think this chart may suggest the answer. This
chart presents the actual revenue and expenditure patterns from 1991 through
this current biennium and a forecast for the next six years.
You
can see the rapid growth in revenues we enjoyed during the roaring 1990s. You
can also see why a healthy economy is the best way to ensure adequate tax
revenue. Follow
along the purple bar and you can see what happened to income tax revenue when
the recession hit in 2001.
Tax receipts went into a free-fall.
The colored lines above the purple mostly represents the one-time
dollars and gimmicks we used to balance the budgets during that difficult
period.
Without much of a reserve fund, we tapped what ever we could and made
painful cuts. As
we look to the biennium just ahead, there is more money flowing in, but we
have no more one-time sources of funds.
With escalating health costs, this will once again be a very difficult
budget to balance.
However,
if we look ahead over the next two biennia, the picture looks much brighter.
Assuming our economy improves as our state economist forecasts, we will
have to opportunity to invest more in education and other vital services, but
we also can build up a reserve fund and put ourselves on a sounder fiscal
footing.
So
our agenda is this: Make
the budget choices now with an eye toward growing the economy and paying for
the most essential public services that deliver results to Oregonians. With
this in mind the Governor and Legislature should commit to revamp the budget
process with the aim of making budgeting a critical tool for setting
direction, determining priorities, and demonstrating accountability for
results. We endorse the recommendations of the Governor’s Advisory Committee
on Performance and Accountability.
In
addition, the State needs to develop a long-term budget plan to help guide the
difficult policy decisions and help prevent future fiscal crises. The
Governor’s budget takes a huge step in this direction.
The Legislature appears to be a willing partner.
Let’s make this the session where Oregon makes its budget process a
tool for targeting critical investments for our future and demonstrating
accountability in spending for public services. Revenue
Stability.
While
we still believe the state’s public finance system is flawed by its
dependence on the personal income tax, we acknowledge that the public support
needed to accomplish substantive tax reform is not yet present.
In the meantime, the Legislature can and should identify a source of
additional funding for Oregon’s reserve fund.
The education reserve fund is supported by 18 percent of lottery
revenues, but the magnitude of the recent recession demonstrates the need to
build a larger reserve and to do so more quickly.
Several proposals to accomplish this have already been discussed.
We call on both parties to find one they can agree on. Public
Sector Performance Award.
Business
needs high quality public services and we need to recognize great performance.
We know that there are many great public agencies working hard for
Oregon.
I
am pleased to announce that the Oregon Business Plan steering Committee has
agreed to present a Public Sector
Performance Excellence Award at future summits. This
will be a recognition program for exemplary state and local agencies and
schools that to engage in continuous improvement and apply performance
measurements and quality practices to improve their overall effectiveness.
For the business leaders in the room, we will be seeking your
help in selecting winners for this award.
This
is once again going to be a difficult budget cycle.
But a great opportunity presents itself.
If we make good choices, we will maintain essential services and invest
to grow the economy. And
pretty soon, a growing economy will improve the lives of Oregonians, and
enable all of us to enjoy higher quality public services.
I think I can safely say the business community is united in its desire
to be a partner with the Governor and the Legislature to make this vision
happen. We look forward to working together. Back to Highlights from Leadership Summit 2004
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