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Earlier this month the two Democratic co-chairs in charge of legislative budgeting released their draft for state spending in 2013-15. Republicans, who are in the minority in both chambers, have criticized repeatedly what they see as the shortcomings of the $16.5 billion general fund budget.
Basically, they complain that the plan relies too much on new revenue and doesn’t do enough to rein in the Public Employees Retirement System. Roseburg Republican Rep. Bruce Hanna, a former co-Speaker of the House, had his say on the floor recently.
"Frustratingly, the Democrats' proposed budget is also balanced by using more in new tax revenue than in total PERS reform or savings," he said. "This may represent a priority for some, but certainly not one I can support. Balancing our budget requires hard decisions but it can be done through common-sense solutions."
We had one question: Does the proposed budget released by Rep. Peter Buckley, D-Ashland, and Sen. Richard Devlin, D-Tualatin, rely "more in new tax revenue than in total PERS reform or savings?" The statement didn’t sound quite right to one of our budget watchers, so we decided to check it out.
People interested in reforming the system, including Gov. John Kitzhaber, say reforms are necessary to curb mounting costs that will eat into public services into the future. People not so interested say the proposed reforms are unfair and probably won’t pass legal muster.
In any case, the legislative budget draft released by Buckley and Devlin calls for lawmakers to find $275 million in additional revenue by eliminating or reducing tax breaks. So that’s the new revenue part.
The draft budget also calls for three ways to reduce spending on the retirement system, although the dollar amount is harder to suss out.
One idea would cap the cost-of-living adjustment given to retirees for an estimated savings of $400 million in 2013-15. Another idea would end a tax break for retirees living out-of-state, saving about $55 million. The third idea is to "collar" rates -- in other words, spread the projected impact of rate changes into the future -- for an estimated $350 million.
Those proposals add up to $805 million in "savings," otherwise known as money that government won’t have to spend on the pension system in 2013-15. But not all of the $805 million will help the state general fund budget. Why not? Well, the $805 million will be spread throughout the budgets of not only the state, but of schools, cities and counties, basically any system that participates in PERS.
So how much money will assist the state budget? The Legislature’s chief fiscal officer Ken Rocco, a non-partisan position, calculates that amount to be closer to $281 million, and this is the number we need to compare with the $275 million figure. We’ll get back to that in the ruling.
We want to clear up one more thing: What do we mean by "help"? Without the reforms, the state would have to find an additional $281 million in revenue to pay for the budget the co-chairs have proposed. Or, legislators would have to spend that much more on PERS and give up what they had hoped to buy with the $281 million.
For example, the draft budget calls for K-12 schools to receive $6.55 billion in 2013-15. But off the balance sheet, school districts will receive an additional $200 million in the form of money officials will no longer have to spend on PERS, giving schools $6.75 billion for the biennium. (In a way, the $16.5 billion turns into $16.78 billion, as far as what agencies are given to spend.)
This is a confusing issue and we have to share with readers that both sides, when reached by PolitiFact Oregon, were mistaken on the amount that affects the general fund. It took our queries to the Legislative Fiscal Office to get the numbers straightened out.
Hanna said on the House floor that the proposed budget by Democrats is balanced "by using more in new tax revenue than in total PERS reform or savings." That is not accurate. The draft budget relies on $275 million in new tax revenue and $281 million in "savings" from PERS reforms. The reforms also reduce pension-related costs for numerous other budgets in Oregon.
Certainly Hanna and others would like to see deeper changes to PERS rather than eliminate some of Oregonians’ tax breaks. That’s a philosophical question for legislators. All we can say is that the state budget as proposed by the Democratic co-chairs contains an approximately equal amount of new tax revenue and PERS cost reductions.
We rate the statement False.
Bruce Hanna, House floor, March 6, 2013
Joint Committee on Ways and Means, "2013-15 Co-Chairs’ Budget," March 4, 2013
E-mails from Angela Wilhelms, aide to Bruce Hanna, March 12, 18, 21, 2013
E-mails from and interview with Peter Buckley, March 12, 13, 2013
Interviews with Ken Rocco, Legislative Fiscal Officer, March 13, 20, 2013
Legislative Fiscal Office, "2013-15 PERS Employer Contribution Rates," October 2012
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