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PERS and the elephant in the room

Now that the Oregon Supreme Court has declared the PERS “Grand Bargain” of benefit reductions to be unconstitutional, school districts are facing huge increases in PERS costs to restore the benefits. Unless something changes, these increases will cause significant reductions in school programs when these programs are already stretched too thin.

Is there anything that can be done to have healthy public services while meeting the increased PERS costs? There is. First, disclosure: I am a PERS recipient. What I have to say here is not related to that, however.

While there are still some PERS adjustments that may lessen the blow, there is an elephant in the room very few people want to see: We, the Oregon electorate, chose to defund the government starting with Measure 5 in 1990. The PERS burden is a symptom of this much larger problem, not its cause. Until we restore a good portion of the funding eliminated by the tax measures, we will always be underfunded in Oregon, not just for PERS, but for everything else in the public sector as well.

It was too good to be true that we could reduce our school taxes by almost 75 percent and not do any damage, but that’s just what Measure 5 and its successors did.

Of course, we were told that the state would be required to make up the difference through recovery of “waste.” There wasn’t near enough waste to supply the billions of dollars lost. School property taxes had been the major source of school funding in the state. No major tax source ever replaced the cuts.

How unrealistic was the school property tax cut? My own house is a typical example: In 1990, the year Measure 5 passed, my K-12 school operating tax was $1,647. My most recent bill, 25 years later, for K-12 was $487 less. How many services we get are lower by any amount compared to 25 years ago? Cable? Water? Electricity? College tuition?

We could pay the PERS increases and reduce class size if we hadn’t made such unrealistic reductions in our school taxes. But the political reality is that property taxes cannot be restored to previous levels, and a sales tax will not pass in Oregon. What to do?

A group, Our Oregon, is putting forth an initiative tax proposal that would solve the PERS crisis and also raise additional funds to lower class sizes, increase transportation funds and more.

It does this by targeting the other major area where taxes have been greatly reduced during the past few decades ... corporation taxes. These taxes have been reduced so much that an Ernst & Young study concluded that Oregon now has the lowest effective business tax rate in the entire nation. The proposed 2.5 percent tax on corporations doing over $25 million in sales would raise billions and yet not raise small business, individual, or property taxes.

The Our Oregon proposal is not perfect. It all but bypasses the two largest corporations in the state, Intel and Nike. It taxes sales, not profits, so low margin businesses are hit harder and might have to raise prices. But all told, the tax might bring Oregon more in line with the national average for business taxes and this shouldn’t be cause for alarm in the large corporations affected by the proposal.

People who say the government should do better at “cost containment” prior to any tax increases should realize that the whole state budget has been in severe and automatic cost containment since the passage of Measure 5.

While the recent PERS hit on budgets is brutal, this could actually be the trigger to finally do what should have been done years ago ... make up for the free lunch we voted for ourselves starting in 1990.

The Our Oregon corporate tax ballot initiative is our best prospect for solving our budget problems in a way that will stand the test of public approval. I’m signing the petition to put it on the ballot, and hope many others will as well.

Walt Hellman is a retired Hillsboro High School physics teacher and longtime member of the Hillsboro Planning & Zoning Hearings Board. Walt can be reached at hellmanw@gmail.com

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